ANNUAL
REPORT
TWO
THOUSAND
& TWELVE
BALMAIN
BOUCHERON
BURBERRY
JIMMY CHOO
KARL LAGERFELD
LANVIN
MONTBLANC
PAUL SMITH
REPETTO
S.T. DUPONT
VANCLEEF&ARPELS
A STRATEGIC
TURNING POINT
INTERVIEW OF THE EXECUTIVE OFFICERS
KEY FIGURES
2012 MILESTONES AND 2013 OUTLOOK
CORPORATE GOVERNANCE
ORGANIZATION AND STRATEGY
BRAND PORTFOLIO
SHAREHOLDER INFORMATION
CONDENSED FINANCIAL STATEMENTS
GROUP ORGANIZATION
REGISTRATION DOCUMENT
02
04
06
08
10
12
40
42
44
45
Jean Madar and
Philippe Bénacin
2 INTERVIEW OF THE
EXECUTIVE OFFICERS
Interview of the Executive Officers
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
How would you describe Interparfums’ performance in 2012?
“As in 2011, it was a year of excellent results. Interparfums
maintained its growth trajectory with record consolidated
sales of €445.5 million, up 11.8% at current exchange rates
and 6.9% at constant exchange rates over 2011 and despite
the high comparison base from the launches of Burberry Body
line in the prior year.
This performance was driven in particular by significant
gains by three brands, Montblanc (51%), Jimmy Choo
(+36%) and Boucheron (+96%) fragrances that generated
combined sales of nearly €100 million after just two years
of activity as part of the group’s portfolio. Their respective
successes highlight the relevance of the creative processes
of our teams: the end result of extensive reflection ensuring
that each fragrance faithfully embodies the specific qualities
it is meant to convey – a unique line indivisible from the
timeless refinement of Montblanc, the sensual and sparkling
elegance of Jimmy Choo, the beauty and splendor of
creations signed Boucheron. These lines also contribute to
one of the primary vocations of a fragrance: transport the
men and women who wear them to an intimate space of
reverie and luxury through a unique olfactory composition.
Our good performances also reflect positive growth
momentum in certain regions, starting with North
America, the Middle East and Asia, all up on 2011.
Also noteworthy was the resilience of Western Europe,
and particularly France, demonstrating how fragrances
remain a sure value in a recessionary environment. As we
have often said, fragrances offer a way of access into the
world of dreams. This makes them as important as ever
during periods of turmoil.”
The main event of the period concerned the Burberry
license. What were the financial and operational
consequences?
“At the end of 2011 Burberry exercised its right to evaluate
the purchase price for the unexpired term of the fragrance
license. Throughout the first half of 2012 discussions were
pursued on the continuation of our partnership. However,
because of divergences in strategies and agendas, we decided
to discontinue these discussions and terminate the license
agreement on December 31, 2012.
In the fall, to ensure a smooth
transition and by mutual
agreement, we decided to extend
the license agreement until
March 2013. For us this was a
good financial outcome since the
exit fees have provided us with
additional cash for future strategic
acquisitions. In addition, it
contributes to achieving a more
balanced portfolio that will enable
us to concentrate on other
brands. In other words, it has
proved to be a significant motor
for accelerating our development
both in terms of internal growth
and acquisitions.
In this way, solving the equation to make up for the
€230 million in Burberry sales may be achieved between
now and 2015 through a combination of new launches
and new licenses. At the operational level, the transition
has proceeded smoothly with teams previously dedicated
to Burberry now focusing other brands, representing a
straightforward transfer of expertise that will also free up
resources in terms of time and energy across the entire
supply chain.”
With a number of launches lined up for 2013, what is the
outlook for the year ahead?
“In effect, new fragrances will be launched on worldwide
markets, here again, each with their own identity and
unique magic. These will include major launches such
as the first fragrance created for Repetto combining its
universe of dance with joyful and playful femininity
symbolized by its celebrated ballerinas, the first women’s
line under the Montblanc brand, in addition to Jimmy
Choo, Lanvin, Van Cleef & Arpels, Paul Smith and
Boucheron fragrance lines. And while many events are
programmed for the period ahead, significant work will also
be undertaken in advance of 2014 that will be a major year.
In addition to the launch of the new Montblanc men’s
fragrance, we are also thus preparing a new fragrance line
for Karl Lagerfeld following the signature of the license
agreement in 2012. The first fragrance signed by this major
name in the world of fashion, who is as well a fascinating
figure, will set the stage for a great adventure ahead.
Another exciting project is the first women’s fragrance
created by Interparfums for Balmain. In this case, we will
follow the lead of the young and brilliant designer,
Olivier Rousteing who is reinventing this legacy through
an alchemy combining a long ultra-fashion tradition of
hyper-luxury, femininity and poetry with the modernity
of the “aristo-rock” label distinguished by both the boldness
of its choices and rigor in its design. Three projects, among
others, provide us with grounds for confidence and
enthusiasm as we enter this next stage in our development
for both the many challenges and new successes ahead.”
3
Interview of the Executive Officers
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
445.5
398.3
305.7
264.9
259.2
212.8
135.9
9.9
8.6
6.3
5.1
4.8
46.3
42.2
34.3
33.7
58.2
Current
36.1
Current
30.3
26.8
22.6
21.1
08
09 10 11 12
08 09 10 11 12
08 09 10 11 12
08 09 10 11 12
Net sales (1)
Operating profit (1)
Net income (1)
Total dividends (1)
4
At December 31 (in € thousands) 2008 2009 2010 2011 2012
Sales 264,864 259,165 305,696 398,328 445,460
international (%) 90% 90% 91% 91% 92.1%
Operating profit 34,259 33,683 42,216 46,301 212,803
% of sales 12.9% 13.0% 13.8% 11.6% 47.8%
Net Income 21,119 22,647 26,807 30,300 135,862
% of sales 8.0% 8.7% 8.8% 7.6% 30.5%
Shareholders’ equity (attributable to the parent) 154,436 169,939 191,884 216,020 344,864
Net cash (2) 26,304 66,201 57,668 17,395 207,927
Total assets 260,572 253,674 296,957 353,194 534,796
Workforce 152 171 180 227 205
Key figures
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
105.4
Non-current
assets
344.8
Shareholders’
equity
200.4
Current
assets
207.9
Net cash (2)
168.9
Current
liabilities
Assets
Liabilities
Balance sheet highlights (1)
Through tight control over all operating
expenses and in particular marketing and
advertising (+9%), the latest estimates
were surpassed with current operating
income reaching €58.2 million, up 19%
on the prior year. Highlighting this point,
the current operating margin came in
at about 13%.
With the recognition of income
and expenses associated with the
discontinuation of the Burberry license for
a net gain of €156.1 million before tax,
and an additional provision for the Nickel
brand, operating profit was up sharply
to €212.8 million. And reflecting
this same trend, net income reached
nearly €136 million.
Like-for-like (and notably excluding items
associated with the discontinuation of
the Burberry license), net income rose
19% to €36.1 million marking
the 16th consecutive year of
uninterrupted growth.
In this context, the group’s financial
position was very significantly strengthened
on December 31, 2012 with shareholders’
equity of €345 million (64% of total
assets) and net cash of €208 million. KEY
FIGURES
On top of this, positive operating cash
flow was generated by tight inventory
controls and further reductions in the
trade receivables balance.
5
(1) Consolidated data in € millions.
(2) Including certificates of deposits with maturities exceeding three months.
Key figures
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
JANUARY
MAY
Commencement of the Balmain license
Commercial activity has begun based
on four existing lines.
Commencement of the Repetto license
agreement
The first women’s fragrance line will be
launched in 2013.
FEBRUARY
Launch of the Jimmy Choo Eau de Toilette
A luminous new scent that puts an original
twist on the original Jimmy Choo fragrance
with notes of ginger, tea rose, exotic tiger
orchid and cedar wood resulting in a floral,
fruity and modern composition.
Launch of the Jeanne Lanvin line of Lanvin
Jeanne Lanvin Couture offers a sophisticated
variation on the theme of the first opus
Jeanne Lanvin. This latest fragrance keeps
its fruity and musky character but is
enriched with more sensual notes
Launch of the Jaïpur Bracelet line of
Boucheron
Jaïpur Bracelet, echoing the high-jewelry
collections of Maison Boucheron, is
inspired by the traditional Nauratan
bracelet given to Rajasthani brides for
good luck.
JUNE
Bonus share distribution
On June 18, 2012, the company proceeded
with its 13th bonus issue on the basis of
one new share for every ten shares held.
Launch of Electro Shock of Nickel
A fatigue-fighting skin care concentrate,
combining the ultra-fresh and invigorating
action of lime with the energizing boost of
Guarana extract.
6 2012 MILESTONES
AND 2013 OUTLOOK
2012 milestones and 2013 outlook
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
JULY
DECEMBER
December Investor Relations Award
Interparfums was awarded the prize for the
Best Investor Relations in the “Mid Cap”
category at the 5th Investor Relations and
Financial Communications Forum.
Burberry license: discussions with
Burberry discontinued
On July 27, following several months of
discussions, Interparfums SA and Burberry
were unable to reach an agreement on the
final terms for a new operating model for
the fragrance and beauty business. On that
basis, the license agreement was terminated
on December 31, 2012 in exchange for
payment by Burberry of an exit price of
€181 million.
OCTOBER
Launch of the Ivoire line of Balmain
Mythical fragrance of the 80’s, Ivoire of
the Balmain couture house, combines
aerial heart notes with a floral accord
followed by a woody trail.
Burberry license transition agreement
Interparfums and Burberry signed an
agreement in order to facilitate a smooth
transition that included an additional
three-month period ending on March 31, 2013.
Signature of a fragrance license agreement
with Karl Lagerfeld
On October 8, Karl Lagerfeld, the
internationally renowned fashion house,
and Interparfums, signed a 20-year
exclusive worldwide license agreement
commencing on November 1, 2012 to create,
produce and distribute perfumes under the
Karl Lagerfeld brand. The first women’s
fragrance line will be launched in 2014.
7
OUTLOOK
Bolstered by strong year-end momentum,
particularly in the US and Asia, Interparfums
exceeded its guidance for 2012 annual
sales issued in the fall. This performance
reflects the very strong development by
Montblanc, Jimmy Choo and Boucheron
fragrances that generated combined sales
of nearly €100 million after just two years
of activity as part of the group’s portfolio.
In 2013, continued gains are expected
from all the portfolio’s brands (excluding
Burberry) in response to:
- growing successes by the Lanvin, Jimmy
Choo, Montblanc and Boucheron
fragrances in particular;
- the spring launch of new women’s
fragrances lines under the Jimmy Choo,
Lanvin and Van Cleef & Arpels brands;
- the first significant initiatives in the fall
for the Boucheron, Balmain and Repetto
brands.
2012 milestones and 2013 outlook
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
GOVERNANCE
Interparfums adopted the form of a société anonyme, the French equivalent of a joint stock
company, when it was created in 1989. It is governed by a Board of Directors and a
Management Committee.
8
Corporate governance
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Management Committee members
As of December 31, 2012 the composition of the Board of Directors was as follows:
Philippe Bénacin
Chairman and Chief Executive Officer
Catherine Bénard-Lotz
Chief Legal Officer
Pierre Desaulles
Vice President, Marketing
Frédéric Garcia-Pelayo
Executive Vice President,
Chief International Officer
Angèle Ory-Guénard
Vice President, Export Sales
Delphine Pommier
Vice President, Marketing
Philippe Santi
Executive Vice President, Chief
Financial and Administrative Officer
Axel Marot
Vice President, Supply Chain & Operations
Jérôme Thermoz
Vice President, French Distribution
Management Committee members (from left to right): Catherine Bénard-Lotz, Pierre Desaulles, Angèle Ory-Guénard,
Axel Marot, Frédéric Garcia-Pelayo, Delphine Pommier, Philippe Bénacin, Philippe Santi and Jérôme Thermoz
CORPORATE
GOVERNANCE
9
Board of Directors
The composition of the Management Committee on December 31, 2012 was as follows:
Philippe Bénacin
Chairman-Chief Executive Officer (1)
Jean Madar
Director (1)
Maurice Alhadève
Independent Director (1)
Michel Dyens
Independent Director (1)
Frédéric Garcia-Pelayo
Director and Executive Vice President (1) (2)
Catherine Bénard-Lotz
Director and Chief Legal Officer (1) (2)
Jean Levy
Director (1)
Patrick Choël
Director (1)
Dominique Cyrot
Independent Director (1)
Chantal Roos
Independent Director (1)
Philippe Santi
Director and Executive Vice President (1) (2)
(1) Term of office expiring at the close of the annual shareholders’ Meeting of 2014.
(2) Holder of an employment contract prior to being appointed as an officer.
Corporate governance
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
FUNCTIONAL
ORGANIZATION
Interparfums today has a staff
of 205 forming a solid chain of
expertise from creation to distribution,
production to logistics as well
as finance and administration.
Each of these areas works in close
collaboration with the others,
guided by the strong leadership
of the executive management team.
10 ORGANIZATION
AND STRATEGY
Production & Logistics
Marketing
A staff of 30 are responsible for this
fine-tuned alchemy of the product
creation process from the initial idea and
conception up to display at points of sale.
In close collaboration with the fashion
houses, this work is based on achieving just
the right balance between imagination,
sensitivity and maintaining the coherence
of each new product within its brand
universe.
The task of managing production, each
year, for thousands of product references
requires skill in orchestrating and ensuring
a harmonious interaction between several
activities: technical development, the
supply chain, production planning at our
subcontractors, logistics, the purchasing
division for our promotional products,
regulatory oversight for France and export
markets. A staff of 33 perform these
missions who are supported by a Quality
team to ensure the procedures defined
in the specifications are respected.
Within this system, lasting partnerships
with suppliers play a critical role by
contributing to an ability to respond to
the high-stakes of coordinating flows with
optimal responsiveness.
Organization and strategy
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
11
Export
French Distribution
Finance & Corporate Affairs
A staff of 29 manage the development
of our products throughout the world
through distributors that are in turn
responsible for retail distribution networks.
A task that remains focused on respecting
all the criteria imposed by the brands (the
choice of the distribution networks,
pricing policy, communications strategy,
merchandising.) while taking into account
the specific cultural codes of each country.
The distribution policy, commercial
management, monitoring sales margins
and advertising budgets for France are
managed by a team of 46. Every launch
is based on its own specific strategy both
with respect to each brand and each retail
channel. The primary goal: reach the
consumer through strong campaigns and
true drivers of differentiation starting with
the product’s added value.
A team of 36 is responsible for this area
that covers internal control, financial,
statutory and tax accounting management,
financial communications, shareholder
relations, cash management, collection as
well as the management of brand licensing
agreements and the protection of
intellectual property.
Organization and strategy
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Interparfums’ unique blend
of expertise
Top notes, our missions: developing perfume
and cosmetic lines through license agreements
with leading luxury brands in close collaboration
with each of their creative and marketing teams.
Heart notes, our core values: meriting the
respect of the prestigious brands that grant us
their confidence, creativity in the service of
their image, professionalism and high
standards in product design and packaging,
orchestrating their distribution and promotion.
Base notes, underlying our vision: a strategy
based on long-term partnerships with all
stakeholders for managing the process of
creation and production and a streamlined
organizational approach with the outsourcing
of packaging and logistics.
12
Brand portfolio
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
BRAND
PORTFOLIO
13
Brand portfolio
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
14
Balmain
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Balmain
In July 2011, Maison Balmain and Interparfums signed a 12-year exclusive worldwide license agreement
to create, produce and distribute perfumes under the Balmain brand that commenced on January 1, 2012.
Lines distributed are Vent Vert (1947), Monsieur Balmain (1964), Ambre Gris (2008), Carbone (2010) and
Ivoire (2012).
Balmain fragrances were integrated into the group’s portfolio in September 2012 that was inaugurated by the
relaunch of the Ivoire line.
15
Balmain
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
€1.5m
2012 sales
Boucheron
In late December 2010, Boucheron and Interparfums signed a 15-year exclusive worldwide license agreement
to create, produce and distribute perfumes under the Boucheron brand that commenced on January 1, 2011.
Lines distributed are Boucheron Femme (1988), Boucheron pour Homme (1989), Jaïpur Homme (1998), Jaïpur
Bracelet (2012).
Its gradually market repositioning and the first initiative with the Jaïpur Bracelet line has confirmed the brand’s
potential.
16
€16.4m
2012 sales
3.7%
Percentage of 2012 group sales
Boucheron
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
17
Boucheron
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
18
Burberry
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Burberry
In July 1993, Interparfums entered into an exclusive license agreement with Burberry Ltd. to create and
produce perfumes under the Burberry name and distribute them worldwide.
In October 2004, Interparfums signed a new agreement for 12.5 years effective July 1, 2004.
In December 2010, Interparfums and Burberry extended by one year the length of the agreement to
December 31, 2017, Burberry’s right to buy the license was advanced from December 31, 2011 to
December 31, 2012.
In December 2011, Interparfums and Burberry announced they were in discussions about the creation of a
new operational structure for the fragrance and beauty business. As there can be no assurance that an
agreement will be reached, Burberry has exercised its right to evaluate the purchase price for the unexpired term
of the existing license.
In July 2012, Interparfums and Burberry announced the discontinuation of their discussions. The license
agreement expired on December 31, 2012 in exchange for payment by Burberry of a €181 million exit fee.
In October 2012, Interparfums and Burberry signed an agreement for the purpose of facilitating a smooth
transition and providing for an additional three-month period ending on 31 March 2013.
Lines distributed are Burberry (1995), Burberry Week end (1997), Burberry Touch (2000), Burberry Brit
(2003/2004), Burberry London (2006), Burberry The Beat (2008), Burberry The Beat Men (2009), Burberry
Sport (2010), a new make-up line Burberry Beauty (2010) and Burberry Body (2011).
Burberry fragrances were up nearly 6% from double-digit growth by the brand’s historic lines and the
continuing success of the Burberry Body line although impacted by lower sales by the Burberry Sport line.
In 2012, Burberry Beauty make-up continued its development through the extension of its products and points
of sale.
2012/2013 awards for Burberry
“2012 International Fragrance” prize forBurberry Body in Russia (Marie Claire)
“Prize for Best Bottle” for Burberry Body in the United Kingdom (Marie Claire)
“Best of the Best Award Nomination” prize for Burberry Body Eau de Parfum in Hong Kong (Cosmopolitan)
2012/2013 awards for Burberry Beauty
“In Style Best Beauty Buys 2012” prize for Burberry Lip Cover in Russia
“Tatler Beauty Awards” prize for the Fresh Glow illuminator in the UK
“It List 2012” prize for the Light Glow Natural Blush in Singapore (Elle Beauty)
19
€234.7m
2012 sales
52.7%
Percentage of 2012 group sales
Burberry
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Jimmy Choo
In early October 2009, the Jimmy Choo and Interparfums groups signed a 12-year exclusive worldwide license
agreement commencing on January 1, 2010 for the creation, development and distribution of fragrances under
the Jimmy Choo brand.
Lines distributed are Jimmy Choo (2011), Flash (2013).
Momentum that began in 2011 with a single product line, Jimmy Choo Eau de Parfum, continued in 2012
with the Eau de Toilette. Jimmy Choo fragrances achieved strong growth of 36% in the period. The new
women’s line Flash was launched in the first quarter of 2013.
2012/2013 awards
Prize in the “Editor’s Pick” fashion fragrance winner category for the Eau de Toilette in the United Kingdom
(Elle Beauty Awards 2012)
Prize for the “Best Women’s Fragrance” for the Eau de Toilette category in the United Kingdom. (Copra 2012 Award)
20
€40.1m
2012 sales
9.0%
Percentage of 2012 group sales
Jimmy Choo
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
21
Jimmy Choo
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
22
Karl Lagerfeld
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Karl Lagerfeld
In October 2012, Karl Lagerfeld, the internationally renowned fashion house, and Interparfums signed a 20-year
exclusive worldwide license agreement to create, produce and distribute perfumes under the Karl Lagerfeld brand.
The launch of a new fragrance line is planned for 2014.
23
Karl Lagerfeld
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Lanvin
In July 2004, Interparfums entered into a 15-year exclusive worldwide license agreement with the company
Lanvin to create, develop and distribute fragrances worldwide under the Lanvin name.
At the end of July 2007, Interparfums acquired the Lanvin brand names and international trademarks for class
3 fragrance and make-up products from the Jeanne Lanvin SA company. On the same date, the two companies
mutually agreed to terminate the existing licensing contract signed in June 2004.
Lines distributed are Arpège (1927), Lanvin L’Homme (1997), Éclat d’Arpège (2002), Rumeur 2 Rose (2008),
Jeanne Lanvin (2008), Lanvin L’Homme Sport (2009), Marry me ! (2010) and Jeanne Lanvin Couture (2012).
Lanvin fragrances have maintained steady growth driven by continuing gains by the Éclat d’Arpège line and the
launch of the Jeanne Lanvin Couture line.
2012/2013 awards
“Design innovation” award prize for Avant-Garde (Forme de Luxe)
24
€60.4m
2012 sales
13.5%
Percentage of 2012 group sales
Lanvin
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
25
Lanvin
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
26
Montblanc
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Montblanc
In early January 2010, Montblanc and Interparfums signed a 10 ½ year exclusive worldwide license agreement
to create, produce and distribute perfumes and ancillary products under the Montblanc brand with a
commencement date of 1 July 2010.
Lines distributed are Présence (2001), Présence d’une Femme (2002), Individuel (2004), Femme Individuelle
(2004), Starwalker (2005), Femme de Montblanc (2006), Homme Exceptionnel (2006), Legend (2011) and
Legend Femme (2012).
Montblanc fragrances, the portfolio’s third-largest brand, delivered strong growth (+51%), confirming the
success of its men’s line, Legend, now the group’s top-selling men’s line before the launch of the women’s line
Legend Femme.
2012/2013 awards
“Best Men’s Advertising Campaign” award in the United Kingdom. (Fifi 2012 Award)
“Best New Fragrance Design and Packaging” award in the United Kingdom (Fifi 2012 Award)
“Best Fragrance for Him” beauty award in China (Self )
“Recommended fragrance” beauty award in China (Men’s Uno)
“Best Business Fragrance” beauty award in China (Men’s Jockers)
27
€46.1m
2012 sales
10.3%
Percentage of 2012 group sales
Montblanc
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Nickel
In April 2004, Interparfums acquired a majority stake in Nickel, a company specialized in skincare products
for men. In June 2007, Nickel became a wholly-owned subsidiary after Interparfums acquired the company’s
remaining shares.
Sales for the men’s skincare brand remained resilient in a difficult market for this segment, boosted by the
performance of the personal hygiene and shaving range.
28
€1.9m
2012 sales
0.4%
Percentage of 2012 group sales
Nickel
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
29
Nickel
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
30
Paul Smith
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Paul Smith
In December 1998, Interparfums entered into a 12-year exclusive worldwide license agreement with Paul Smith
to create and produce perfumes and cosmetics under the Paul Smith brand.
In July 2008, this agreement was extended for seven years until December 31, 2017 on the basis of comparable
contractual terms and conditions.
Lines distributed are Paul Smith (2000), Paul Smith Extrême (2002), Paul Smith Rose (2007), Paul Smith Man 2
(2010) and Paul Smith Optimistic (2011).
Paul Smith remains concentrated in the United Kingdom with a solid position in that market based on the
steady performance by the brand’s historic line Paul Smith Extrême.
€11.6m
2012 sales
2.6%
Percentage of 2012 group sales
31
Paul Smith
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Repetto
In 2011, Repetto, the French maker of dance-inspired footwear and fashion accessories, and Interparfums
signed a 13-year worldwide license agreement starting on January 1, 2012 for the creation, development and
distribution of fragrances under the Repetto brand.
The first fragrance line is planned for summer 2013.
32
Repetto
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
33
Repetto
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
34
S.T. Dupont
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
S.T. Dupont
In July 1997, Interparfums entered into an 11-year exclusive license agreement with S.T. Dupont to create and
produce perfumes under the S.T. Dupont name and distribute them worldwide. In April 2006, this agreement
was extended for an additional three years, i.e. until June 30, 2011. In April 2011, this license agreement was
renewed for 5 ½ years to 31 December 2016.
Lines distributed are S.T. Dupont (1998), S.T. Dupont Essence Pure (2002), Passenger (2008), Passager Cruise
(2011) and 58 Avenue Montaigne (2012).
S.T. Dupont fragrances, with its strongest sales based in the Middle East and Eastern Europe continued to
grow (+5%), boosted in particular by the launch of the men’s and women’s line 58 Avenue Montaigne.
€13.8m
2012 sales
3.1%
Percentage of 2012 group sales
35
S.T. Dupont
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Van Cleef & Arpels
At the end of September 2006, the Van Cleef & Arpels and Interparfums groups signed an exclusive
worldwide license agreement to manufacture and distribute perfumes and ancillary products under the Van
Cleef & Arpels brand name with a 12-year term that took effect on 1 January 2007.
Lines distributed are First (1976), Van Cleef pour Homme (1978), Tsar (1989), Van Cleef (1994) First 1er Bouquet
(2008), Féerie (2008), Collection Extraordinaire (2009), Oriens (2010), Midnight In Paris (2010), Un Air de First
(2011) and Rêve (2013).
Van Cleef & Arpels fragrances had steady sales in the year without major launches. The new women’s line Rêve
is scheduled to be launched in spring 2013.
36
€17.8m
2012 sales
4.0%
Percentage of 2012 group sales
Van Cleef & Arpels
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
37
Van Cleef & Arpels
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
38
Brand portfolio
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
39
Brand portfolio
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
SHAREHOLDER
INFORMATION
The Interparfums share
For the year to date, trends for Interparfums’
share price in 2012 can be divided into three
distinct phases:
- a rise over the first half back up to the
€20 range following the significant drop
in December 2011 in conjunction with
the discussions initiated by Burberry on
the creation of a new operational structure
for the fragrance and beauty business;
- the share price fell back to around
€17 following the announcement of the
discontinuation of these discussions between
the two companies;
- finally, a slow and steady uptrend to
reach €23 at the end of the year with the
announcement of good half-year results,
strong gains by Montblanc, Jimmy Choo
and Boucheron in particular and positive
trends for the years ahead.
Bolstered by the signature of a 20-year license
agreement with the Karl Lagerfeld brand in
November 2012, the share price has traded
at around €25 since the publication of the
2012 annual results for a market capitalization
of approximately €550 million. Trading
volume has remained resilient with an average
of 15,000 shares per day.
40
Shareholder information
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Trading activity: Interparfums vs. the CAC Mid & Small index
Euro
27
26
25
24
23
22
21
20
19
18
Volume
500.000
450.000
400.000
350.000
300.000
250.000
200.000
150.000
100.000
50.000
Mach May
August
Sept.
January March May
August
Sept.
January
2011
2012
2013
Dividends
Dividend for fiscal year: 2008 2009 2010 2011
Paid in: 2009 2010 2011 2012
Dividends per share €0.38 €0.39 €0.48 €0.50
Dividend adjusted for bonus share issues €0.24 €0.29 €0.40 €0.45
Annual change for the adjusted dividend +9 % +21 % +38 % +13 %
Financial communications:
a dual commitment to both
transparency and fair presentation
Since it was listed on the Paris Stock Exchange in1995,
Interparfums’ financial communications strategy has been
based on a dual commitment to both transparency and fair
presentation. This approach is strengthened by a commitment
to dialogue and proximity with a range of both targeted
and diversified tools: the annual report included with the
registration document, half-year report, letter to shareholders,
press releases and financial notices. These publications are
supplemented by interactive tools and a platform for online
exchange www.interparfums.fr as well as individual and
group meetings with shareholders, analysts, journalists,
fund managers.
Upcoming publications and events
2013 second-quarter sales: End of July 2013
2013 first-half sales and earnings: Mid-September 2013
2013 third-quarter sales: End of October 2013
2013 Letter to shareholders: Mid-November 2013
2013 sales: End of January 2014
2013 annual results: Mid-March 2014
Forums and trade shows
Large & Mid Cap Events trade show in Paris:
October 2 & 3, 2013
Actionaria trade show, Paris:
November 22 & 23, 2013
41
Securities market information
Market: NYSE Euronext Paris
Market segment: Segment B (Mid Caps)
IPO date: November 1995
ISIN code: FR0004024222 ITP
Stock market indexes: CAC Mid & Small
Market maker: Oddo Midcap
Analyst coverage
Institutions providing financial research on Interparfums:
Exane BNP Paribas, Gilbert Dupont, ID Midcaps,
Natixis Securities, NFinance and Oddo Securities.
Shareholder base as of December 31, 2012
Interparfums has more than 6,300 individual shareholders
Free float 27%
Interparfums Inc. 73%
and 300 institutional shareholders (with foreign investors
representing one third).
2012 awards
In December, at the 5th “Investor Relations & Finance
Communications Forum” the best professionals and teams
of companies listed on NYSE Euronext Paris were
recognized by the Investor Relations Awards organized in
partnership with the French Society of Financial Analysts
(SFAF) and IR-Intelligence. On this occasion, Philippe
Santi, Executive Vice President, received the award for the
Mid Cap category.
Shareholder information
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
CONDENSED
FINANCIAL STATEMENTS
Consolidated income statement
In € thousands,
except per share data which is in units 2011 2012
Sales 398,328 445,460
Cost of sales (145,602) (163,535)
Gross margin 252,726 281,925
% of sales 63.4% 63.3%
Selling and administrative expenses (205,822) (223,772)
Current operating income 46,904 58,153
% of sales 11.8% 13 .1%
Other operating income and expenses (603) 154,650
Operating profit 46,301 212,803
% of sales 11.6% 47.8%
Net financial expense 566 (3,023)
42
Income before income tax 46,867 209,780
% of sales 11.8% 47.1%
Income tax (16,661) (74,083)
Effective tax rate 35.5% 35.2%
Net income before non-controlling interest 30,206 135,697
% of sales 7.6% 30.5%
Attributable to non-controlling shareholders (94) (165)
Net income 30,300 135,862
% of sales 7.6% 30.5%
Condensed financial statements
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
Consolidated balance sheet
Assets
In € thousands 2011 2012
Non-current assets
Net trademarks and other intangible assets 73,059 79,624
Net property, plant, equipment 9,057 7,017
Financial assets and other non-current financial assets 1,560 8,505
Deferred tax assets 5,777 10,214
Total non-current assets 89,453 105,360
Current assets
Inventory and work in progress 101,167 87,199
Trade receivables and related accounts 129,109 106,179
Other receivables and deferred tax assets 6,865 7,055
Cash and cash equivalents 26,600 229,003
Total current assets 263,741 429,436
Total assets 353,194 534,796
Shareholders’ equity & liabilities
In € thousands 2011 2012
Shareholders’ equity
Share capital 59,602 66,001
Additional paid-in capital and reserves 125,841 142,883
Net income for the year 30,300 135,862
Equity attributable to parent company shareholders 215,743 344,746
Non-controlling interests 277 118
Total shareholders’ equity 216,020 344,864
Non-current liabilities
Provisions for non-current commitments 2,127 2,994
Non-current borrowings 12 -
Deferred tax liabilities 1,472 1,625
Total non-current liabilities 3,611 4,619
Current liabilities
Trade payables and related accounts 96,238 68,396
Current borrowings 3,450 62
Bank facilities 9,205 21,076
Provisions for contingencies and expenses 49 48
Other payables and deferred tax liabilities 24,621 95,731
Total current liabilities 133,563 185,313
Total shareholders’ equity and liabilities 353,194 534,796
43
Condensed financial statementss
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
GROUP
ORGANIZATION
Interparfums and its subsidiaries
Commercial operations are conducted largely through Interparfums SA. To pursue its international development,
Interparfums set up four new subsidiaries on January 1, 2007 in the key European markets in partnership with its local
distributors: Germany (51%), United Kingdom (51%), Italy (71%) and Spain (100%).
Interparfums also created a wholly-owned subsidiary in Switzerland, Interparfums Suisse Sarl. This subsidiary is the owner
of the Lanvin brand name for class 3 products.
In 2010, Interparfums SA further strengthened its presence in markets and major regions by creating wholly-owned distribution
subsidiaries in Singapore (Interparfums Singapore) and the United States (Interparfums Luxury Brands) respectively.
PHILIPPE BÉNACIN
JEAN MADAR
FREE FLOAT
44
46%
54%
INTERPARFUMS INC.
NASDAQ - New York
FREE FLOAT
73%
27%
INTERPARFUMS SA
Euronext Paris
51%
51%
71%
100%
100%
100%
100%
INTERPARFUMS
DEUTSCHLAND
GMBH
Germany
INTERPARFUMS
LTD
INTERPARFUMS
SRL
United Kingdom
Italy
INTER ESPAÑA
PARFUMS &
COSMETIQUES SL
Spain
INTERPARFUMS
SUISSE SARL
INTERPARFUMS
LUXURY BRANDS
INTERPARFUMS
SINGAPORE
Switzerland
United States
Singapore
Group organization
INTERPARFUMS ANNUAL REPORT TWO THOUSAND & TWELVE
TWO
THOUSAND
TWELVE
REGISTRATION
DOCUMENT
This original French language version of the registration document (Document de référence) was filed with the French financial
market authority (Autorité des Marchés Financiers or AMF) on March 28, 2013 in compliance with article 212-13 of the AMF
General Regulation. It may be used in connection with a financial transaction only if accompanied by a memorandum approved
by the AMF. The original French language version of this document was prepared by the issuer and is binding on its signatories.
CONSOLIDATED MANAGEMENT REPORT
CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
SHAREHOLDER INFORMATION
HISTORY OF THE COMPANY
NOMINATIONS AND CORPORATE AWARDS
AUDITORS AND RESPONSIBILITY STATEMENT
46
60
90
112
126
128
130
CONSOLIDATED
MANAGEMENT
REPORT
ORGANIZATION OF THE COMPANY P. 47
CONSOLIDATED FINANCIALS P. 49
RISK FACTORS P. 50
SOCIAL RESPONSIBILITY P. 53
SOCIETAL AND ENVIRONMENTAL RESPONSIBILITY P. 55
DIVIDENDS P. 57
TRADING IN OWN SHARES P. 57
GROUP ORGANIZATION P. 58
MARKET SHARE AND COMPETITION P. 59
POST-CLOSING EVENTS P. 59
2013 OUTLOOK P. 59
46
Historical financial information
In accordance with article 28 of Commission Regulation (EC) 809-2004 implementing the prospectus directive, the following
information shall be incorporated by reference in this registration document:
- the consolidated financial statements for the period ended December 31, 2011 prepared in accordance with international
accounting standards and the auditors’ report on these financial statements, as presented in the chapter “IFRS consolidated
financial statements” of the original French language version of the registration document filed with the AMF on April 6, 2012
under No. D.12-0298.
- the consolidated financial statements for the period ended December 31, 2010 prepared in accordance with international
accounting standards and the auditors’ report on these financial statements, as presented in the chapter “IFRS consolidated
financial statements” of the original French language version of the registration document filed with the AMF on April 6, 2011
under No. D.11-0244.
Disclaimer
This English language version of this registration document is a free translation of the original “Document de référence 2012” that
was prepared in French. All possible care has been taken to ensure that this translation is an accurate representation of the original
the issued in French language and registered on March 28, 2013 by the AMF (French Securities and Exchange Commission).
However, in all matters of interpretation of information, views or opinions expressed therein, the original language version of the
document in French takes precedence over this translation. In consequence, the translation may not be relied upon to sustain any legal
claim, nor be used as the basis of any legal opinion and Interparfums SA expressly disclaims all liability for any inaccuracy herein.
Consolidated management report
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1.
ORGANIZATION
OF THE COMPANY
1.1.
Business overview
The company creates, manufactures and distributes prestige
perfumes through license agreements with leading brands
in the high-end ready-to-wear, high fashion, jewelry and
accessories sectors. This business model is based on obtaining
rights granted by a brand name company to Interparfums to
use its brand name in exchange for royalty payments typically
indexed to sales (see the list of licenses in note 6.2 of the
consolidated financial statements).
The product design cycle of between 12 and 18 months is
assured by the company’s marketing and development teams
in partnership with the licensor.
In this business model Interparfums outsources the entire
production process to manufacturing partners ensuring
optimal expertise in their respective areas. These include
producers of juice, glass, caps and cardboard boxes and
packaging companies.
1.3.
2012 milestones
January
Commencement of the Balmain license
Commercial activity has begun based on four existing lines.
Commencement of the Repetto license agreement
The first women’s fragrance line will be launched in 2013.
February
Launch of the Jimmy Choo Eau de Toilette
A luminous new scent that puts an original twist on the original
Jimmy Choo fragrance with notes of ginger, tea rose, exotic
tiger orchid and cedar wood resulting in a floral, fruity and
modern composition.
May
Launch of the Jeanne Lanvin Couture line of Lanvin
Jeanne Lanvin Couture offers a sophisticated variation on
the theme of the first opus Jeanne Lanvin. This latest fragrance
keeps its fruity and musky character but is enriched with
more sensual notes.
The company distributes its products worldwide (see note
5.2 of the consolidated financial statements) through wholly-
owned distribution subsidiaries or joint ventures, independent
companies, subsidiaries of major luxury good corporations
and duty free operators.
Launch of the Jaïpur Bracelet line of Boucheron
Jaïpur Bracelet, echoing the high-jewelry collections of Maison
Boucheron, is inspired by the traditional Nauratan bracelet
given to Rajasthani brides for good luck.
Product promotion and advertising are assured by Interparfums’
marketing departments.
June
Bonus share distribution
47
1.2.
The selective market
In the United States, according to the market research company,
NPD Group, Inc., the prestige beauty market posted a 7%
gain in 2012 generating sales of US$10.2 billion compared
with 11% in 2011.
In the French fragrance market, after two years of growth,
in 2012 sales declined 3% for unit sales and 0.9% for sales
revenue to €2.8 billion according to NPD. However, Martine
Ringwald, NPD Senior Vice President, put this performance
in perspective by noting “Do not be defeatist. Selective Perfumery
is doing pretty well. This is not a bad performance in times of
crisis, in a market where the average price is high and continues
to grow.”
Revenues in the fragrances industry are likely to continue
to develop at dynamic rates over the upcoming eight years.
“We forecast global revenues of more than US$15.6 billion
in 2019”, commented Oliver Kutsch, Chairman-CEO of
Ceresana, the German-based market research firm.
With the number of consumers demanding fragrance
products rising worldwide, the study emphasized in particular
the importance of emerging countries of Latin America and
the Asia-Pacific region as growth engines for the industry.
On June 18, 2012, the company proceeded with its 13th bonus
issue on the basis of one new share for every ten shares held.
Launch of Electro Shock of Nickel
A fatigue-fighting skin care concentrate, combining the
ultra-fresh and invigorating action of lime with the energizing
boost of Guarana extract.
July
Burberry license: discussions with Burberry discontinued
On July 27, 2012 following several months of discussions,
Interparfums SA and Burberry were unable to reach
an agreement on final terms for a new operating model for
the fragrance and beauty business. On that basis, the license
agreement expired on December 31, 2012 in exchange
for payment by Burberry of an exit price of €181 million.
October
Launch of the Ivoire line of Balmain
Mythical fragrance of the 80’s, Ivoire of the Balmain couture
house, combines aerial heart notes with a floral accord followed
by a woody trail.
Burberry license: transition agreement
Interparfums and Burberry signed an agreement in order
to facilitate a smooth transition that included an additional
three months period ending on March 31, 2013.
Consolidated management report
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Signature of a fragrance license agreement with Karl Lagerfeld
On October 8, Karl Lagerfeld, the internationally renowned
fashion house, and Interparfums, the creator of prestige
perfumes and cosmetics, signed a 20-year exclusive worldwide
license agreement commencing on November 1, 2012
to create, produce and distribute perfumes under the
Karl Lagerfeld brand. The first women’s fragrance line will
be launched in 2014.
December
Investor Relations Award
Interparfums was awarded the prize for the Best Investor
Relations in the “Mid Cap” category at the 5th Investor
Relations and Financial Communications Forum.
1.4.
Operating highlights and key figures
Bolstered by strong year-end momentum, particularly in
the US and Asia, Interparfums exceeded its guidance for 2012
annual sales issued in the fall. With record consolidated
sales of €445.5 million, the company experienced
continuing growth in the period, up 11.8% at current
exchange rates and 6.9% at constant exchange rates over
2011, and despite the high comparison base from the
launches of the Burberry Body line in the prior year.
This performance reflects the very strong development by
Montblanc (+51%), Jimmy Choo (+36%) and Boucheron
(+96%) fragrances that generated combined sales of
nearly €100 million after just two years of activity as part
of the group’s portfolio.
1.5.
Sales by brand
In € millions 2008 2009 2010 2011 2012
As a % of sales
Burberry 169.0 166.2 184.2 221.7 234.7
63.8% 64.1% 60.4% 55.7% 52.7%
Lanvin 39.0 40.6 53.0 57.8 60.4
14.7% 15.7% 17.3% 14.5% 13.6%
Montblanc - - 7.0 30.6 46.1
- - 2.3% 7.7% 10.4%
48
Jimmy Choo - - 0.6 29.4 40.1
0.2% 7.4% 9.0%
Van Cleef & Arpels 21.0 20.2 25.9 20.4 17.8
7.9% 7.8% 8.5% 5.1% 4.0%
Boucheron - - - 8.4 16.4
- - - 2.1% 3.7%
S.T. Dupont 11.5 11.5 15.8 13.2 13.8
4.3% 4.4% 5.2% 3.3% 3.1%
Paul Smith 13.4 12.8 14.9 14.2 11.6
5.0% 4.9% 4.9% 3.6% 2.6%
Nickel 2.7 2.3 2.2 2.0 1.9
1.1% 1.0% 0.7% 0.5% 0.4%
Balmain - - - - 1.5
- - - - 0.3%
Other 8.3 5.6 1.5 0.6 1.2
3.2% 2.1% 0.5% 0.2% 0.3%
Total 264.9 259.2 305.7 398.3 445.5
Burberry fragrances rose nearly 6% from double-digit growth
by the brand’s historic lines and the continuing success
of the Burberry Body line although impacted by lower sales
by the Burberry Sport line.
Lanvin fragrances for the first time exceeded sales of €60 million,
with steady growth driven by continuing gains from the Éclat
d’Arpège line and the launch of the Jeanne Lanvin Couture line.
With sales of more than €46 million, Montblanc fragrances
delivered strong growth (+51%), confirming the success
of Legend (€22 million) that is now the group’s top-selling
men’s fragrance line.
Jimmy Choo also showed very robust gains (+36%) with
sales of €40 million, based on a single women’s line.
In a year without major launches, Van Cleef & Arpels
fragrances remained resilient with sales of nearly €18 million.
The gradual re-release of Boucheron fragrances and a first
initiative with the Jaïpur Bracelet line have already generated
€16 million in sales.
Consolidated management report
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1.6.
Sales by region
In € millions 2011 2012
North America 80.3 103.6
South America 36.8 35.4
Asia 65.3 72.9
Eastern Europe 34.7 38.1
Western Europe 103.3 108.5
France 33.7 35.1
Middle East 39.9 46.6
Africa 4.3 5.2
Total 398.3 445.5
The company continued to reap benefits from its strong
international positions and balanced sales mix:
- Asia (16% of revenue), and China in particular, showed
continuing momentum with growth of nearly 12%;
- North America registered the year’s biggest increase (+29%),
boosted in particular by remarkable performances of Jimmy
Choo and Montblanc fragrances in the US;
- performances in Western Europe (excluding France) remained
positive (+5%) despite weaker consumer spending in selected
countries;
- expansion in the Middle East and Eastern Europe continued
on gains of 17% and 10% respectively with robust growth
in Saudi Arabia and Russia;
- finally, against the backdrop of modest growth for the
perfumes and cosmetics market both for sales revenue and
volume sales, France performed well (+4%).
2.
CONSOLIDATED FINANCIALS
2.1.
Income statement highlights
49
In € thousands 2009 2010 2011 2012
Sales 259,199 305,696 398,328 445,460
International (%) 90.0% 91.0% 91.5% 92.1%
Operating profit 33,683 42,216 46,301 212,803
% of sales 13.0% 13.8% 11.6% 47.8%
Net income 22,647 26,807 30,300 135,862
% of sales 8.7% 8.8% 7.6% 30.5%
In 2012, Interparfums maintained its forward momentum
of prior years with further market share gains driven
by significant advances in particular by Montblanc, Jimmy
Choo and Boucheron fragrances that generated combined
sales of nearly €100 million after just two years of activity
as part of the group’s portfolio.
Through tight control over all operating expenses and in
particular for marketing and advertising (+9%), results came
in above recent estimates. Current operating income thus
reached €58.2 million, up 24% on the prior year with a
margin rising above 13%.
With the recognition of income and expenses associated with
the discontinuation of the Burberry license for a net gain
of €156.1 million before tax, and a provision for additional
goodwill impairment of €1.4 million for the Nickel
brand, operating profit was up sharply to €212.8 million.
And reflecting this same trend, net income reached nearly
€136 million.
Like-for-like (and notably excluding items associated with
the discontinuation of the Burberry license), net income rose
19% to €36.1 million marking the 16th consecutive year of
uninterrupted growth.
Consolidated management report
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
50
2.2.
Balance sheet highlights
In € millions 2011 2012
Non-current assets 89.5 105.4
Inventories 101.2 87.2
Trade receivables 129.1 106.2
Net cash 17.4 207.9
Group shareholders’ equity 215.7 344.7
Borrowings and financial liabilities 12.6 21.1
Trade payables 96.2 68.4
The group’s financial position was very significantly
strengthened at December 31, 2012 with shareholders’ equity
of €345 million (64% of total assets) and net cash of
€208 million. On top of this, positive operating cash flow
was generated by tight inventory controls and further
reductions in the trade receivables balance.
3.1.
Operating risks
3.1.1.
License agreements
2.3.
Cash flow statement highlights
Key changes in consolidated cash flows:
- a positive trend for operating cash flows reflecting the
€181.2 million inflow from the Burberry exit fee in December,
a reduction in trade payables mainly in response to shorter
average customer settlement periods, a comparison base with
2011 significantly impacted by the Burberry Body line
launched in September and lower trade payables mainly due
to the decline in the volume of component purchases and
adjustments in advertising expenses;
- cash flows from investing activities that included the upfront
payment for Karl Lagerfeld license and royalty advances of
€19.2 million as well as the purchase of fixed assets notably
relating to the creation of molds for bottles for new lines
and department store stands;
- cash flows from financing activities including the
€3.3 million for the repayment of loans obtained for
the acquisition of the Lanvin trademarks, a €9.9 million
dividend payment for fiscal 2011 and capital increases
generated by the exercise of stock options amounting to
€2.4 million.
On this basis, net cash at December 31, 2012 amounted to
€207.9 million, compared with €17.4 million one year earlier.
3.
RISK FACTORS
After performing a review of risks that could potentially
have a material adverse effect on its business, financial position
or results (or its ability to meet its targets), the company
considers that there do not exist other risks than those
presented below.
The risk mapping procedure launched in 2004 and regularly
updated since, has made it possible to classify risks into four
categories: operating risks, risks related to international
operations, environmental and employee-related risks and
risks related to financial market conditions.
The licensing system which is typical in the perfume
and cosmetics industry consists of a brand name company
(Montblanc, Boucheron, etc.) granting the licensee
(Interparfums) a right to use the brand name in exchange for
royalty payments indexed to sales. The associated risk pertains
to the potential non-renewal of agreements upon expiration.
In the case of Interparfums, several factors tend to limit or
eliminate this risk:
- length of contracts (10 years or more);
- possibility of early renewal;
- diversified portfolio of licensed brands;
- factors specific to the company (sophisticated marketing,
distribution network, corporate organization, etc.);
- limited number of potential licensees with a similar profile;
- ongoing efforts to add new licenses in order to limit the
weight of existing brands in the portfolio.
Furthermore, the company is the owner of two brand names
and international trademarks for class 3 fragrances and
make-up products (Lanvin and Nickel) that reduces
the overall risk of the non-renewal of license agreements.
3.1.2.
Market conditions
The creation and distribution of prestige perfumes is a
highly competitive sector. The quality of its product portfolio,
internal market studies and privileged relations with distributor
partners maintained in each of the countries through
regular visits, product presentations supported by marketing
plans all reduce the risk of a loss of market share.
3.1.3.
Sourcing and production
Sourcing of raw materials for the plants is assured by
Interparfums’ Production Department. Planning for the
launch of production lines is regularly updated and monitored
with component suppliers combined with recourse to
multiple suppliers selected by the company, limit the risk
of supply chain disruptions.
Consolidated management report
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Production risks result from the possibility that manufacturing
partners might be unable to manufacture products on time
for their distribution. To reduce this risk, the company
implements production plans early on in the process in
partnership with manufacturers. These measures are
supplemented by ensuring multiple supplies of molds for bottles
and related items as well as a number of production sites.
3.1.4.
Insurance
Interparfums has always carried adequate insurance for its
activities worldwide under conditions that comply with
industry standards, providing global coverage for important
risks and activities.
This coverage includes:
- property damage and business interruption;
- inventory loss or damage;
- contingent business income coverage;
- civil liability;
- Directors’ and Officers’ liability;
- product liability;
- transport;
- professional travel and automobile insurance;
- IT equipment loss or damages;
- specific risks linked to particular events.
Interparfums purchases supplemental insurance when
required, either in compliance with the law or more
specifically to cover business risks or risks arising from
specific circumstances.
Insurance coverage is overseen by a specialized broker and
spread among four major European insurers.
In addition, Interparfums is the named beneficiary for a life
insurance policy for its Chairman and Chief Executive.
All these risks are covered through outside insurance providers.
3.2.
International business risks
3.2.1.
Currency risks
Because a significant portion of group sales is in foreign
currencies, it incurs a risk from exchange rate fluctuations,
primarily from the US dollar (41.2% of sales) and to a lesser
extent the Pound sterling (8.2% of sales) and the Japanese
yen (1.3% of sales).
The primary objective of the company’s foreign policy is to
hedge the most probable budget exposure related primarily
to cash flows from operating activities in US dollars as well
as trade receivables in the US dollar, Pound sterling and
Japanese yen. To this purpose, the company has recourse to
forward sale agreements according to procedures that
prohibit any transactions of speculative nature.
Financial instruments used by the group to manage its
foreign exchange exposure are described in note 3.15.3 of
the consolidated financial statements.
3.2.2.
Country risks
With sales in more than 100 markets, Interparfums regularly
reassesses country risks.
For the past few years, the company has incurred no significant
default on payments in countries considered at risk.
Given our collections policies, receivables monitoring and
the quality of our distributors’ financial health, no country
risk reserve allocations were made in the financial statements
for the year ended December 31, 2012.
3.3.
Employee-related risks
In light of the company’s organizational structure, the role
of personnel is decisive. To foster personnel retention and
raise the level of expertise and service provided to customers,
the company has developed a strong corporate culture
and implemented a system for employee management and
motivation based on a combination of tools including variable
compensation, stock options available to all personnel, annual
review meetings, training, etc.
The company has a very low rate of employee turnover
and absenteeism (refer to the chapter “social responsibility”
of this document).
51
3.4.
Trade and financial risks
3.4.1.
Customer risks
Trade receivable collection risks are managed from the
inception of the receivable by maintaining a good knowledge
of the company’s market and customer base and limiting
the volume of orders for new customers. In addition,
this risk is further reduced by a diversified customer base
with 100 customers accounting for 80% of sales. Balances
of outstanding trade receivables are monitored daily,
and collection procedures are immediately implemented.
3.4.2.
Risks of default
The risk of the company not meeting its financial commitments
is extremely low given its significant net cash resources and
very low debt load ratio.
At December 31, 2012, all debt had been paid off.
Financial instruments used by the group to manage interest
rate risk are described in note 3.15.1 of the consolidated
financial statements.
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3.4.3.
Liquidity risk and covenants
3.4.6.
Risk associated with inadequate internal controls
A prudent management of liquidity risk implies maintaining
a sufficient level of liquidity and the availability of financial
resources through the appropriate types of credit lines.
After performing a specific review of its liquidity risk, the
company considers that is has the resources to honor its future
payment obligations. Maturities for financial assets and
liabilities are presented in note 3.15.2 of the consolidated
financial statements.
Loans obtained by the company are subject to obligations
under covenants. These ratios are calculated every year to
verify compliance with these contractual obligations. A breach
of these ratios could render these loan facilities subject to an
obligation of immediate prepayment.
Covenants in force are described in note 3.11.4 of the
consolidated financial statements.
3.4.4.
Equity risk
Treasury shares are held exclusively in connection with the
liquidity agreement managed by a brokerage firm. They are
recorded in the consolidated financial statements at acquisition
cost as a charge under shareholders’ equity.
The portfolio of marketable securities includes primarily
money market funds that do not include an equity component.
The group does not use hedging instruments to cover these
positions.
52
3.4.5.
Valuation risks
A significant share of the company’s assets consists of intangible
assets whose value depends in large part on future operating
performances. The valuation of intangible assets also implies
recourse to objective judgments and complex estimates
concerning items uncertain by nature. If a change occurs
in the underlying assumptions on which this valuation
is based, a reduction in the value of shareholders’ equity will
be recorded. The impact of such adjustment would however
be extremely limited.
Effective procedures applied by all group companies and for
all areas of financial risks identified are reassessed annually
in compliance with the Financial Security Act (Loi de Sécurité
Financière).
These internal controls are reinforced in France by application
of the Sarbanes Oxley Act within the framework of the
regulatory obligations of Interparfums Inc. (parent company
of Interparfums SA) and its listing on NASDAQ (see the
chapter on “internal control” of this registration document).
3.4.7.
Information technology risks
Interparfums and its subsidiaries have an ERP application
providing integrated sales, production and accounting
management capabilities. This system makes it possible to
monitor information in real-time and reduce the risk of data
loss and errors from multiple entries.
The company’s computer system is subject to risks of
breakdown, electrical power outages, computer viruses and
data theft. To reduce such risks, the company has robust
security systems (power converters, firewalls, anti-virus
programs, etc.) and has implemented business continuity
and IT recovery plans. These plans will contribute to improved
computer performances and include a fault tolerance system
for restoring normal operations in a few minutes.
3.4.8.
Litigation and other risks
These risks are managed by regularly monitoring legal and
regulatory developments and by taking measures to avoid
exposure to potential criminal liability and risks related to
commercial law and intellectual property rights. The company’s
legal department also manages litigation and disputes in
close collaboration with outside legal counsel and attorneys,
as well as the drawing up and reviewing the main contracts
of the company.
Provisions for contingencies concern primarily contract-related
disputes.
There are no other legal, judicial or arbitration proceedings
(including any that are pending or threatened of which
the company is aware), which may have or have had during
the past 12 months, a material effect on the financial position
or profitability of the company and/or group.
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4. SOCIAL RESPONSIBILITY
4.1.
Staff data
4.1.1.
Breakdown of staff
By gender
Interparfums staff by gender breaks down as follows:
women 70%, men 30%. This breakdown has remained
stable from one year to the next.
By age
Number of employees at 12/31/2012
Less than 25 years 13
Between 25 and 35 years 89
Between 36 and 45 years 71
Between 46 and 55 years 30
> 55 years 2
Total 205
The average age for Interparfums employees is 37.
By department
Number of employees at 12/31/2012
Executive Management 2
Production & Logistics 35
Burberry Fragrances 32
Luxe & Fashion 28
France 46
Finance & Corporate Affairs 36
Subsidiaries 26
Total 205
The decrease in headcount results mainly from the expiration
of work-study contracts.
By geographic area
Number of employees at 12/31/2012
France 86%
Europe excluding France 3%
North America 7%
Asia 4%
Total 100%
As a measure of prudence, the discussions initiated in 2011
between Interparfums and Burberry with respect to the
continuation of the partnership resulted in the recruitment
of staff on fixed-term contracts. In 2012, Interparfums
terminated its license agreement with Burberry. The departures
observed consequently reflect the expiration of these contracts.
4.1.3.
Remuneration and payroll trends
Interparfums has a compensation policy, a system of job
classifications and performance evaluations uniformly applied
to all employees. These procedures guarantee the principle
of fairness and equal treatment of men and women employees.
Employees of the company and its subsidiaries also benefit
from variable incentive compensation benefits linked to the
group’s performance.
Interparfums also promotes employee stock ownership
through annual stock option plans available to all employees.
As required by French law, a statutory employee profit-sharing
agreement was implemented on December 20, 2001.
The amount paid for employee profit sharing for 2012
was €10.3 million (compared to €1.7 million in 2011).
In € thousands 2011 2012
Total wages and benefits
(including profit sharing
and social charges) 24,771 25,161
of which Management Committee members
- wages, bonuses & social charges 4,063 4,266
- share based payment expenses 48 89
53
In addition €227 million in supplemental retirement benefits
for Executive Management were paid in 2012.
4.2.
Work organization
4.2.1.
Working time organization
All employees of the company work on the basis of a 35-hour
workweek annualized according to a fixed number of 218
work days per year and are entitled to 9 “recuperation days”
(RTT) per year.
Most employees work on a full-time basis.
At the end of 2012, 87% of employees were on permanent
contracts and 13% on fixed term contracts.
4.1.2.
Recruitment and dismissals
4.2.2.
Absenteeism
Headcount at 12/31/2011 227
Recruitment 34
Dismissals (13)
Resignations (6)
Expiration of contracts (37)
Headcount at 12/31/2012 205
The rate of absenteeism in 2012 was 9.54% (3.94% in 2011),
and reflects mainly an increase in maternity leaves. The
number of days of absence due to sick leave includes mainly
leave for cause of illness, maternity leave and two extended
sick leaves.
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TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
The breakdown for days of absence by cause, excluding legal
and contractual holidays is as follows:
Accordingly, in 2012, only one occupational accident was
reported by Interparfums.
Number of
days of absence %
Maternity and
paternity leave 1,105 45.7%
Sick leave 1,308 54.3%
Total 2,413 100%
4.3.
Labor relations
4.3.1.
The organization of dialogue between
employees and management
As required by law, elections are held every four years to
select a works’ committee and employee representatives.
The last elections, held in early 2011 resulted in the formation
of a single body of employee delegates (Délégation Unique du
Personnel) comprised of four salaried management employees
and two non-management employees.
Destined to meet on a monthly basis, the Works committee
is informed and consulted on strategic and organizational
issues having an impact on group employees. The minutes
of works committee meetings are distributed to all staff and
displayed in the company.
3 occupational accidents of limited severity occurred in 2011
resulting in short-term sick leaves without any impact on
the company’s general operations.
4.5.
Training
4.5.1.
Training policy
All Interparfums employees are offered training to develop
technical, management or personal skills.
Employees also regularly exercise their rights to individual
training benefits provided for under French law (Droit
Individuel à la Formation).
All Interparfums’ legal obligations with respect to continuing
vocational training are delegated a number of accredited
bodies including notably Intergros (the joint commission
for collective training or OPCA for wholesale and international
trade), AGEFOS (the French professional training fund
management organization) and FONGECIF (the management
fund for individual employee training rights) for the greater
Paris region.
In 2012, Interparfums devoted 2.27% of total payroll
to continuing vocational training (the legal obligation for
companies with more than 10 employees is 1.6%).
54
4.3.2.
Assessment of collective agreements
4.5.2.
Report on of training hours
Interparfums depends on the collective bargaining agreement
for the wholesale distribution industry applicable in France.
In addition, an action plan promoting the employment
of seniors has been in place by the company since 2009
and an action plan on gender equality in place since 2011.
4.4.
Health and safety
As required by law, elections are held every four years to
select members of the Health, Safety and Working Conditions
Committee (CHSCT). The last elections, held at the end
of 2012, resulted in the formation of a Health, Safety
and Working Conditions Committee comprised of two
management-level employees.
The purpose of the meetings of this committee CHSCT
destined to be held at least once every quarter is to contribute
to protecting the physical and psychological health, the
safety and improved working conditions of employees
of Interparfums, including temporary workers, and ensure
that legal and regulatory provisions on occupational health
and safety are respected. The minutes of CHSCT committee
meetings are distributed to all staff and displayed in the
company.
As Interparfums does not possess manufacturing sites, the
risk of occupational accidents are minimized. Furthermore,
the company does not generate hazardous situations.
The objective of training programs is to both adapt the skills
of staff to the needs of their actual position and prepare
them for future assignments. In 2012, 45% of employees
participated in at least one training program. Individual
training benefits provided for under French law (Droit
Individuel à la Formation or DIF) used in 2012 represented
a total of 1,731 hours.
The subjects covered by training programs in 2012 concerned
mainly personal development, computer skills, language
training, management and training relating to employee
representation bodies.
4.6.
Equal opportunity
and non-discrimination
4.6.1.
Gender equality
The gender equality action plan adopted in 2011 sets forth
notably measures destined to guarantee equal access
to employment, equal access to professional training and
improving the balance between professional and family life.
Women account for 70% of Interparfums’ workforce with
57% in management positions.
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4.6.2.
Disabled workers
Interparfums does not employ any disabled workers. In contrast,
since 1998 it has used the services of sheltered workshops
for disabled workers (Centres d’Aide par le Travail – CAT)
for the packaging of fragrance products.
4.6.3.
Combating discrimination
The company adheres to equal opportunity employment
principles with respect to recruitment, career advancement,
access to training and remuneration.
The company has also adopted plans in favor of non-
discrimination. These included a gender equality plan starting
in 2011 and a plan promoting the employment of older
workers in place since 2009.
4.7.
Promoting compliance with
the core conventions of the
International Labor Organization
In addition to items intrinsically related to collective bargaining
rights and combating discrimination described above, all
personnel of Interparfums are employed within a framework
based on consensual relations where the working conditions are
the result of negotiations between management and employees.
Interparfums respects the convention for the abolishment
of child labor since all employees are of legal age at a
minimum at the time of their recruitment.
5.
SOCIETAL
AND ENVIRONMENTAL
RESPONSIBILITY
The company has developed a business model built around
intellectual and commercial services, and namely the creation,
development and distribution of products. On this basis,
it has decided not to engage in industrial activities with
the entire production process outsourced to manufacturing
partners possessing specialized expertise in their respective areas.
These include producers of juice, glass, caps and cardboard
boxes and packaging companies. With no production activities
of its own, Interparfums does not own laboratories or
manufacturing sites.
However, even though Interparfums operates in a sector
considered less polluting than other industries, it remains
committed to preserving the environment by adopting
sustainable development processes. For this reason, it remains
involved in the production process by responsibly selecting
its suppliers and pursuing efforts to identify environmental
and societal priorities. The sustainability of its business
model is based not only on its extensive expertise but also
long-term values that it seeks to share with its manufacturing
partners, who in this way in turn contribute to promoting
the company’s environmental priorities.
The information presented in this chapter have been drawn
up in accordance with the provisions of article R. 225-105
of the French Commercial Code with respect to CSR
reporting requirements. Certain disclosures provided for
by Decree No. 2012-557 dated April 24, 2012 for CSR
reporting have not been included as they do not fall within
the scope of the company’s activities or its environmental
and social priorities such as in particular the sustainable use
of resources, climate change and the protection of biodiversity.
The major priorities that are the focus of concrete measures and
studies on continuing progress to be made are presented below.
In addition to the framework imposed by regulations, the
environmental and social dimension has become a decisive
factor for determining the organization of the company’s
relations with suppliers as well as customers as it indisputably
contributes to the quality of its performances and promotes
confidence by investors and partners.
5.1.
Optimized consumption of utilities
Consumption of water and energy by Interparfums’ head
office is limited to normal office usage in its administrative
premises that house 172 employees. Other water and energy
consumption concerns the sales offices and commercial
teams covering the French market that represent 33 employees
out of 205.
The search for new more efficient logistics solutions adapted
to the company’s needs has resulted in the construction
of a HQE certified warehouse operating since the summer
of 2011. This certification concerns notably improved
insulation, a lighting system with presence-detectors, Ecolabel
finishing materials, centralized technical management for
energy controls, rainwater recovery, high-performance waste
separation collection installations, etc.
5.2.
Recycling
To balance product quality and aesthetics with environmental
considerations, Interparfums takes care to reduce packaging
volumes at the source and select appropriate materials
at each stage of production to ensure optimal conditions
for their recycling or disposal.
The bottles of its products are made of recyclable glass and
the production process provides for a system of recuperation,
grinding and recasting of certain bottle components, which
generates savings in volume of materials used of 20%.
In addition, Interparfums ensures that its subcontractors
also have waste sorting and recycling systems. The company
has for example implemented with its suppliers of perfume
sets a system for the retrieval of collection bins.
Finally, Interparfums invests in measures required for the
treatment and recycling of the packages, cardboard boxes and
glass left once its customers have finished using its products.
With this objective, through its participation in the
“Eco Emballage” packaging recycling program, Interparfums
contributes to waste management and recycling.
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5.3.
Minimizing environmental impacts
Through the choice of techniques and materials
Interparfums strives to reduce the already low impact of
its business on the environment. Accordingly, Interparfums
selects partners using cutting-edge design techniques with
a commitment to reduce the impact of manufacturing
processes on the environment.
A water-soluble solution in part biodegradable that does not
harm the environment is used in the coloring of some
of its bottles. The coating process provides for the elimination
of solvent-based coatings and the progressive adoption of
hydro-coating for the remaining lines, in compliance with
the law of 2005 for reducing emissions of Volatile Organic
Compounds (VOC) in the air. In addition, sub-contractors
for glass making have electrostatic air filters to reduce dust
and smoke emissions in addition to wastewater recycling
and emission control monitoring systems.
Reducing CO2 rates (-4.5%), water consumption per pump
(-23.4%), and the number of components are important
factors in choosing sprayer pumps for Interparfums
products.
Interparfums has eliminated thermosetting plastics from its
line of bath and body care products in favor of recyclable
plastic.
This commitment to environmental responsibility, reducing
energy consumption and recycling are among the key
priorities in the selection of subcontractors.
Through initiatives to optimize logistics
Reducing its carbon footprint is also a priority for
Interparfums’ logistics and transportation management. In
this way, promotional materials manufactured in Asia are
shipped directly to Asian distributors without being
imported and stored in France. Particular attention is paid
to the efforts of its logistics service provider to optimize the
transportation management through trucks with full loads
to limit overall time on the road. Finally, by establishing
a warehouse strategically located at the crossroads for its
subcontractors, Interparfums has reduced distances for raw
material shipments.
Through initiatives for the transport of goods
Both the means of transport chosen and reducing transport
distances contribute to measures undertaken in accordance
with the company’s environmental priorities. In the area of
transport, the company’s priority is in favor of road transport
in France and other European countries and maritime
transport for Asia and the Americas. Use of air transport
is very limited and reserved only for urgent situations where
no other solutions are available.
Interparfums sourcing strategy also focuses on systematically
identifying local procurement solutions which contribute
to reducing CO2 emissions. In this way, 65% of Interparfums’
production originates from France and 20% from nearby
countries. Similarly, to reduce the transfer of components
which contributes to multiple shipments, Interparfums prefers
the use of service providers that cover several areas or integrate
different production phases (for example glass design and
plastic processing).
5.4.
Optimization of packaging
International and European regulations impose environmental
requirements with respect to the design and manufacture
of packaging, and in particular limits on volumes and weight.
Reducing packaging is clearly associated with the priorities
with respect to transport as it contributes to reducing the
cost and level of CO2 emissions.
With this objective, at the end of 2012, the company initiated
a study on the optimization and rationalization of bulk and
secondary packaging (product boxes and perfume sets).
The goal of this study is to enable the company to achieve
the following objectives:
- optimization of palettes;
- reducing cardboard packaging materials;
- reducing the volumes transported by decreasing the
amount of empty space for optimized transport.
The study is expected to result in the implementation
of actions in 2013.
5.5.
Regulatory issues
in the area of product safety
The REACH Regulation on the Registration,
Evaluation, Authorization and Restriction
of Chemical substances
Even though Interparfums does not manufacture its products
itself, it nevertheless ensures their introduction on the market.
As such it is responsible for ensuring the safety for use of
cosmetic products it distributes. To this purpose, it conducts
tests that include ensuring the innocuous nature for the
skin and eyes. In addition, in compliance with the European
Cosmetic Directive (and the new regulation 1223/2009
that will enter into force on July 11, 2013), its products are
not subject to any tests on animals. Tests for skin irritation
are thus conducted on healthy voluntary adult subjects and
ocular safety tests are performed through cell cultures. Within
this framework, it also ensures compliance with all other
relevant European and international regulations concerning
the design and production of all products it distributes.
Interparfums has taken measures for the application of
the new European Community Regulation on chemicals
and their safe use concerning the Registration, Evaluation,
Authorization and Restriction of Chemical substances
(EC Directive 1907/2006 of December 18, 2006) or REACH
with its suppliers. All technical and organizational measures
to be applied following the adoption of REACH have been
implemented by the company.
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The pre-registration phase of REACH ended on
December 1, 2008. During this period, importers and
manufacturers of “phase-in” substances were required
to register the substances once volume exceeded one ton
per year. Pre-registration makes it possible to obtain additional
delays in connection with the registration procedure.
Interparfums, as a downstream user of chemical substances,
is not subject to the registration requirement. However,
it has sought to maintain an active role by ensuring that the
registration process proceeds effectively and that there exists
a continuous supply for sourcing chemical substances
contained in its products.
Interparfums took the initiative to contact its different
subcontractors and suppliers to ensure they and those further
down the supply chain effectively comply with registration,
notification or authorization request procedures. Interparfums
has asked all its suppliers to provide commitments that
they will not supply articles containing substances listed
in appendix XIV (Substances of Very High Concern).
To date, no supplier has declared the presence in articles
provided to Interparfums of substances subject to authorization.
Information relating to REACH including notably risk
management measures transmitted through security data
files will be taken into account by Interparfums or its suppliers
as they are issued.
For information, the deadlines for the implementation
of REACH are spread over the period from June 1, 2008
to June 1, 2018.
Interparfums’ actions in this area as a responsible corporate
citizen thus exceed that of a simple coordinator, by pursuing
measures to increase awareness by its partners of environmental
issues and staying informed of the business practices of its
subcontractors and suppliers to preserve the environment.
Cosmetics Good Manufacturing Practices
(GMP) – ISO 22716 International Standard
The objective of this international cosmetics standard is to
ensure the quality and safety of cosmetic products distributed
within the European Union. Between now and 2013,
this standard imposes an obligation on all participants
in the cosmetics product cycle to comply with the Good
Manufacturing Practices required by the standard for the
manufacturing, packaging, testing, storage, and transportation
of cosmetic products.
The company is conscious of the advantages this standard
offers by contributing in particular to:
- managing potential risk factors affecting the quality of
cosmetic products;
- reducing the risk of confusion, deterioration, contamination
and errors;
- contributing to greater vigilance by personnel in the
performance of their activities;
- guaranteeing quality products.
The company has recently adopted procedures to study
the means to be deployed starting in 2013 for determining
the scope of the compliance audit.
6.
DIVIDENDS
Since 1998, the company has adopted a policy of distributing dividends that today represents more than 30% of consolidated
earnings to reward shareholders while at the same time associating them with the group’s expansion. In early May 2012,
a dividend of €0.50 per share was paid or a total amount of €8.6 million.
Dividends
Dividend for fiscal year: 2008 2009 2010 2011
Paid in: 2009 2010 2011 2012
Dividend per share €0.38 €0.39 €0.48 €0.50
Dividend adjusted for bonus share issues €0.24 €0.29 €0.40 €0.45
Annual change for the adjusted dividend +9% +21% +38% +13%
7.
TRADING IN OWN SHARES
In compliance with article 241-1 et seq. of the AMF General
Regulation, this paragraph describes the share buyback program
that will be submitted for authorization to the shareholders’
meeting of April 22, 2013.
7.1.
Purpose of the new share repurchase
authorization
The shareholders meeting of April 22, 2013 is called to renew
through its sixth resolution the authorization granted to the
Board of Directors to purchase and sell shares of the company
for the following purposes:
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- market-making or ensuring the liquidity of the company’s
shares through an investment services provider within
the framework of a liquidity agreement in compliance with
the conduct of business rules of the French association of
financial market professionals (AMAFI);
- grant employees or officers of the company and/or the
group stock options (articles L. 225-177 et seq. of the French
Commercial Code) and/or bonus shares (articles L. 225-197-1
et seq. of the French Commercial Code);
- remittance of shares pursuant to the exercise of rights
attached to securities conferring rights by redemption,
conversion, exchange, presentation of warrants or any other
means to grants of the company’s shares;
- use such shares for payment or exchange in connection
with financial transactions or acquisitions in compliance with
the financial market regulations;
- the maximum purchase price is €40 per share, excluding
execution costs;
- the total number of shares acquired may not exceed 5% of
the capital stock outstanding at any time. This 5%
limit applies to an amount of capital that will be adjusted
as applicable for corporate actions affecting the capital stock
after this meeting, whereby acquisitions by the company
shall under no circumstances increase its holding, directly
and indirectly through subsidiaries, to more than 5% of
the capital stock;
- pursuant to the above, by way of indication and without
taking into account shares already held by the company,
22,000,301 shares on December 31, 2012 would represent
5% of the capital stock corresponding to a maximum
theoretical purchase price of €44,000,602 on the basis
of a maximum purchase price of €40 per share.
- cancel shares to increase the return on equity and earnings
per share and/or eliminate the impact of dilution for
shareholders from capital increases subject to adoption of
the twelfth resolution of the extraordinary general Meeting
presented below authorizing this cancellation.
7.3.
Duration of the share
buyback program
7.2.
Maximum percentage of capital –
Maximum purchase price
Excerpt of the sixth resolution submitted for approval to
the shareholders meeting of April 22, 2013:
58
Shares acquired shall be subject to the following limits:
In compliance with the provisions of the sixth resolution to
be submitted to the shareholders meeting of April 22, 2013,
the authorization to implement this share buyback program
is granted for 18 months from the date of this meeting or
no later than October 22, 2014.
If one of the characteristics of the description of this program
is modified during the period of its duration, the public shall be
notified of this modification in accordance with the provisions
set forth in article L. 212-13 of the AMF General Regulation.
8.
GROUP ORGANIZATION
The shareholder base of Interparfums Inc. at December 31, 2012 was as follows:
PHILIPPE BÉNACIN
JEAN MADAR
FREE FLOAT
46%
54%
INTERPARFUMS INC.
NASDAQ - New York
FREE FLOAT
73%
27%
INTERPARFUMS SA
Eurolist - Euronext Paris
51%
51%
71%
100%
100%
100%
100%
INTERPARFUMS
DEUTSCHLAND
GMBH
Germany
INTERPARFUMS
LTD.
INTERPARFUMS
SRL
United Kingdom
Italy
INTER ESPAÑA
PARFUMS &
COSMETIQUES SL
Spain
INTERPARFUMS
SUISSE SARL
INTERPARFUMS
LUXURY BRANDS
INTERPARFUMS
SINGAPORE
Switzerland
United States
Singapore
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9.
MARKET SHARE
AND COMPETITION
Market share
In France, Interparfums attained roughly a 2% share of the
selective distribution market of prestige perfumes. In certain
countries such as the United States, the United Kingdom,
Russia or China, the company estimates its market share of
total French perfume imports at between 1% and 4%.
Source: Internal estimates.
Competition
Interparfums operates in a sector dominated by ten major
historic players in the perfume and cosmetics market that
have fragrance divisions with billions of euros in sales.
There exist around ten mid-size players like Interparfums
also operating in this segment with sales ranging between
€100 million and €1 billion.
While Interparfums has also developed a brand portfolio in
the luxury universe, it has adopted a markedly different
approach with a business model based on methodical long-
term development focused on creation and building
customer loyalty rather than volume and advertising.
10.
POST-CLOSING EVENTS
None.
11.
2013 OUTLOOK
In 2013, continued gains are expected from all the portfolio’s
brands (excluding Burberry) in response to:
- growing successes by the Lanvin, Jimmy Choo, Montblanc
and Boucheron fragrances in particular;
- the spring launch of new women’s fragrances lines under
the Jimmy Choo, Lanvin and Van Cleef & Arpels brands;
- the first significant initiatives in the fall for the Boucheron,
Balmain and Repetto brands.
Otherwise, as Interparfums will continue operating the
business for the Burberry brand for a period limited
to the first quarter, and based on the current Euro-US dollar
exchange rate, consolidated revenue for the 2013 full-year
may reach €300 million.
Furthermore, in light of an estimated cash position of
€200 million by the middle of the period, Interparfums
will remain focused on exploring all opportunities to expand
its portfolio either by acquiring new brands on a proprietary
basis or as a licensee.
Philippe Bénacin, Chairman and CEO commented:
“The level of these results, sustained development by the portfolio’s
main lines, and in particular Eclat d’Arpège, Jimmy Choo
or Montblanc Legend, initial market responses to the launch
of the Jimmy Choo Flash line and the quality of upcoming
initiatives for the Lanvin, Van Cleef & Arpels, Balmain,
Boucheron and Repetto brands render us very confident and provide
a solid basis for optimism in meeting our annual sales target
of €300 million for the 2013 full year. In light of the above,
the strategic shift we initiated in 2012 appears to be off to a
particularly excellent start.”
Philippe Santi, Executive Vice President, added:
“Despite a backdrop of uncertainty in the period, the merits
of our successful business model were again confirmed in 2012.
Highlighting this point, the current operating margin came
in above 13%. And even as our marketing and advertising
expenditures are redeployed in the period ahead, this margin
in 2013 is expected to remain at a high level of around 11%.”
59
Consolidated management report
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS P. 66
SIGNIFICANT ACCOUNTING POLICIES P. 66
PRINCIPLES OF PRESENTATION P. 70
NOTES TO THE BALANCE SHEET P. 71
NOTES TO THE INCOME STATEMENT P. 82
SEGMENT INFORMATION P. 85
OTHER INFORMATION P. 85
60
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Consolidated income statement
In € thousands,
Except per share data which is in units Notes 2011 2012
Sales 4.1 398,328 445,460
Cost of sales 4.2 (145,602) (163,535)
Gross margin 252,726 281,925
% of sales 63.4% 63.3%
Selling expenses 4.3 (193,865) (212,278)
Administrative expenses 4.4 (11,957) (11,494)
Current operating income 46,904 58,153
% of sales 11.8% 13.1%
Other operating expenses 4.5 (603) (26,550)
Other operating income 4.5 - 181,200
Operating profit 46,301 212,803
% of sales 11.6% 47.8%
Financial income 550 447
Interest and similar expenses (1,055) (1,084)
Net finance costs (505) (637)
Other financial income 4,780 3,023
Other financial expense (3,709) (5,409)
Net financial income/(expense) 4.6 566 (3,023)
Income before income tax 46,867 209,780
% of sales 11.8% 47.1%
61
Income tax 4.7 (16,661) (74,083)
Effective tax rate 35.5% 35.2%
Net income before non-controlling interests 30,206 135,697
% of sales 7.6% 30.5%
Attributable to non-controlling shareholders (94) (165)
Net income 30,300 135,862
% of sales 7.6% 30.5%
Basic earnings per share 4.8 1.60 (1) 6.48
Fully diluted earnings per share 4.8 1.60 (1) 6.47
(1) Restated for bonuses issues.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Consolidated statement of comprehensive income and expense
In € thousands 2011 2012
Net income 30,206 135,697
Available-for-sale assets 34 26
Change in gross income/(expense) recognized directly in equity 34 26
Deferred tax (15) (9)
Change in net income/(expense) recognized directly in equity 19 17
Total recognized income and expense for the period 30,225 135,714
Attributable to non-controlling shareholders 94 165
Attributable to equity holders of the parent 30,319 135,879
62
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Consolidated balance sheet
Assets
In € thousands Notes 2011 2012
Non-current assets
Net trademarks and other intangible assets 3.1 71,049 79,025
Goodwill, net 3.2 2,010 599
Net property, plant, equipment 3.3 9,057 7,017
Long-term investments 1,128 1,751
Other non-current financial assets 3.4 432 6,754
Deferred tax assets 3.12 5,777 10,214
Total non-current assets 89,453 105,360
Current assets
Inventory and work in progress 3.5 101,167 87,199
Trade receivables and related accounts 3.6 129,109 106,179
Other receivables 3.7 5,780 5,621
Corporate income tax 1,085 1,434
Cash and cash equivalents 3.8 26,600 229,003
Total current assets 263,741 429,436
Total assets 353,194 534,796
Shareholders’ equity & liabilities
In € thousands Notes 2011 2012
Shareholders’ equity
Share capital 59,602 66,001
Additional paid-in capital 377 -
Retained earnings 125,464 142,883
Net income for the year 30,300 135,862
63
Equity attributable to parent company shareholders 215,743 344,746
Non-controlling interests 277 118
Total shareholders’ equity 3.9 216,020 344,864
Non-current liabilities
Provisions for non-current commitments 3.10 2,127 2,994
Non-current borrowings 3.11 12 -
Deferred tax liabilities 3.12 1,472 1,625
Total non-current liabilities 3,611 4,619
Current liabilities
Trade payables and related accounts 3.13 96,238 68,396
Current borrowings 3.11 3,450 62
Bank facilities 3.11 9,205 21,076
Provisions for contingencies and expenses 3.10 49 48
Income tax 1,016 63,373
Other payables 3.13 23,605 32,358
Total current liabilities 133,563 185,313
Total shareholders’ equity and liabilities 353,194 534,796
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Statement of changes in shareholders’ equity
In € thousands Total equity
Number Common Paid-in OCI Retained Group NCI Total
of shares stock capital earnings share
& net
income
As of December 31, 2009 (1) 16,186,315 48,671 1,205 (108) 120,082 169,850 109 169,959
Bonus share issue 1,638,298 4,915 (3,650) - (1,265) - - -
Shares issued on exercise of stock options 221,534 665 3,248 - - 3,913 - 3,913
Capital decrease (157,150) (471) (395) - (2,629) (3,495) - (3,495)
2010 net income - - - - 26,807 26,807 (156) 26,651
2009 dividend paid in 2010 - - - - (6,338) (6,338) - (6,338)
Treasury shares 13,432 - - - 267 267 - 267
Stock based compensation - - - - 152 152 - 152
Remeasurement of instruments
securities at fair value - - - 215 - 215 - 215
Changes in group structure
of consolidated operations - - - - (497) (497) 497 -
Effect of exchange rate fluctuations - - - - 548 548 (7) 541
Other changes - - - - 77 77 (58) 19
As of December 31, 2010 (1) 17,902,429 53,780 408 107 137,204 191,499 385 191,884
Bonus share issue 1,803,851 5,412 (1,898) - (3,514) - - -
Shares issued on exercise of stock options 137,280 410 1,867 - - 2,277 - 2,277
2011 net income - - - - 30,300 30,300 (94) 30,206
2010 dividend paid in 2011 - - - - (8,628) (8,628) - (8,628)
Treasury shares (30,037) - - - (420) (420) - (420)
Cost of stock-based compensation - - - - 135 135 - 135
Remeasurement of instruments
securities at fair value - - - 19 - 19 - 19
Effect of exchange rate fluctuations - - - - 561 561 (14) 547
As of December 31, 2011 (1) 19,813,523 59,602 377 126 155,638 215,743 277 216,020
Bonus share issue 2,000,027 6,000 (2,384) - (3,616) - - -
Shares issued on exercise of stock options 132,948 399 2,007 - - 2,406 - 2,406
2012 net income - - - - 135,862 135,862 (165) 135,697
2011 dividend paid in 2012 - - - - (9,914) (9,914) - (9,914)
Treasury shares 22,220 - - - 458 458 - 458
Cost of stock-based compensation - - - - 171 171 - 171
Remeasurement of instruments
securities at fair value - - - 17 - 17 - 17
Effect of exchange rate fluctuations - - - - 3 3 6 9
As of December 31, 2012 (1) 21,968,718 66,001 - 143 278,602 344,746 118 344,864
(1) Excluding treasury shares.
64
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Statement of cash flows
In € thousands 2011 2012
Cash flows from operating activities
Net income before NCI 30,206 135,697
Depreciation, amortization and other 10,922 26,963
Capital (gains) losses on fixed assets disposals - 1,625
Net finance costs 505 637
Tax charge of the period 16,661 74,083
Operating cash flows 58,294 239,005
Interest expense payments (1,413) (1,373)
Tax payments (23,094) (13,377)
Cash flow after interest expense and tax 33,787 224,255
Change in inventory and work in progress (35,997) 1,996
Change in trade receivables and related accounts (55,537) 22,381
Change in other receivables (27) (190)
Change in trade payables and related accounts 42,918 (27,843)
Change in other current liabilities (278) 6,858
Change in working capital needs (48,921) 3,202
Net cash flows provided by (used in) operating activities (15,134) 227,457
Cash flows from investing activities
Net acquisitions of intangible assets (4,302) (14,139)
Net acquisitions of property, plants and equipment (5,727) (5,585)
Net acquisitions of marketable securities (>3 months) 35,785 -
Changes in investments and other non-current assets 164 (6,918)
Net cash flows provided by (used in) investing activities 25,920 (26,642)
Cash flow from financing activities
Debt repayments (8,412) (3,347)
Dividend payments to shareholders (8,628) (9,914)
Capital increases 2,279 2,406
Treasury shares (513) 572
65
Net cash flows provided by (used in) financing activities (15,274) (10,283)
Change in net cash (4,488) (190,532)
Cash and cash equivalents, beginning of year 21,883 17,395
Cash and cash equivalents, end of year 17,395 207,927
The reconciliation of net cash breaks down as follows:
In € thousands 2011 2012
Cash and cash equivalents 26,600 229,003
Bank facilities (9,205) (21,076)
Net cash at the end of the period 17,395 207,927
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
Annual highlights
January
Commencement of the Balmain license
Commercial activity has begun based on four existing lines.
Commencement of the Repetto license agreement
The first women’s fragrance line will be launched in 2013.
February
Launch of the Jimmy Choo Eau de Toilette
A luminous new scent that puts an original twist on the
original Jimmy Choo fragrance with notes of ginger, tea rose,
exotic tiger orchid and cedar wood resulting in a floral,
fruity and modern composition.
May
Launch of the Jeanne Lanvin line of Lanvin
Jeanne Lanvin Couture offers a sophisticated variation
on the theme of the first opus Jeanne Lanvin. This latest
fragrance keeps its fruity and musky character but is it
enriched with more sensual notes
66
Launch of the Jaïpur Bracelet line of Boucheron
Jaïpur Bracelet, echoing the high-jewelry collections of
Maison Boucheron, is inspired by the traditional Nauratan
bracelet given to Rajasthani brides for good luck.
June
Bonus share distribution
On June 18, 2012, the company proceeded with its 13th
bonus issue on the basis of one new share for every ten
shares held.
Launch of Electro Shock of Nickel
A fatigue-fighting skin care concentrate, combining
the ultra-fresh and invigorating action of lime with the
energizing boost of Guarana extract.
July
Burberry license: discussions with Burberry discontinued
On July 27, 2012 following several months of discussions,
Interparfums SA and Burberry were unable to reach an
agreement on final terms on a new operating model for the
fragrance and beauty business. On that basis, the license
agreement was terminated on December 31, 2012 in exchange
for payment by Burberry of an exit price of €181 million.
October
Launch of the Ivoire line of Montblanc
Mythical fragrance of the 80’s, Ivoire of the Balmain
couture house, combines aerial heart notes with a floral
accord followed by a woody trail.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Burberry license: transition agreement
Interparfums and Burberry signed an agreement in order
to facilitate a smooth transition that included an additional
three-month period ending on March 31, 2013.
Signature of a fragrance license agreement with Karl Lagerfeld
On October 8, Karl Lagerfeld, the internationally
renowned fashion house, and Interparfums, the creator
of prestige perfumes and cosmetics, signed a 20-year
exclusive worldwide license agreement commencing on
November 1 to create, produce and distribute perfumes
under the Karl Lagerfeld brand. The first women’s fragrance
line will be launched in 2014.
December
Investor Relations Award
Interparfums was awarded the prize for the Best Investor
Relations in the “Mid Cap” category at the 5th Investor
Relations and Financial Communications Forum.
1.
SIGNIFICANT
ACCOUNTING POLICIES
1.1.
Basis of presentation
and compliance statement
In accordance with EC regulations 1606/2002 of July 19, 2002
on international accounting standards, the 2012 consolidated
financial statements of the Interparfums are established
in compliance with IAS/IFRS (International Accounting
Standards/International Financial Reporting Standards)
applicable since 2005 as endorsed by the European Union.
Financial information presented herein is based on:
- IFRS standards and interpretations whose application was
mandatory starting in 2005;
- options retained and exemptions used by the group for
the preparation of IFRS consolidated financial statements.
The consolidated financial statements at December 31, 2012
were adopted by the Board of Directors on March 11, 2013.
They will become definitive after having been approved by
the ordinary general Meeting of April 22, 2013.
1.2.
Changes in accounting standards
The following standards, amendments and interpretations
that entered into force on January 1, 2012 were applied by
the company in preparing its 2012 consolidated financial
statements:
- amendment to IAS 1 “Presentation of items of other
comprehensive income”.
These standards, amendments and interpretations did not
have a material effect on the company’s consolidated
financial statements.
The following standards, amendments and interpretations that
entered into force on 1 January 2013 were not applied by the
company in preparing its 2012 consolidated financial statements:
- amendment to IAS 19 “Employee benefits”.
The impact of the application of this amendment is in the
process of being evaluated.
1.3.
First-time adoption of IFRS
For the first time adoption of IFRS for the financial statements
prepared on December 31, 2005 with a transition date of
January 1, 2004, as authorized under IFRS 1, Interparfums
chose to apply the following exemptions for standards
applicable to the company:
- Fixed assets: the group has chosen to continue to
recognize property, plant and equipment at historical cost;
- Share-based payments and equivalents: for programs involving
equity-settled share-based payment, the group has elected to
apply IFRS 2 for grants after November 7, 2002 and not
vested before January 1, 2005.
1.4.
Basis of consolidation
In March and June 2010, Interparfums created two
wholly-owned distribution subsidiaries in the United States
and Singapore respectively, “Interparfums Luxury Brands”
and “Interparfums Singapore”.
In October 2010, Interparfums acquired the remaining
49% share of its Spanish subsidiary “Inter España Parfums
et Cosmetiques SL”, now in consequence wholly-owned.
In October 2010, Interparfums also acquired an additional
20% stake in its Italian subsidiary “Interparfums Srl”,
henceforth 71%-held.
All group subsidiaries are fully consolidated. These include
Interparfums Deutschland GmbH, Inter España Parfums
et Cosmetiques SL, Interparfums Srl, Interparfums Ltd,
Interparfums Suisse Sarl, Interparfums Luxury Brands and
Interparfums Singapore.
Interparfums SA Ownership Ownership
interest (%) interest (%)
Interparfums Suisse Sarl
Interparfums Deutschland GmbH
Inter España Parfums et Cosmetiques SL
Interparfums Srl
Interparfums Ltd
Interparfums Luxury Brands
Interparfums Singapore
Switzerland 100% 100%
Germany 51% 51%
Spain 100% 100%
Italy 71% 71%
United Kingdom 51% 51%
United States 100% 100%
Singapore 100% 100%
67
Subsidiaries’ financial statements are prepared on the basis of the same accounting period as the parent company. The fiscal
year covers the 12 month period ending on December 31.
1.5.
Translation method
The company’s operating currency and currency for the presentation of financial statements is the Euro.
Transactions in foreign currencies are translated at the exchange rate in effect on the date of the transaction. Foreign currency
denominated payables and receivables are translated at the exchange rate in effect as of December 31, 2012. Translation losses
and gains arising from the conversion of accounts denominated in foreign currencies on December 31, 2012 are recorded
in the income statement. Hedged transactions are translated at the negotiated exchange rate.
The main exchange rates applied for the translation of subsidiary accounts in relation to the Euro are as follows:
Currency Closing exchange rate Average exchange rate
2011 2012 2011 2012
US dollar (USD) 1.2939 1.3194 1.3920 1.2848
Pound sterling (GBP) 0.8353 0.8161 0.8679 0.8109
Singapore dollar (SGD) 1.6819 1.6111 1.7489 1.6055
Swiss franc (CHF) 1.2156 1.2072 1.2326 1.2053
1.6.
Use of estimates
The preparation of consolidated financial statements requires
the use of estimates and assumptions for the valuation
of certain balance sheet and income statement balances.
These concern primarily the valuation of intangible assets,
amounts to be set aside for provisions for contingencies
and expenses, provisions for inventory losses and deferred tax
assets. Although these estimates are based on management’s
best knowledge of current events and situations, actual results
may ultimately differ from these estimates.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1.7.
Revenue recognition
Revenue includes principally ex-warehouse sales to distributors
and agents and direct sales to retailers for the portion realized
by group subsidiaries.
Revenue from perfume and cosmetics products is presented
net of all forms of discounts and rebates.
Revenue is recognized on the basis of conditions of transfer
to the buyer of the risks and rewards incident to ownership.
Amounts invoiced at year-end when the actual transfer
of title occurs in the following year are not recognized under
revenue of the year in progress.
1.8.
Trademarks, other intangible
assets and goodwill
Trademarks and other intangible assets
Trademarks and other intangible fixed assets, including
trademarks under licensing contracts and acquired
trademarks are recorded at cost.
These trademarks that constitute well-established legally
protected international brand names are classified as
indefinite life intangible assets and are not amortized.
Finite life intangible assets such as upfront license fees
are amortized on a straight-line basis over the duration
of the license.
68
Rights on molds for bottles and related items are classified
as finite life intangible assets and amortized over a period
of between three and five years.
Licenses and upfront license fees are remeasured at least
once a year or whenever there is an indication of impairment
of value in use defined as the present value of estimated
future cash flows expected to arise from the continuing use
of these assets. Data used originates from the annual and
multi-year budgets for duration of the license agreements
drawn up by Management.
Proprietary brand names are remeasured at least once a year
by comparing the net carrying value and the recoverable
amount defined as the higher of value in use on the basis
of the present value of estimated future cash flows derived
from five year budgets discounted to infinity.
The discount rate before tax applied for remeasurement
is the weighted average cost of capital (WACC) of
7.60% at December 31, 2012 compared to 7.74% at
December 31, 2011. This ratio is determined on the basis
of the long-term interest rate of 2% corresponding to the
average rate for 10-year OAT French fungible treasury
bonds of the last quarter, the rate expected by an investor
in this sector and the specific risk premium for this sector.
The perpetuity growth rate used is 2% at December 31, 2012
and 1.5% at December 31, 2011.
A provision for impairment is recorded if this value is lower
than the carrying value.
Costs generated on acquisition analyzed as directly attributable
costs are included in the cost of the acquired assets.
Other intangible assets are amortized over their useful lives
and subject to impairment testing when an indication of
impairment exists.
Goodwill
Goodwill is defined as the difference between the purchase
price of shares of consolidated companies and the group’s
share in restated net assets after measurement of the fair value
of assets and liabilities acquired.
Positive goodwill arising from the acquisition of Nickel
has been recognized in the balance sheet.
This goodwill is tested annually or whenever there exists an
indication of potential impairment. When the net carrying
value of this goodwill exceeds the higher of the value in use
or market value, an impairment is recorded for the difference.
Value in use is based on the present value of future cash
flows that will be generated by these assets while market
value is determined in reference to recent comparable
transactions or valuations performed by independent
appraisers in view of their disposal.
1.9.
Property, plant and equipment
Tangible fixed assets are valued at cost (purchase price plus
acquisition-related costs) and depreciated over their estimated
useful lives on a straight-line basis (2 to 5 years). Tangible
fixed assets include molds for caps.
1.10.
Inventory and work in progress
Inventories are valued at the lower of cost or probable resale
value. A provision for impairment is recorded when their
probable resale value is lower than the carrying value.
The cost of inventories of raw materials and supplies is valued
on the basis of average weighted prices.
The cost of finished products includes the cost of materials
used, production expenses and a share of indirect costs valued
at a standard rate.
At the end of every year, these standard rates are compared
with the effective rate obtained based on actual figures at
year-end.
Expenditure on advertising and promotional activities is
recognized when received or produced in the case of goods
or when rendered in the case of services.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1.11.
Non-current financial assets
Marketable securities on initial recognition are recorded at
cost and subsequently remeasured at fair value corresponding
to the market value at the end of each period.
Because they are destined to be held for more than one year,
all group marketable securities have been classified as
“available-for-sale financial assets” and presented in
“Non-current financial assets”.
Gains and losses on “available-for-sale financial assets”
are recorded at year-end in equity. However, a significant
or prolonged decline in fair value below the cost value
of the securities is recognized in profit or loss.
1.12.
Accounts receivable
Accounts receivable are recorded at face value. A provision
for impairment is recorded on a case-by-case basis when
the probable recovery value is deemed to be less than the
carrying value.
1.13.
Deferred tax
Timing differences between the tax base of consolidated
assets and liabilities and tax on restatements on consolidation
give rise to the recognition of deferred taxes under the liability
method, taking the known year-end tax conditions into account.
Potential tax savings resulting from loss carry forwards are
recorded under deferred tax assets only when their use in
the short term is deemed likely, and subject to depreciation
when appropriate, are maintained in the balance sheet.
1.14.
Current financial assets
Current financial assets consist of investments in the form
of certificates of deposits with maturities of more than three
months.
1.15.
Cash and cash equivalents
The line item “Cash and cash equivalents” includes marketable
securities and cash at bank and in hand that consist of highly
liquid investments with maturities of less than three months
readily convertible to a known cash amount and are subject
to an insignificant risk of changes in value.
1.16.
Treasury shares
Interparfums shares held by the group are recorded as a
deduction from equity at cost.
If sold, the proceeds are recorded directly under equity net
of tax.
1.17.
Provisions for contingencies
and expenses
Retirement severance benefits
This reserve is maintained to honor employee pension
benefit commitments and corresponds to the present value
of the payments to which employees are entitled, under the
collective bargaining agreement, once they retire. For the
measurement of retirement severance benefits, Interparfums
has adopted the procedure for voluntary severance agreements
introduced on July 23, 2008 extending the cross-industry
agreement (accord interprofessionnel) of January 11, 2008.
This procedure provides for the systematic signature
of a severance agreement by the employer and the employee
specifying the terms and conditions of the termination.
Because last year’s method involving compulsory retirement
was applied, the impact of this change in the assumptions
used for calculation was dealt with under past service costs.
The projected unit credit was applied. This method takes
into account rights and wages projected to term, the probability
of payment as well as the prorated amount of seniority so
that commitments correspond to the value of service already
rendered by employees.
Accordingly, the calculation of commitments for severance
benefits involves estimating the probable present value
of projected benefit obligations (PBO), i.e. the rights of
employees at the time of departure taking into account the
probability of departure and death of the employees before
term as well as the impact of revaluations and discounts.
This projected benefit obligation is then prorated to take
into account the seniority of the employees of the company
on the calculation date.
Provisions for other contingencies and expenses
A provision is recognized when the company has a present
obligation (legal or constructive) as a result of a past event
when it is probable that an outflow or resources embodying
economic benefits will be required to settle an obligation
and a reliable estimate can be made of the amount of the
obligation.
1.18.
Financial instruments
Derivative financial and hedging instruments are used
by the group to reduce exposure to interest rate and
foreign exchange risks. Such instruments are not used for
speculative purposes.
The company has recourse to forward exchange contracts
and cash flow hedges put into place at the time receivables
are recognized. These contracts have maturities of three to
six months according to the maturities of the corresponding
receivables in foreign currencies (primarily the US dollar
and Sterling pound). Currency gains and losses from these
instruments are recognized in the income statement when
the receivables are booked.
69
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
2.
PRINCIPLES OF PRESENTATION
2.1.
Presentation of the income statement
The consolidated income statement of the company is
presented by function. Under this format, expenses and
income are broken down by function (cost of sales, selling
expenses, administrative expenses) and not according
to the nature of the origin of expenses and income.
2.2.
Presentation of the balance sheet
The balance sheet is presented based on a classification
between current and non-current liabilities.
2.3.
Segment reporting
Segment information presented in this report is based on the
segments used by management to monitor group operations.
2.3.1.
Business lines
The company is organized and focused around two profit
centers: “Perfumes” and “Skincare and Beauty”.
In the 2010 first half, Interparfums launched its first make-up
lines under the Burberry brand. The results of this business
are monitored by the company’s Executive Management as
part of the already existing “Cosmetics” division. This segment
that includes these two comparable activities is presented
under the heading “Skincare and Beauty”.
Details on these two segments for which the company possesses
performance indicators are in consequence disclosed below.
2.3.2.
Geographic segments
The company has a significant international dimension
and analyses sales by geographic segment.
All assets necessary for the company’s activity are located
in France.
1.19.
Borrowings
On initial recognition, borrowings are measured at fair value
to which are added transaction costs directly attributable
to the issuance of the liability.
At year-end, borrowings are recognized at amortized cost
according to the effective interest rate method.
1.20.
Other liabilities
Other financial debt and operating liabilities are measured
at fair value on initial recognition. This amount generally
corresponds to the amount of the invoice in the case of
short-term payables.
1.21.
Stocks options
IFRS 2 requires that a charge be recorded in the income
statement with a corresponding increase to reserves representing
advantages granted to beneficiaries of stocks options.
For the measurement of these advantages, the company uses
the Black-Scholes model. This model takes into account the
characteristics of the plans (exercise price, exercise period),
market data at time of grants (risk-free rate, share price,
volatility, projected dividends) and assumptions with respect
to the behavior of beneficiaries. Changes occurring after
the grant date do not have an impact on this initial valuation.
The value of the options is related notably to their expected
lifespan that the company considers corresponds to their
vesting period.
1.22.
Registration of trademarks
Under IAS 38, expenses incurred in connection with
the registration of each trademark are not capitalized
and are expensed under “research and consulting costs”.
1.23.
Earnings per share
Basic earnings per share are calculated using the weighted
average number of shares outstanding during the year after
subtracting treasury shares.
Fully-diluted earnings per share are calculated based on the
average number of shares outstanding in the period, after
subtracting only treasury shares destined to be held on
a long-term basis and adjusted for the effects of all potential
diluted ordinary shares resulting from the exercise in stock
options in the period.
To ensure the comparability of information, basic and
diluted earnings per share of the prior year are systematically
recalculated to take into account bonus share grants in the
year in progress.
70
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.
NOTES TO THE BALANCE SHEET
3.1.
Trademarks and other intangible assets
3.1.1.
Nature of intangible assets
In € thousands 2011 + - 2012
Gross value
Indefinite life intangible assets
Nickel trademark 2,133 - - 2,133
Lanvin trademark 36,323 - - 36,323
Finite life intangible assets
S.T. Dupont upfront license fee 1,219 - - 1,219
Burberry upfront license fee 5,000 - (5,000) -
Van Cleef & Arpels upfront license fee 18,250 - - 18,250
Montblanc upfront license fee 1,000 - - 1,000
Boucheron upfront license fee 15,000 - - 15,000
Balmain upfront license fee 2,050 - - 2,050
Karl Lagerfeld upfront license fee - 12,877 - 12,877
Other intangible assets
Rights on molds for bottles and related items 9,481 966 - 10,447
Registration of trademarks 500 - - 500
Software 2,087 296 (197) 2,186
Other 165 - - 165
Total gross amount 93,208 14,139 (5,197) 102,150
71
Depreciation and impairment
Indefinite life intangible assets
Nickel trademark (384) - - (384)
Finite life intangible assets
S.T. Dupont upfront license fee Dupont (1,219) - - (1,219)
Burberry upfront license fee (2,926) (449) 3,375 -
Van Cleef & Arpels upfront license fee (7,605) (1,521) - (9,126)
Montblanc upfront license fee (148) (100) - (248)
Boucheron upfront license fee (1,000) (1,000) - (2,000)
Balmain upfront license fee - (171) - (171)
Karl Lagerfeld upfront license fee - (80) - (80)
Other intangible assets
Rights on molds for bottles and related items (7,653) (756) - (8,409)
Registration of trademarks (448) (12) - (460)
Software (667) (441) 197 (911)
Other (109) (8) - (117)
Total amortization and impairment (22,159) (4,538) 3,572 (23,125)
Net total 71,049 9,601 (1,625) 79,025
Nickel trademark
Lanvin trademark
As Interparfums is the owner of the Nickel brand, acquired
on April 1, 2004, no amortization was recognized in its
balance sheet. The brand is tested for impairment once
a year on December 31.
As Interparfums acquired ownership for the Lanvin trademark
and brand name for class 3 products (perfumes) in July 2007
no amortization was recognized in its balance sheet. The
brand is tested for impairment once a year on December 31.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
S.T. Dupont upfront license fee
An upfront license fee of €869,000 paid on April 1, 1997 is
amortized over the 11-year term of the S.T. Dupont license
agreement. An additional license fee of €350,000 was paid
in March 2006. The total upfront license fee of €1,219,000
has been fully amortized since June 30, 2011.
Burberry upfront license fee
Because of the termination of the Burberry license agreement
before term, the upfront license fee of €5 million when the
license was initially acquired was cleared on December 31, 2012.
This transaction generated an expense corresponding
to the net carrying value of €1,625,000 that was recognized
in the income statement under “other operating expenses”
Van Cleef & Arpels upfront license fee
An upfront license fee of €18 million paid on January 1, 2007
is amortized over the 12-year term of the Van Cleef & Arpels
license agreement.
Montblanc upfront license fee
The upfront license fee of €1 million paid on June 30, 2010
is amortized over the 10.5 year term of the Montblanc license
agreement.
Boucheron upfront license fee
3.1.2.
Impairment tests
Nickel trademark
A valuation was performed on December 31, 2012 based
on the method of discounting future royalty payments to
infinity. No additional provision was recorded for impairment
in the period.
Lanvin trademark
A valuation was performed on December 31, 2012
by discounting future cash flows to infinity. No provision
was recorded.
Upfront license fees
All upfront license fees were measured on December 31, 2012
using the discounted cash flow method. No provision was
recorded.
For all discounts, the weighted average cost of capital (WACC)
of 7.60% is applied.
Analysis of sensitivity
A one point fluctuation in the discount rate before tax or
the perpetuity growth rate would not result in an additional
impairment charge on trademarks and other intangible assets.
The upfront license fee of €15 million paid on
December 17, 2010 is amortized over the 15 year term
of the Boucheron license agreement.
3.2.
Goodwill
72
Balmain upfront license fee
The upfront license fee of €2,050,000 was recognized in
2011 and is amortized over the term of the Balmain license
agreement that commenced on January 1, 2012.
Karl Lagerfeld upfront license fee
The upfront license fee of €12,877,000 was recognized in
2012 and is amortized over the term of the Lagerfeld license
agreement that commenced on January 1, 2012.
Goodwill from the 100% shareholding in Nickel was
recognized in the balance sheet at December, 31 2007.
This goodwill corresponds to the initial acquisition
of a 67.57% stake in June 2004 for €6,910,000 followed
by 32.43% in June 2007 for €3,518,000.
This goodwill is tested for impairment each year. In 2012
an additional impairment charge of €1,411,000 was
recorded. Changes in goodwill break down as follows:
In € thousands
The upfront license fee includes the difference between the
nominal value and the present value of the advance on royalties
for €3,287,000 (See note 3.4. Other non-financial assets).
Gross value 5,202
Amounts for impairment before 2012 (3,192)
2012 impairment (1,411)
Rights on molds for bottles and related items
Rights on molds for bottles and related items are amortized
over 5 years. Design costs are amortized over 3 years.
Net value at December 31, 2012 599
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.3.
Property, plant and equipment
In € thousands 2011 + - 2012
Fixtures, improvements, fittings 11,732 3,822 (509) 15,045
Office and computer equipment and furniture 1,663 104 (87) 1,680
Molds for bottles and caps 7,886 2,267 - 10,153
Other (1)
1,003 121 (133) 991
Total gross amount 22,284 6,314 (729) 27,869
Accumulated depreciation and impairment (1) (13,227) (8,238) 613 (20,852)
Net total 9,057 (1,924) (116) 7,017
(1) Including fixed assets held under finance leases (vehicles) for a gross amount of €359,000 and an accumulated depreciation of €300,000.
The increase in tangible fixed assets reflects mainly the
acquisition of new stands for points of sale and the
manufacture of bottle caps for new lines.
The increase in depreciation and impairment charges
reflects mainly the accelerated depreciation of Burberry
stands linked to the discontinuation of the license
agreement before term.
3.4.
Non-current financial assets
The signature of the new Karl Lagerfeld license agreement
resulted in an advance on royalty payments to be charged
against future license fees of €9,589,000. This advance was
discounted over the license agreement term and reduced
accordingly to €6,296,000 at December 31, 2012.
3.5.
Inventory and work in progress
The corresponding difference of €3,287,000 was included
in the cost of the upfront license fees (see note 3.1.1. Nature
of intangible assets).
The fair value that corresponds to the market value of
marketable securities amounted to €458,000 at
December 31, 2012.
73
In € thousands 2011 2012
Raw materials and components 40,190 33,120
Finished goods 66,179 68,335
Total gross amount 106,369 101,455
Allowances for raw materials (307) (5,214)
Impairment of finished goods (4,895) (9,042)
Accumulated provisions for impairment (5,202) (14,256)
Net total 101,167 87,199
The decrease in inventory for raw materials reflects mainly the early discontinuation of the production of Burberry products.
The significant increase in inventory impairment charges (raw materials and components) is largely due to the contractual
conditions providing for the transfer of inventory to Burberry following the discontinuation of the license.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.6.
Trade receivables and related
accounts
In € thousands 2011 2012
Total gross amount 133,077 110,696
Impairment (3,968) (4,517)
Net total 129,109 106,179
3.8.2.
Cash and cash equivalents
In € thousands 2011 2012
Certificates of deposit
(less than 3 months) 17,387 219,787
Bank accounts 9,213 9,216
Cash and cash equivalents 26,600 229,003
In 2012, the rise in cash reflects mainly Burberry’s exit payment
of €181.2 million.
The decrease in trade receivables is largely due to the
reduction in average customer settlement period compared
to 2011 that was significantly impacted by the launch of
the Burberry Body line in September 2011.
3.9.
Shareholders’ equity
The aged trial balance for trade receivables breaks down as
follows:
3.9.1.
Common stock
In € thousands 2011 2012
Not due 113,354 92,706
0-90 days 14,989 13,925
91-180 days 987 420
181-360 days 351 126
More than 360 days 3,396 3,519
Total gross amount 133,077 110,696
Trade receivables past due for more than 360 days relate mainly
to a suspension of payment by one of our distributors.
The full amount of these receivables has been written down
for impairment.
74
3.7.
Other receivables
In € thousands 2011 2012
Prepaid expenses 2,182 2,306
Holding current accounts 264 362
Value-added tax 2,411 2,061
Hedging instruments - 594
Other receivables 923 298
Total 5,780 5,621
3.8.
Current financial assets,
cash and cash equivalents
3.8.1.
Current financial assets
Current financial assets consist of investments in the form
of certificates of deposits with maturities of more than three
months.
In 2012, no certificates of deposit had maturities exceeding
three months.
As of December 31, 2012, Interparfums’ capital was comprised
of 22,000,301 shares fully paid-up with a par value of €3,
73.2%-held by Interparfums Holding.
For the period under review, capital increases result
from the exercise of stock options and the capital increase
in connection with the bonus issue of June 18, 2012
on the basis of one new share for every ten shares held.
3.9.2.
Stock option plans
Employees of Interparfums and its subsidiaries benefit regularly
from stock option plans.
Rules for the grant of stock options to executive officers
are based on the level of responsibilities exercised and the
performance of the company. The quantity of stock options
granted to officers may vary from one year to another according
to the performance of the company over the period.
On December 17, 2009 and October 8, 2010, the Board
of Directors decided to grant options to corporate officers
on that date whose exercise will be contingent on criteria
of internal performance based on the company’s sales.
Under these terms, the number of options exercisable is
based on the average rate of actual growth for the company’s
sales relative to the rate of attainment of the target for
average growth. This objective is set by the Board of Directors
for a period of reference corresponding to the 4 year tax
waiting period that applies to the stock option plan established
by this Board.
The Board of Directors has decided that these officers must
retain 10% of the shares resulting from the exercise of stock
options for the duration of their terms of office in accordance
with the provision of article L. 225-185 of the French
Commercial Code.
In 2012, no stock option plans were created.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
The characteristics of plans currently in force are as follows:
Plans Number of Number of Grant Vesting Exercise
beneficiaries shares granted/ date period price (1)
exercised
at inception
Plan 2008 (IP Inc.) 96 84,500 02/14/2008 4 years $11.30
Plan 2009 135 87,000 12/17/2009 4 years €13.25
Plan 2010 143 114,700 10/08/2010 4 years €18.85
(1) Subscription price adjusted for bonus issues.
In the period, changes in plans issued by Interparfums SA break down as follows:
Plans Options Conversions Grants Bonus Cancellations Options
outstanding in the in the share in the outstanding
at 12/31/2011 period period grants period at 12/31/2012
Plan 2006 136,434 (132,948) - - (3,486) -
Plan 2009 103,939 - - 10,368 (1,210) 113,097
Plan 2010 125,840 - - 12,199 (3,960) 134,079
366,213 (132,948) - 22,567 (8,656) 247,176
At December 31, 2012, the potential number of
Interparfums SA shares that may be created was 247,176.
All employees of the group benefited in February 2008
from a stock option plan created by the parent company
Interparfums Inc. This plan was recognized in accordance
with IFRIC 11 and is charged to Interparfums SA by the
parent company.
Benefits granted to employees in the form of stock options,
in accordance with IFRS 2, were calculated using the Black-
Scholes model. The impact of this calculation, including the
US plan, represents an expense that is recognized over the
duration of the vesting period. This expense amounted to
€267,000 for 2012 and €346,000 for 2011.
The estimation of the fair value of each stock option outstanding based on the Black-Scholes model is calculated on the grant
date on the basis of the following assumptions:
Plans Fair value of Risk free Dividend Volatility Share price
the options interest yield rate retained
rates for the
calculation
75
Plan 2008 (1)
$3.96 2.72% 1.20% 39% $11.59
Plan 2009 €4.27 3.56% 2.67% 30% €17.60
Plan 2010 €6.55 2.81% 1.81% 30% €22.95
(1) The 2008 plan has been issued by the parent company Interparfums Inc.
For all these plans, the stock options have terms of six years.
3.9.3.
Treasury shares
Within the framework of the share buyback program authorized by the general Meeting of April 27, 2012,
31,583 Interparfums shares were held by the company as of December 31, 2012 or 0.14% of the share capital.
Changes in the period break down as follows:
In € thousands Number of shares Book Value
At December 31, 2011 53,803 882
Acquisitions 146,626 2,894
Bonus share issue of June 18, 2012 3,990 -
Reversal of provisions for impairment - 204
Sales (172,836) (3,354)
At December 31, 2012 31,583 626
Management of the share buyback program is assured by an investment services provider within the framework of a liquidity
agreement in compliance with the conduct of business rules of the French association of financial market professionals (AMAFI).
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Purchases of shares under this program are subject to the following conditions:
- the maximum purchase price is €40 per share, excluding execution costs;
- the total number of shares acquired may not exceed 5% of the company’s capital stock.
3.9.4.
Non-controlling interests
Non-controlling interests concern percentages not held in European subsidiaries (Interparfums Deutschland GmbH 49%;
Interparfums Srl 29%; Interparfums Ltd 49%) that break down as follows:
In € thousands 12/31/2011 12/31/2012
Reserves attributable to non-controlling interests 371 283
Earnings attributable to non-controlling interests (94) (165)
Non-controlling interests 277 118
Non-controlling shareholders have an irrevocable obligation to offset losses by an additional investment.
3.9.5.
Information on equity
The company is not subject to specific regulatory or contractual
obligations in respect to capital stock.
In compliance with the provisions of article L. 225-123
of the French Commercial Code, the shareholders’ meeting
of September 29, 1995 decided to create shares carrying
a double voting right. These shares must be fully paid up and
recorded in the company’s share register in registered form
for at least three years.
76
Since 1998, the company has adopted a policy of distributing
dividends that today represents more than 30% of
consolidated earnings to reward shareholders while at
the same time associating them with the group’s expansion.
In early May 2012, a dividend of €0.50 per share was paid
or a total of €9.9 million.
Significant shareholders equity and low gearing ensures that
the group is able to secure financing for important projects
from banks in the form of medium-term loans.
The level of consolidated shareholders’ equity is regularly
monitored to ensure the company continues to have sufficient
financial flexibility to take advantage of all potential
opportunities for external growth.
3.10.
Provisions for contingencies and expenses
In € thousands 2011 Increases
Provisions 2012
Used in Reversal
the period of unused
provisions
Provisions for retirement severance payments 2,127 867 2,994
Total provisions for expenses > 1 year 2,127 867 - - 2,994
Provisions for contingencies < 1 year 49 - - (1) 48
Total provisions for contingencies and expenses 2,176 867 - (1) 3,042
Since 2008, for the measurement of retirement severance
benefits, Interparfums has adopted the procedure for
negotiated terminations introduced on July 23, 2008
extending the cross-industry agreement of January 11, 2008.
For 2012, the following assumptions were applied: a
negotiated termination at age 65, a rate of 48% for employer
payroll contributions for all employees, a 5% average rate
for annual salary increases, a 5% annual rate of turnover
for all employees under 55 years of age and nil above, the
TH 00-02 mortality table for men and the TF 00-02 mortality
table for women, and a discount rate for the 10 year IBOXX
corporate bond index of 3.20%.
Past service costs not recognized of €520,000 were recorded
under off-balance sheet items at December 31, 2012.
On the basis of these assumptions, the annual expense
of €867,000 recorded under current income breaks down
as follows:
- Service costs: €240,000;
- Financial expense: €116,000;
- Amortization of past service costs: €22,000;
- Actuarial losses: €489,000.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.11.
Non-current borrowings and financial liabilities
Since the end of September 2012, the full amount of medium-term financial debt had been reimbursed.
3.11.1.
Financial liabilities by maturity and rate
In € thousands Total < 1 year 1 to 5 years > 5 years
Automobile leases 62 62 - -
Bank overdrafts 21,076 21,076 - -
Total at December 31, 2012 21,138 21,138 - -
In € thousands Total < 1 year 1 to 5 years > 5 years
Floating-rate (3M Euribor) 3,353 3,353 - -
Fixed rate - - - -
Automobile leases 109 97 12 -
Bank overdrafts 9,205 9,205 - -
Total at December 31, 2011 12,667 12,655 12 -
The increase in bank overdrafts reflects mainly a credit line opened to finance the acquisition of the Karl Lagerfeld license.
Of this €20 million credit line, €19 million was used. This credit line reaches maturity on April 25, 2013 and is renewable
until October 22, 2013.
3.11.2.
Analysis of financial liabilities
Lanvin Van Cleef
& Arpels
77
Inception date September 28, 2007 January 1, 2007
Initial amount (in € thousands) 22,000 18,000
Duration 5 years 5 years
Rate Floating Rate Fixed rate
3M Euribor +0.40% 4.1%
Repayment schedule Quarterly Quarterly
Amount payable at 12/31/2012 (in € thousands) - -
3.11.3.
Additional disclosures
3.11.4.
Covenants
The floating-rate portion of the Lanvin debt contracted
in September 2007 was covered by a 4.42% fixed rate swap.
The loans obtained by the parent company are subject
to the following covenant ratios:
At September 30, 2012, this loan has been paid back in full.
The associated swap was cleared with a positive impact of
€53,000 recognized under income.
- net debt to net equity;
- net debt to cash flow.
In 2012, all these loans were reimbursed.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.12.
Deferred tax
Deferred taxes arise mainly from timing differences between financial accounting and tax accounting.
Deferred taxes from consolidation adjustments and loss carryforwards are recovered as follows:
In € thousands 2011 Changes Changes 2012
through through
reserves income
Deferred tax assets
Timing differences between financial and tax accounting 1,632 - 3,441 5,073
Forward exchange hedges 46 - (43) 3
Loan swap 19 - (19) -
Loss carryforwards 486 - (38) 448
Intra-group inventory margin 2,646 - 1,561 4,207
Advertising and promotional costs 1,334 - (484) 850
Other 100 16 (35) 81
Total deferred tax assets before amortization 6,263 16 4,383 10,662
Depreciation of deferred tax assets (486) - 38 (448)
Net deferred tax assets 5,777 16 4,421 10,214
Deferred tax liabilities
Timing differences between financial and tax accounting - - - -
Acquisition cost 632 - (6) 626
Stocks options - 96 (96) -
Gains (losses) on treasury shares - 114 (114) -
Market value of securities 70 11 - 81
Remeasurement gains (losses) 770 - - 770
Other - - 148 148
Total deferred tax liabilities 1,472 221 (68) 1,625
78
Total net deferred tax (4,305) 205 (4,489) (8,589)
The increase in timing differences reflects mainly the sharp rise in the provision for employee profit sharing expenses.
The increase in deferred tax relating to the intra-group margin on inventory reflects mainly the rise in inventories of
the US subsidiary.
3.13.
Trade payables and other current liabilities
3.13.1.
Trade payables and related accounts
3.13.2.
Other payables
The significant decrease in trade payables reflects mainly
the effects of the discontinuation of the Burberry license,
and notably reduced volumes for component purchases
and the adjustment of advertising expenses.
In € thousands 2011 2012
Accrued credit notes 3,218 4,924
Tax and employee-related liabilities 10,344 20,328
Accrued royalties 5,927 6,242
Currency hedges 2,730 -
Other payables 1,386 864
Total 23,605 32,358
The change in tax and employee-related liabilities is mainly
due to the non-recurring nature in 2012 of profit sharing
expenses and the corresponding fixed amount for social charges,
and linked to the discontinuation of the Burberry license.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.14.
Financial instruments
3.14.1.
Breakdown of financial assets and liabilities by category
The following table presents financial instruments in the balance sheet according to the categories provided for under IAS 39.
In € thousands Notes Carrying Fair Fair value Available- Loans & Derivatives
value value through for-sale receivables
profit assets or
At December 31, 2012 or loss payables
Long-term investments 1,751 1,751 - - 1,751 -
Other non-current financial assets 3.4 6,754 6,754 - 458 6,296 -
Trade receivables and related accounts 3.6 106,179 106,179 - - 106,179 -
Other receivables 3.7 5,621 5,621 - - 5,027 594
Cash and cash equivalents 3.8 229,003 229,003 - - 229,003 -
Assets 349,308 349,308 - 458 348,256 594
Borrowings and financial liabilities 3.11 62 62 - - 62 -
Trade payables and related accounts 68,395 68,395 - - 68,395 -
Bank facilities 3.11 21,076 21,076 - - 21,076 -
Other payables 3.13 32,358 32,358 - - 32,358 -
Liabilities 121,891 121,891 - - 121,891 -
In € thousands Notes Carrying Fair Fair value Available- Loans & Derivatives
value value through for-sale receivables
profit assets or
At December 31, 2011 or loss payables
Long-term investments 1,128 1,128 - - 1,128 -
Other non-current financial assets 3.4 432 432 - 432 - -
Trade receivables and related accounts 3.6 129,109 129,109 - - 129,109 -
Other receivables 3.7 5,780 5,780 - - 5,780 -
Cash and cash equivalents 3.8 26,600 26,600 - - 26,600 -
79
Assets 163,049 163,049 - 432 162,617 -
Borrowings and financial liabilities 3.11 3,462 3,462 53 - 3,409 -
Trade payables and related accounts 96,238 96,238 - - 96,238 -
Bank facilities 3.11 9,205 9,205 - - 9,205 -
Other payables 3.13 23,605 23,605 - - 20,875 2,730
Liabilities 132,510 132,510 53 - 129,727 2,730
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.14.2.
Breakdown by method for measuring financial assets and liabilities
Financial instruments are broken down according to different levels of fair value defined by the amendment to IFRS 7.
In € thousands Carrying Fair value Quoted Internal Prices not
value prices model based based on
(level 1) on directly observable
observable market data
market inputs (level 3)
At December 31, 2012 (level 2)
Long-term investments 1,751 1,751 - 1,751 -
Other non-current financial assets 6,754 6,754 458 6,296 -
Trade receivables and related accounts 106,179 106,179 - 106,179 -
Other receivables 5,621 5,621 - 5,621 -
Cash and cash equivalents 229,003 229,003 - 229,003 -
Assets 349,308 349,308 458 348,850 -
Borrowings and financial liabilities 62 62 - 62 -
Trade payables and related accounts 68,395 68,395 - 68,395 -
Bank facilities 21,076 21,076 - 21,076 -
Other payables 32,358 32,358 - 32,358 -
Liabilities 121,891 121,891 - 121,891 -
In € thousands Carrying Fair value Quoted Internal Prices not
value prices model based based on
(level 1) on directly observable
observable market data
market inputs (level 3)
At December 31, 2011 (level 2)
80
Long-term investments 1,128 1,128 - 1,128 -
Other non-current financial assets 432 432 432 - -
Trade receivables and related accounts 129,109 129,109 - 129,109 -
Other receivables 5,780 5,780 - 5,780 -
Cash and cash equivalents 26,600 26,600 - 26,600 -
Assets 163,049 163,049 432 162,617 -
Borrowings and financial liabilities 3,462 3,462 - 3,462 -
Trade payables and related accounts 96,238 96,238 - 96,238 -
Bank facilities 9,205 9,205 - 9,205 -
Other payables 23,605 23,605 - 23,605 -
Liabilities 132,510 132,510 - 132,510 -
3.15.
Risk management
The primary risks related to the group’s business and
organization result from interest rate and foreign exchange
rate exposures that are hedged using derivative financial
instruments. The potential impacts of other risks on the
company’s financials are not material.
3.15.1.
Interest rate risks
The group’s interest rate exposure is related principally to
debt. The objective of the group’s policy is to ensure a stable
level of financial expense through the use of hedges in
the form of fixed rate swaps and the use of floor and caps.
These financial instruments are not eligible for hedge
accounting under IAS 39. The group nevertheless considers
that these transactions are not speculative in nature and are
necessary to effectively manage its interest rate exposure.
At December 31, 2012, hedging instruments for interest-rate
risk were terminated in full in light of the payment of the
balance owed on the corresponding debt.
Sensitivity to interest rates
The interest expense recorded in 2012 on medium-term
debt represents the maximum expense in light of the ceiling
provided for under the conditions for the fixed rate swap.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
3.15.2.
Liquidity risk
The net position of financial assets and liabilities by maturity is as follows:
In € thousands < 1 year 1 to 5 years > 5 years
Financial assets 229,003 458 6,296
Financial liabilities (21,138) - -
Net position before hedging 207,865 458 6,296
Hedging of assets and liabilities - - -
Net position after hedging 207,865 458 6,296
3.15.3.
Foreign exchange risk
Net positions of the group in the main foreign currencies are as follows:
In € thousands USD GBP YEN CAD
Assets 41,053 7,886 779 1,294
Liabilities (2,300) (23) (71) (30)
Net position before hedging at the closing price 38,753 7,863 708 1,264
Hedging instruments (36,412) (6,371) - -
Net position after hedging 2,341 1,492 708 1,264
In addition, because a significant portion of group sales is
in foreign currencies, it incurs a risk from exchange rate
fluctuations, primarily from the US dollar (41.2% of sales)
and to a lesser extent the Pound sterling (8.2% of sales) and
the Japanese yen (1.3% of sales).
Foreign exchange risk management policy
The group’s exchange-rate risk management policy seeks to
hedge exposures related mainly to monetary flows resulting
from sales in US dollars, pounds sterling and Japanese yens.
To this purpose, the group has recourse to forward exchange sales,
according to procedures that prohibit speculative trading. All
forward currency hedging must be backed in terms of amount
and maturity by an identified economic underlying asset.
At December 31, 2012, the group had hedged nearly 89%
of its receivables in US dollars and nearly 81% in Pound
sterling for booked trade receivables.
Sensitivity to foreign exchange risk
The group considers that a 10% fluctuation in the exchange
rate of the US dollar in relation to the Euro represents
a pertinent risk factor that may reasonably occur within
a given year. An immediate upswing in the exchange rate
(US dollar and Pound sterling) of 10% would result in a
maximum positive currency effect of €21.9 million on sales
and €17.2 million on operating income. A 10% decrease
of these same exchange rates would have an equivalent
negative currency effect for the same amounts.
81
3.15.4.
Counterparty risk
Financial instruments used by the group to manage interest
rate and foreign exchange risks are obtained from counterparties
with benchmark ratings. At December 31, 2012, counterparties
(according to Standard & Poor’s) were rated A.
Cash is deposited with financial institutions with a rating
issued by a specialized agency. At December 31, 2012, 100% of
counterparties (according to Standard & Poor’s) were rated A.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
4.
NOTES TO THE INCOME STATEMENT
4.1.
Breakdown of consolidated sales by brand
In € thousands 2011 2012
Burberry 221,749 234,664
Lanvin 57,825 60,407
Montblanc 30,610 46,146
Jimmy Choo 29,417 40,096
Van Cleef & Arpels 20,399 17,838
Boucheron 8,372 16,437
S.T. Dupont 13,164 13,772
Paul Smith 14,172 11,589
Nickel 2,036 1,878
Balmain - 1,463
Other 585 1,170
Total 398,328 445,460
4.2.
Cost of sales
82
In € thousands 2011 2012
Raw materials, trade goods and packaging (171,677) (148,694)
Changes in inventory and allowances 43,479 (812)
POS advertising (10,100) (7,546)
Staff costs (3,339) (3,326)
Subcontracting (1,832) (626)
Transportation costs (1,101) (788)
Other expenses related to the cost of sales (1,032) (1,743)
Total cost of sales (145,602) (163,535)
4.3.
Selling expenses
In € thousands 2011 2012
Advertising (91,860) (98,052)
Royalties (35,879) (40,855)
Staff costs (16,541) (17,154)
Subcontracting (25,370) (27,829)
Transportation costs (5,828) (5,791)
Commissions (2,011) (2,216)
Travel expenses (3,115) (3,078)
Allowances and reversals (7,014) (9,405)
Other selling expenses (6,247) (7,898)
Total selling expenses (193,865) (212,278)
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
4.4.
Administrative expenses
In € thousands 2011 2012
Purchases and external costs (4,035) (3,550)
Staff costs (4,871) (4,670)
Tax and related expenses (708) (739)
Allowances and reversals (795) (823)
Other administrative expenses (1,548) (1,712)
Total administrative expenses (11,957) (11,494)
4.5.
Other operating income and expenses
Other operating income and expenses include transactions related to the discontinuation of the Burberry license as well as
the goodwill impairment charge on Nickel that break down as follows:
In € thousands Other Other
operating operating
income expenses
Burberry license exit payment 181,200 -
Allowances for depreciation and amortization, provisions - (10,247)
Additional employee profit-sharing expense including social charges - (10,467)
Transfer of the Burberry upfront license fee - (1,625)
Other expenses associated with the discontinuation of the license - (2,800)
Total transactions related to the discontinuation of the Burberry license 181,200 (25,139)
Additional goodwill impairment charge for Nickel - (1,411)
Total other operating income and expenses 181,200 (26,550)
83
4.6.
Net financial income (expense)
In € thousands 2011 2012
Financial income 550 447
Interest and similar expenses (1,055) (1,084)
Net finance costs (505) (637)
Currency losses (2,796) (4,193)
Currency gains 3,910 1,815
Net currency gains (losses) 1,114 (2,378)
Other financial income and expenses (43) (8)
Net financial income (expense) 566 (3,023)
The change in the net currency gains (losses) reflects mainly the adverse impact of the US dollar in the second half of 2012.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
4.7.
Income taxes
4.7.1.
Analysis of income taxes
In € thousands 2011 2012
Current income tax - France (15,097) (75,023)
Current income tax - Foreign operations (2,323) (3,549)
Total current income tax (17,420) (78,572)
Deferred tax - France 417 4,845
Deferred tax - Foreign operations 342 (356)
Total deferred taxes 759 4,489
Total income taxes (16,661) (74,083)
The increase in the tax expense is mainly the result of the €181.2 million exit fee paid by Burberry included in operating income.
4.7.2.
Reconciliation of the effective tax expense and theoretical tax expense
The difference between the effective tax recorded and the theoretical tax expense calculated by applying the tax rate of 36.10%
applicable for fiscal 2011 and 2012 to pre-tax income reflects the following.
In € thousands 2011 2012
Tax base 46,867 209,780
Theoretical tax calculated at the parent company rate (16,919) (75,731)
Effect of tax rate differences 1,908 1,275
Recognition of tax income not previously classified as tax assets 810 215
Deferred tax not recognized on losses of the period (35) (177)
Permanent non-deductible differences (2,425) 335
84
Income tax (16,661) (74,083)
The change in permanent differences is mainly due to the non-deductible nature in 2011 of the tax on the debt waiver granted
to the Spanish subsidiary.
4.8.
Earnings per share
In € thousands, except number of shares and earnings per share in euros 2011 2012
Net income 30,300 135,862
Average number of shares 18,918,963 20,957,788
Basic earnings per share (1) 1.60 6.48
Dilutive effect of stock options:
Potential additional number of fully diluted shares 74,313 33,809
Potential fully diluted average number of shares outstanding 18,993,276 20,991,597
Diluted earnings per share (1) 1.60 6.47
(1) Adjusted for bonus shares granted in 2011 and 2012.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
5.
SEGMENT INFORMATION
5.1.
Business lines
In € thousands 2011 2012
Perfumes Skincare Total Perfumes Skincare Total
and Beauty and Beauty
Sales 392,436 5,892 398,328 437,264 8,196 445,460
Current operating income 52,149 (5,848) 46,301 65,202 (8,460) 56,742
Impairment - (603) (603) - (1,411) (1,411)
Trademarks, licenses
and goodwill 69,250 3,809 73,059 77,227 2,397 79,624
Inventories 96,665 4,502 101,167 84,980 2,219 87,199
Other segment assets 178,152 766 178,918 366,500 1,473 367,973
Total segment assets 344,117 9,077 353,194 528,707 6,089 534,796
Segment liabilities 132,407 1,156 133,563 185,275 38 185,313
Segment assets and liabilities consist of operating assets (liabilities) used primarily in France.
5.2.
Geographic segments
Sales by geographic segment break down as follows:
In € thousands 2011 2012
85
North America 80,253 103,583
South America 36,759 35,433
Asia 65,347 72,903
Eastern Europe 34,722 38,108
Western Europe 103,283 108,540
France 33,702 35,116
Middle East 39,942 46,605
Africa 4,320 5,172
Total 398,328 445,460
6.
OTHER INFORMATION
6.1.
Off balance sheet commitments
The following presentation of off-balance sheet commitments is based on AMF recommendation No. 2010-14
of December 6, 2010.
6.1.1.
Summary of off-balance sheet commitments
In € thousands 2011 2012
Off-balance sheet commitments in connection with the company’s operating activities 312,531 167,473
Off balance sheet commitments 542 520
Total commitments given 313,073 167,993
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
6.1.2.
Off-balance sheet commitments in connection with the company’s operating activities
In € thousands Main characteristics 2011 2012
Guaranteed minima on trademark royalties (1) Guaranteed minima on royalties
254,500
130,000
Headquarters rental payments
Guaranteed minima for warehousing
and logistics
Firm component orders (inventories)
regardless of sales achieved for each
of the trademarks in the period.
Rental payments due over the remainder
of the lease period (3, 6 or 9 years).
Contractual minima for remuneration
of warehouses regardless of sales volume
for the period.
Inventories of components on stock
with suppliers the company undertakes
to purchase as required for releases.
3,974
2,652
9,180
10,065
44,877
24,756
Total commitments given in connection with operating activities 312,531 167,473
(1) The reduction in guaranteed minimas for brand license fees is mainly due to the early termination of the Burberry license agreement.
6.1.3.
Off-balance sheet commitments in connection with financing activities
Commitments with respect to forward currency sales at December 31, 2012 amounted to US$48,043,000 and £5,200,000.
6.1.4.
Other off-balance sheet commitments
In € thousands Main characteristics 2011 2012
86
Pension liabilities
The portion of past service costs deferred
as an off-balance sheet item pursuant to
application of the closing of July 23, 2008
and amortized over 28 years
542
520
Total other commitments given 542 520
Act No. 2004-391 of May 4, 2005 on lifelong vocational training and social dialogue established an individual training benefit
for employees in France (Droit Individuel à la Formation or DIF). Pursuant to this measure, the company provides for training
benefits of the basis of 21 hours per year and per employee. Individual training benefits vested by group employees corresponded
to a total of 7,352 hours at December 31, 2012 and 1,731 training hours under this provision were used by group employees
in the period.
6.1.5.
Commitments given by maturity at December 31, 2012
In € thousands Total Up to 1 year 1 to 5 years 5 years or more
Guaranteed minima on trademark royalties 130,000 9,830 50,620 69,550
Headquarters rental payments 2,652 868 1,644 140
Guaranteed minima for warehousing and logistics 10,065 1,342 5,368 3,355
Firm component orders (inventories) 24,756 24,756 - -
Commitments given in connection with operating activities 167,473 36,796 57,632 73,045
Bank guarantees - - - -
Commitments given in connection with financing activities - - - -
Pension liabilities 520 22 87 411
Other commitments given 520 22 87 411
Total commitments given 167,993 36,818 57,719 73,456
Maturities are defined on the basis of the contract terms (license agreements, leases, logistic agreements, etc.).
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
6.1.6.
Commitments received
Commitments received in connection with forward currency purchases at December 31, 2012 amounted to €36,921,000
for US dollar hedges and €6,465,000 for Pound sterling hedges representing total commitments of €43,386,000.
6.2.
License agreements
Nature License Duration Expiration date
of license inception date
Burberry Original July 1993 13 years and 6 months -
Renewal July 2004 12 years and 6 months Before term
December 2012
S.T. Dupont Original July 1997 11 years -
Renewal January 2006 5 years and 6 months -
Renewal January 2011 6 years December 2016
Paul Smith Original January 1999 12 years -
Renewal July 2008 7 years December 2017
Van Cleef & Arpels Original January 2007 12 years December 2018
Jimmy Choo Original January 2010 12 years December 2021
Montblanc Original July 2010 10 years and 6 months December 2020
Boucheron Original January 2011 15 years December 2025
Balmain Original January 2012 12 years December 2023
Repetto Original January 2012 13 years December 2024
Karl Lagerfeld Original November 2012 20 years October 2032
87
On October 11, 2012, in anticipation of the pending transfer
of the fragrance and beauty business, Interparfums and
Burberry concluded an agreement to facilitate a smooth
transition. This agreement provided for an additional three
month period ending March 31, 2013 and confirmed the
payment of the exit fee by December 31, 2012.
According to the terms of this agreement, Interparfums will
continue to manage the perfume business until March 31, 2013,
at which date it will then be taken over by Burberry.
On December 8, 2012, Karl Lagerfeld and Interparfums
signed a 20-year worldwide license agreement commencing
on January 1, 2012 for the creation, development and
distribution of fragrances under the Karl Lagerfeld brand.
The renewal of the Burberry license agreement on July 1, 2004
was accompanied by an option to extend the license by
an additional five years and an option by Burberry Ltd to
acquire the license at its market value at December 31, 2011.
On December 21, Interparfums and Burberry extended by
one year certain terms of their license agreement, and notably
its duration to December 31, 2017. Burberry’s right
to buy the license was furthermore moved forward from
December 31, 2011 to December 31, 2012.
On December 20, 2011, Burberry exercised its right to evaluate
the purchase price for the unexpired term of the existing
license.
On July 16, 2012, Burberry exercised its option to terminate
the license agreement between the two parties.
On July 27, 2012, the two companies decided to terminate the
license agreement with an expiration date of December 31, 2012
in exchange for payment of a €181 million exit fee (excluding
trade receivables, inventories and tangible assets).
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
6.3.
Proprietary brands
Lanvin
At the end of July 2007, Interparfums acquired the Lanvin
brand names and international trademarks for fragrance
and make-up products from the Jeanne Lanvin company.
Interparfums and Lanvin also concluded a technical and
creative assistance agreement in view of developing new
perfumes based on net sales until June 30, 2019. The Jeanne
Lanvin company holds a buy back option for the brands
which will be exercisable on July 1, 2025.
Nickel
In April 2004, Interparfums acquired a majority stake in
Nickel, a company specialized in skincare products for men.
In June 2007, Nickel became a wholly-owned subsidiary.
6.4.
Insurance
Interparfums SA is named as beneficiary under a €15 million
life insurance policy for Philippe Bénacin.
6.5.
Employee-related data
88
6.5.1.
Employees by category
Number of employees at 12/31/2011 12/31/2012
Managers 118 119
Supervisory staff 14 7
Employees 95 79
Total 227 205
6.5.2.
Employees by department
Number of employees at 12/31/2011 12/31/2012
Executive Management 2 2
Production & Operations 32 35
Burberry Fragrances 39 32
Luxe & Fashion 26 28
France 67 46
Finance & Corporate Affairs 37 36
Subsidiaries 24 26
Total 227 205
The decrease in headcount results mainly from the expiration
of respectively work-study and fixed term employment contracts
(see note 4.1.2 of the consolidated management report).
6.5.3.
Wages and benefits
In € thousands 2011 2012
Staff costs 15,963 16,392
Social security charges 6,680 6,902
Profit-sharing 1,782 1,600
Stock option costs 346 267
Total wages and benefits 24,771 25,161
In addition €227 million in supplemental retirement benefits
for Executive Management were paid in 2012.
6.6.
Information on related parties
6.6.1.
Management Committee
The nine members of the Management Committee exercise
responsibilities in the areas of strategy, the management
and oversight. They have employment contracts and receive
compensation as follows:
In € thousands 2011 2012
Wages, bonuses & social charges 4,063 4,266
Share based payment expenses 48 89
The executive officers Philippe Bénacin and Jean Madar,
co-founders of Interparfums SA are also executive officers
and majority shareholders of the parent company
Interparfums Inc.
6.6.2.
Board of Directors
The eleven members of the Board of Directors exercise
responsibilities in the areas of strategy, management consulting,
acquisitions and oversight. Only outside Directors are paid
Directors’ fees that break down as follows:
In € thousands 2011 2012
Directors’ fees (1)
63 66
(1) Calculated on the basis of actual Board meeting attendance.
6.6.3.
Relations with the parent company
The accounts of Interparfums SA and its subsidiaries,
through Interparfums Holding, are fully consolidated
into the accounts of Interparfums Inc., whose registered
office is located at 551 Fifth Avenue, New York, NY 10176,
United States. No material transactions exist between
Interparfums SA and Interparfums Inc. or Interparfums
Holding.
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
6.7.
Auditors’ fees
Total auditors’ fees expensed in the income statement relating to their engagement as Statutory Auditors break down as follows:
In € thousands Mazars
2011 % 2012 %
Work as Statutory Auditors and certification
of separate and consolidated financial statements:
Of the Issuer 320 80 % 284 65 %
Of fully consolidated subsidiaries 81 20 % 153 35 %
Other directly related assignments - - - -
Other services rendered by members
of the auditor’s network to fully consolidated subsidiaries - - - -
Total 401 100% 437 100%
In € thousands SFECO & Fiducia Audit
2011 % 2012 %
Work as Statutory Auditors and certification
of separate and consolidated financial statements:
Of the Issuer 100 98 % 100 100 %
Of fully consolidated subsidiaries - - - -
Other directly related assignments 2 2 % - -
Other services rendered by members
of the auditor’s network to fully consolidated subsidiaries - - - -
Total 102 100% 100 100%
6.8.
Post-closing events
None.
89
Consolidated financial statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
CORPORATE
GOVERNANCE
BOARD OF DIRECTORS P. 91
MANAGEMENT COMMITTEE P. 97
COMPENSATION OF EXECUTIVE OFFICERS P. 97
SPECIAL REPORT OF THE BOARD
OF DIRECTORS ON STOCK OPTIONS P. 100
CHAIRMAN’ REPORT ON CORPORATE
GOVERNANCE AND INTERNAL CONTROL
AND RISK MANAGEMENT PROCEDURES P. 102
90
Corporate governance
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1.
BOARD OF DIRECTORS
Interparfums adopted the form of a société anonyme, the French
equivalent of a joint stock company, when it was created in
1989. It is governed by a Board of Directors and a Management
Committee.
On March 8, 2010, the Board of Directors of the company
decided to refer to the Middlenext Code of December 2009
designed for Small and Mid Caps, after reviewing the points
requiring special attention (“points de vigilance”) set forth
therein, duly noting the main issues relating to effective
corporate governance.
a permanent basis concerning all strategic and financial matters
necessary to perform their duties in the most effective manner.
The Board Charter adopted on March 3, 2009 has been
revised to incorporate the recommendations of the Middlenext
Code of December 2009 and is reproduced below in full.
Members of the Board of Directors
As of December 31, 2012 the composition of the Board of
Directors was as follows:
Philippe Bénacin
Chairman and Chief Executive Officer of Interparfums
Date of 1st appointment: January 3, 1989
Composition of the Board of Directors
Date of last reappointment: April 23, 2010
To strengthen the Board of Directors of initially four members
by drawing on an expanded range of expertise and experience,
new members originating from the luxury industry sector
were appointed in 2004. On December 31, 2012 the Board
of Directors had 11 members.
When the terms of office of the Directors were up for renewal,
the general Meeting of April 23, 2010 decided to set terms
of office of four years to comply with recommendations
of the Middlenext Code. This decision seeks to reconcile the
objective of assuring the independence of the Directors
by preventing terms that are too long, and their commitment
to the company by preventing terms that are too short.
The Board ensures that at least 30% of its members are
Independent Directors. A Director is considered to be
independent according to the criteria of the Middlenext Code
when there exists no material financial, contractual or
family relationship that could compromise his or her free
exercise of judgment whereby the Director may not:
- be a current employee or corporate officer (mandataire social)
of the company or a company of its group or have been so
within the past three years;
- be a significant customer or supplier of the company or
its group, or for which the company or its group represents
a significant part of its business;
- be the main shareholder of the company;
Professional address: Interparfums, 4, rond-point des Champs
Élysées, 75008 Paris, France
Philippe Bénacin, 54, a graduate of the ESSEC Business School
and co-founder of the company with his partner Jean Madar,
has served as Chairman and Chief Executive Officer of
Interparfums SA since its creation in 1989.
Other offices and directorships: Chairman of the Board of
Directors of Interparfums Holding, President and Vice
Chairman of the Board of Interparfums Inc. (United States)
Jean Madar
Director
Date of 1st appointment: December 23, 1993
Date of last reappointment: April 23, 2010
91
Professional address: Interparfums, 4, rond-point des Champs
Élysées, 75008 Paris, France
Jean Madar, 52, a graduate of the ESSEC Business School, is the
co-founder of the company with his partner Philippe Bénacin.
Other offices: Chairman of the Board of Directors of
Interparfums Holding, Chief Executive Officer and Vice
Chairman of the Board of Interparfums Inc. (United States)
Maurice Alhadève
Independent Director
- be related by close family ties to a corporate officer or a main
shareholder;
Date of 1st appointment: April 23, 2004
Date of last reappointment: April 23, 2010
- have been an auditor of the company within the previous
three years.
On the basis of these criteria, the Board includes four
Independent Directors, Dominique Cyrot, Chantal Roos,
Maurice Aladhève and Michel Dyens.
Professional address: 16 rue de Molitor 75016 Paris, France
Other offices and directorships: none
Catherine Bénard-Lotz
Director
To date, the Board has three members having the status of
employee resulting from an employment contracts predating
their appointment as Directors.
Date of 1st appointment: April 23, 2004
Date of last reappointment: April 23, 2010
As a general rule, members of the Board of Directors have
an in-depth or multidisciplinary experience of the business
world in international markets. They are subject to conduct
of business rules, specified in the Board Charter (Règlement
Intérieur) that includes notably obligations of secrecy and
due diligence in the performance of their duties ensuring
the effective collegial work of the Board. Directors are provided
not only with information before each meeting but also on
Professional address: Interparfums, 4, rond-point des Champs
Élysées, 75008 Paris, France
Catherine Bénard-Lotz, with an advanced degree in business
law from the University of a Paris, has served as Interparfums’
Chief Legal Officer since 1994.
Other offices and directorships: none
Corporate governance
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Patrick Choël
Director
Chantal Roos
Independent Director
Date of 1st appointment: December 1, 2004
Date of 1st appointment: April 24, 2009
Date of last reappointment: April 23, 2010
Date of last reappointment: April 23, 2010
Professional address: 7 rue de Talleyrand 75007 Paris, France
Other officers and directorships: Director of Interparfums
Inc. (United States), Director of Parfums Christian Dior,
Director of Guerlain, Director of SGD, Director of ILEOS
Previous offices and directorships: Director of Modelabs
Professional address: CREA, 168 avenue Charles de Gaulle,
92200 Neuilly sur Seine, France
Other offices and directorships: Managing Partner of CREA
Previous offices and directorships: Chairman and Chief
Executive Officer of Yves Saint Laurent Beauté
Dominique Cyrot
Independent Director
Philippe Santi
Director and Executive Vice President
Date of 1st appointment: April 27, 2012
Date of 1st appointment: April 23, 2004
Professional address: 8 rue de la Pompe 75016 Paris, France
Date of last reappointment: April 23, 2010
Other offices and directorships: Director of Séché
Environnement
Professional address: Interparfums, 4, rond-point des Champs
Élysées, 75008 Paris, France
Michel Dyens
Independent Director
Date of 1st appointment: April 23, 2004
Date of last reappointment: April 23, 2010
Professional address: Michel Dyens & Co., 17 avenue
Montaigne, 75008 Paris, France
Other offices and directorships: Chairman of Michel
Dyens & Co., Managing Partner of Varenne Entreprises
92
Previous appointments: Director of Direct Panel
Frédéric Garcia-Pelayo
Director and Executive Vice President
Date of 1st appointment: April 24, 2009
Date of last reappointment: April 23, 2010
Professional address: Interparfums, 4, rond-point des Champs
Élysées, 75008 Paris, France
Frédéric Garcia Pelayo, 54, EPSCI international exchange
program graduate of the ESSEC Business School, has been
Vice President for Export Sales of Interparfums since 1994
and Executive Vice President since 2004.
Other offices and directorships: none
Jean Levy
Director
Date of 1st appointment: April 23, 2004
Date of last reappointment: April 23, 2010
Professional address: 17 rue de Margueritte, 75017 Paris, France
Other appointments: Director of Interparfums Inc. (United
States), Director of Axcess Groupe SA, Director of Rallye SA
Previous appointments: Director of Price Minister SA,
Director of MoM SAS
Philippe Santi, 51, graduate of the École Supérieur de
Commerce of Reims and a public accountant has served as the
Chief Financial and Administrative Officer of Interparfums SA
since 1995 and as Executive Vice President since 2004.
Other offices and directorships: Director of the parent
company Interparfums Inc.
The terms of office of all Directors will expire at the end
of the ordinary general Meeting of 2014.
Absence of condemnations
To the best of the company’s knowledge, in the last five
years none of the members of the Board of Directors have
been:
- convicted for fraud or penalties for infractions rendered
by statutory or regulatory authorities;
- been a party in a bankruptcy, receivership or liquidation
proceeding as a Director or Officer;
- disqualified from serving as a Director or Officer or
participating in the management of the operations of an issuer.
Absence of potential conflicts of interest
To the best of the company’s knowledge, there exist
no potential conflicts of interest between the duties towards
the company and the personal interests and/or other duties
of one of the members of the Board.
Absence of service contracts with Board members
To the best of the company’s knowledge, none of the Board
members is bound by service agreements with the company
or one of its subsidiaries providing for the grant of benefits
under its terms.
This Charter or “Rules of Procedure” (Règlement Intérieur),
previously entitled “Charter of the Board of Directors”
adopted by the Board on March 3, 2009, was updated by
the Board on March 8, 2010, in order to take into account
the provisions of the Middlenext Code of December 2009
to which the Board has opted to refer instead of the
AFEP/MEDEF Code previously used.
Corporate governance
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
The full text of the Middlenext Code is attached to this
Charter.
Applicable to all current and future Directors, and in
line with the Middlenext Code, this Charter, is destined
to supplement the provisions of the law, regulations
and the company’s bylaws, in the interest of the company
and its shareholders in order to specify:
- the composition of the Board/criteria of independence
for members;
- the role the Board in the performance of its duties and
powers;
- Board procedures (meetings, discussions, information
provided to members);
- Board procedures (meetings, discussions, information
provided to members);
- the duties of Board members (code of conduct: loyalty,
confidentiality, abstention, etc.).
1.
COMPOSITION OF THE
BOARD OF DIRECTORS
The Board of Directors includes a maximum of 18 members
with at least three selected from independent persons
having no ties of interest with the company so that they
are entirely free in the exercise of their judgment.
1.1.
Independent Directors
A director is considered to be independent according to
the criteria of the Middlenext Code when there exists no
material financial, contractual or family relationship that
could compromise his or her free exercise of judgment
whereby the Director may not:
- be a current employee or corporate officer (mandataire
social) of the company or a company of its group or have
been so within the past three years;
- be a significant customer or supplier of the company or
its group, or for which the company or its group
represents a significant part of its business;
- be the main shareholder of the company;
- be related by close family ties to a corporate officer
or a main shareholder;
- have been an auditor of the company within the
previous three years.
The Board may consider that one of its members,
even though fulfilling the above criteria, should not be
considered as independent, in light of his or her particular
situation or that of the company, with respect to its
shareholder structure or for any other reason.
Conversely, the Board may also consider that one of its
members not fulfilling these criteria to be independent.
1.2.
Balanced representation
of men and women
on the Board of Directors
In accordance with the French law No. 2011-103 of
January 27, 2011 on the balanced representation of men
and women on Boards of Directors and professional gender
equality, the Board must respect a timetable having
been set to reach certain quotas and if not met, any new
appointment of a male Director shall be considered void
and the Directors’ fees suspended:
- within six months of the enactment of this law, the Board
must include one woman. In 2013, the Board of Directors
of Interparfums counted three women among its eleven
members;
- no later than the annual general Meeting approving
the financial statements for the fiscal year ending
December 31, 2014, the number of women serving on
the Board must represent at least 20% of its members;
- no later than the annual general Meeting approving
the financial statements for the fiscal year ending
December 31, 2017, the number of women serving on
the Board must represent at least 40% of its members.
2.
ROLE OF THE BOARD
OF DIRECTORS
2.1.
Strategic body
The mission of the Board of Directors is to determine
the strategy of the company and ensure that this
strategy is implemented. Subject to the powers granted
to shareholders’ meetings and within the limits of the
company’s corporate purpose, the Board may address
any matter pertaining to the proper management of
the company and settle all items of business relating
thereto.
In addition to the attributes provided for by law and
regulations, the Board may be called to address and grant
its approval for, in particular, the following matters:
- assess the environment of the company and analyze
opportunities for external growth through acquisitions;
- the creation of a company or acquiring controlling interest
in all forms in any company or undertaking outside
the group;
- review projects involving material investments or
not relating to the company’s ordinary operating activities;
- analyze major strategic projects presented to Executive
Management and their impact on the economic and
financial situation of the company;
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94
- analyze the annual budget submitted by Executive
Management;
information to assist the Board of Directors in connection
with preparing its meetings.
- implement procedures for control or verification it
considers appropriate.
And in general, the Board ensures the merits of any measure
adopted for the strategic development of the company
and the solidity of the company’s balance sheet.
2.2.
Audit Committee function
On March 3, 2009 the Board of Directors decided that
in light of the company’s organization and structure, an
independent Audit Committee would not be established
and that in consequence, in accordance with the provisions
provided for under article L. 823-20 of the French
Commercial Code, it would exercise the functions of
Audit Committee in plenary session.
In connection with the performance of the functions
of Audit Committee, the primary tasks of the Board of
Directors are to:
- ensure compliance with accounting regulations
and the correct application of the principles for preparing
the company’s accounts;
- ensure that the process for producing financial information
is based on internal procedures for the collection
and control of information that guarantee its quality
and exhaustive nature;
- assess the performance of internal control systems
by evaluating the organization principles and functioning
of Internal Audit and by verifying the process for
identifying risks; Review the audit missions and evaluations
of the internal control system carried out by the Finance
Department;
The Chairman actively contributes to the performance
of the duties of Directors by serving as an intermediary
between the latter and the main parties involved
in implementing the company’s strategic objectives.
3.2.
Executive Management
The Board of Directors determines the manner that
Executive Management is exercised, under its responsibility,
either by the Chairman of the Board of Directors, or by
a person appointed by the latter with the title of Chief
Executive Officer (Directeur Général).
The Board of Directors’ meeting of December 19, 2002
decided not to separate the functions of Chairman of the
Board of Directors from those of Chief Executive Officer.
In this respect, and subject to the powers granted by law
to general Meetings and the limitations provided for by
the provisions of the Charter, the Chairman of the Board
of Directors exercises the functions of Chief Executive
Officer and is vested with the broadest powers to act
in all circumstances in the name of the company with
the exception of the following strategic decisions that are
submitted for approval to the Board of Directors:
- any financial commitment (immediate or deferred)
for an amount exceeding €10 million per transaction
and having a material impact on the company’s scope of
consolidation, including mainly the acquisition or disposal
of assets or equity investments in companies;
- any decision, regardless of the amount involved, that
could potentially materially affect the strategy of the
company or materially modify the scope of its normal
activity.
- monitor the application of the rules of independence
and objectivity of the auditors in the performance
of their duties, the conditions for the renewal of their
appointments and setting their fees.
On proposals by the Chief Executive Officer, the Board
of Directors may appoint one or more individuals to
assist the Chief Executive Officer with the title of Executive
Vice President (Directeur Général Délégué).
3.
PROCEDURES FOR
EXERCISING EXECUTIVE
MANAGEMENT
3.1.
The Chairman
of the Board of Directors
The Chairman, appointed by the Board of Directors
from among its members, organizes and manages the
work of the Board on which he reports to the general
Meeting of the shareholders. He ensures that management
bodies of the company are effectively run and, in
particular, that Directors are able to perform their duties.
The Chairman may request any documents or specific
4.
FUNCTIONING OF THE
BOARD OF DIRECTORS
4.1.
Calling and holding
of Board meetings
Notice of meetings may be issued by any means including
orally and may be transmitted by the Secretary of
the Board within at least eight days before each meeting.
The Board meets as often as the interests of the company
require, and in general, at least five times a year, with
three of these meetings devoted to reviewing the budget,
strategy and the activity of the company. Decisions by
the Board are adopted on the basis of a simple majority.
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In the case of split vote, the Chairman of the meeting
has the casting vote.
The Board establishes for the year according to the
proposal of the Chairman a schedule for its meetings,
with the exception of extraordinary meetings.
4.4.
Evaluation of the work
of the Board
4.2.
Participation in meetings
through videoconferencing
or telecommunications media
In accordance with applicable regulations and article 14
of the company’s bylaws, Directors who participate
in Board meetings through videoconferencing or
telecommunications technology are considered present
for calculating the quorum and majority.
The Chairman ensures that videoconferencing and
telecommunications technologies used guarantee
the effective participation of all parties in the meetings.
The proceedings must be broadcast without interruption.
Measures necessary to identify each party and verify the
quorum must be assured. Failing this, the Board meeting
may be adjourned.
The attendance register and the minutes must indicate
the names of Directors having participated through
videoconferencing or telecommunications means.
Remote participation using the technologies is expressly
prohibited for proceedings concerning the following
decisions:
- the approval of the company’s statutory and consolidated
financial statements;
- preparing the management report to be included in the
group’s management report.
4.3.
Transmission of information
to Directors
All Directors are provided with the documents and
information required to make informed decisions on
the items of business on the agenda.
It is the responsibility of all Directors to ensure that they
possess all information they consider necessary for the
effective conduct of proceedings of the Board and, when
applicable, request this information when they consider
that it has not been made available.
Furthermore, Directors are kept regularly informed,
outside of these meetings of all events or transactions of a
material nature with respect to the company’s strategic
priorities and provided with all relevant information when
warranted by events concerning the company.
Once a year, the Chairman of the Board invites the Board
members to express their views on the functioning
of the Board and on the preparation of its work for the
purpose of:
- preparing a report on the Board’s work;
- examining the composition of the Board;
- ensuring the quality and effective conduct of
discussions on matters of importance.
The evaluation is recorded in the minutes of the
meeting.
5.
CODE OF CONDUCT
OF DIRECTORS
5.1.
Obligations of discretion
and secrecy
Concerning non-public information acquired in
connection with their duties, Directors shall be considered
subject to a true obligation of professional secrecy that
exceeds the obligation of discretion provided for by article
L. 225-37 subsection 5 of the French Commercial Code.
In general, Directors shall refrain from speaking individually
outside the collegial framework of the Board of Directors
about matters considered therein. Outside the company,
Directors undertake to respect the collegial nature on
any oral or written communication that they may issue.
5.2.
Duties of independence
Directors have a duty to act in all circumstances in the
interest of the company and all shareholders. To this
purpose, they are subject to an obligation of informing
the Board of any situation involving a conflict of interest,
even a potential conflict of interest, and must refrain
from voting in the proceedings relating thereto, and if
necessary, resign. Absence of information thereon constitutes
confirmation of that no conflict of interest exists.
And in general, Directors shall be prohibited from engaging
in transactions in the shares of the company and/or the
group if they possess privileged information. Each party
is personally responsible for assessing the privileged nature
of information in his or her possession, and, in consequence,
to authorize or prohibit any use or transmission of
such information, and to engage in any transactions
in the company’s shares.
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And in any case, Directors undertake to comply with
their obligation prohibiting any dealings in the company’s
shares for a period of 15 days prior to:
6.
COMPENSATION
- the publication of the interim consolidated or annual
results, according to the calendar available to the Director;
- the publication of quarterly, interim and annual sales,
according to the calendar available to the Director.
6.1.
Directors’ fees
5.3.
Obligations of due diligence
At the time they assume their appointment, every Board
member duly notes the obligations resulting therefrom
and notably those relating to legal rules governing holding
multiple appointments and before accepting, signs the
Board Charter. To this purpose, it is recommended that
a Director, when exercising the function of “executive
officer”, does not accept more than three appointments
as a Director of listed companies, including companies
outside of his or her own group.
Directors must devote to their duties the necessary time and
attention. To this purpose, they will limit the appointments
that they hold to a reasonable number to ensure their
regular participation in the meetings of the Board.
Directors have an obligation to obtain and request from
the Chairman within the appropriate delays information
necessary to effectively participate in the items of business
to be addressed by the Board of Directors’ meetings.
5.4.
Obligation to report dealings
in the company’s shares
Directors and persons with whom they have close relations
must report to the AMF the purchase, sale, subscription
or exchange of shares of the company when the amount
exceeds €5,000 for the calendar year progress.
To this purpose, they will send their declaration to the
AMF by electronic means within five trading days following
the transactions and send at the same time a copy of
the declaration to the Secretary of the Board of Directors
of the company.
The Board of Directors freely sets the amount of fees for
attendance for which the general Meeting fixes the annual
amount. It allocates this amount equally among members
on basis of their attendance and the amount of time they
devote to their duties.
By express waiver of the Directors concerned, Directors’
fees are allocated exclusively to Directors selected from
outside the company.
6.2.
Compensation of Directors
for special assignments
The Board of Directors may entrust one of its members
with a mission, for which it determines the conditions
and terms that are subject to approval by the Board,
except by the Board member designated for this mission.
The Board will determine notably the amount of
compensation, the duration of the mission as well
as the procedures for payment and the reimbursement
of expenses incurred in the performance of this mission.
The Chairman is responsible for ensuring that this
mission is properly carried out according to the conditions
approved by the Board to whom it regularly reports thereon.
7.
MODIFICATION
THE BOARD CHARTER
This Charter may be adapted or modified by decision
of the Board of Directors.
Every new member of the Board of Directors shall
be provided with a copy of this Charter as well as the
company’s bylaws (statuts).
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3.
COMPENSATION
OF EXECUTIVE OFFICERS
In connection with the preparation of this registration
document, the Board of Directors has analyzed the different
components of compensation and benefits for corporate
officers in light of the principles set forth in the Middlenext
Code recommendations of December 2009. It reviewed
the procedures in place for determining cash compensation
and benefits of all kinds granted to corporate officers that
are presented below in detail.
In general, the Board of Directors sets the compensation
policy for officers both in reference to market practice
in comparable sectors and the size of the company notably
in respect to sales and the number personnel.
97
2.
MANAGEMENT COMMITTEE
Mission
The purpose of the Management Committee, led by the
Chairman and Chief Executive Officer, is to address operational
issues related to the development of the company.
Composition as of December 31, 2012
Philippe Bénacin, Chairman and Chief Executive Officer
Philippe Santi, Executive Vice President, Chief Financial
and Administrative Officer
Frédéric Garcia-Pelayo, Executive Vice President, Chief
International Officer
Hugues de la Chevasnerie, Vice President, Burberry Fragrances
Angèle Ory-Guénard, Vice President, Export Sales –
Burberry Fragrances
Jérôme Thermoz, Vice President, French Distribution
Axel Marot, Vice President, Production & Logistics
The Management Committee met ten times in 2012 (seven
times in 2011) and discussed the following items of business:
January: 2011 year-end sales, the Burberry license agreement,
the 2012 salary policy, year-end employee assessments,
the distributors seminar, 2012/2013 launchings;
February: Summary of the distributors seminar, first-quarter
sales, Burberry discussions;
March: 2011 year-end results, Burberry negotiations,
acquisitions advertising expense budgets, subsidiaries;
April: 2012 first and second-quarter sales, Burberry
discussions, internal organization, the Criquebeuf warehouse;
June: 2012 first-half sales, 2012 first-half earnings forecast,
2013 launches, Burberry discussions, acquisitions;
July: 2012 first half sales, 2012 second-half earnings forecast,
2012 second-half advertising expenses, Burberry discussions;
September: summary of 2012 first-half results, 2013 budget,
2013/2014 launches, Burberry transition, internal organization,
Karl Lagerfeld license agreement;
October: Burberry transition, internal organization, 2012
third-quarter sales, 2013 budgets and launches; Karl Lagerfeld
license agreement;
November: Burberry transition, 2013 advertising expenses,
2012 sales, 2013 launches, 2013 budgets, feedback from
the TFWA duty free and travel retail association Tax-Free
trade show in Cannes;
December: Burberry transition, subsidiaries in 2013, 2012
sales, 2013/2014 launches, 2013 budgets.
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Compensation of officers for fiscal 2012
Compensation of officers consists of both fixed and variable
components. Fixed compensation takes into account the
level of responsibilities, experience and performance. Variable
compensation is determined in relation to the company’s
achievement of overall performance objectives and events
related to each fiscal year.
One half of variable compensation is determined in accordance
with net sales, operating income and net profit, and half
in relation to qualitative criteria of performance. This latter
criteria is evaluated in respect to the contribution of corporate
officers to achieving the objectives of the company and results
actually obtained.
On this basis, compensation paid to executives as officers or
salaried employees in connection with employment contracts
concluded prior to becoming officers is disclosed below.
Fiscal 2011 Fiscal 2012
Compensation Compensation Compensation Compensation
due for paid in due for paid in
the year the year the year the year
Philippe Bénacin (1)
Chairman and Chief Executive Officer
Net fixed compensation €216,960 €216,960 €216,960 €216,960
Net variable compensation €186,400 €206,400 €203,600 €183,600
Benefits in-kind and net housing allowances €106,800 €106,800 €106,800 €106,800
Supplemental executive retirement plans €8,500 €8,500 €8,730 €8,730
Philippe Santi (2)
Director – Executive Vice President
Net fixed compensation €216,960 €216,960 €222,720 €222,720
Net variable compensation €198,800 €198,800 €206,800 €198,800
Supplemental executive retirement plans €8,500 €8,500 €8,730 €8,730
98
Frédéric Garcia-Pelayo (3)
Director – Executive Vice President
Net fixed compensation €216,960 €216,960 €222,720 €222,720
Net variable compensation €198,800 €198,800 €206,800 €198,800
Benefits in-kind €6,840 €6,840 €6,840 €6,840
Supplemental executive retirement plans €8,500 €8,500 €8,730 €8,730
Catherine Bénard-Lotz (4)
Director
Net fixed compensation €93,600 €93,600 €96,000 €96,000
Net variable compensation €60,400 €60,000 €64,000 €60,400
Supplemental executive retirement plans €8,500 €8,500 €8,730 €8,730
Jean Madar (5)
Director
Gross fixed compensation $380,000 $380,000 $380,000 $380,000
Gross bonus - - - -
(1) Philippe Bénacin does not have an employment contract with the company. He exercises his functions as Chairman and Chief Executive Officer
pursuant to his appointment as a corporate officer by the Board of Directors.
(2) Compensation paid to Philippe Santi as a salaried employee with the position of Chief Financial and Administrative Officer under the terms of an
employment contract predating his appointment as Executive Vice President (Directeur Général Délégué) and Director of the company that remained in
force. Philippe Santi receives no compensation of any nature in connection with his appointment as an officer of the company.
(3) Compensation paid to Frédéric Garcia Pelayo as a salaried employee with the position of Chief International Officer under the terms of an
employment contract predating his appointment as Executive Vice President (Directeur Général Délégué) and Director of the company that remained
in force. Frédéric Garcia Pelayo receives no compensation of any nature in connection with his appointment as an officer of the company.
(4) Compensation paid to Catherine Bénard-Lotz as a salaried employee with the position of Chief Legal Officer under the terms of an employment
contract predating her appointment as Director of the company that remained in force. Catherine Bénard-Lotz receives no compensation of any nature
in connection with her appointment as a company Director.
(5) Compensation is paid to Jean Madar by the parent company of the group, Interparfums Inc. (United States) as the Chief Executive Officer of this
company. Jean Madar receives no compensation of any nature from Interparfums SA.
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Directors’ fees for 2012
Directors’ fees are allocated to the Board of Directors
by the shareholders’ meeting and distributed by the Board
to Directors that are not salaried employees for a set amount
per meeting attended of €3,000 for fiscal 2012. The sixth
resolution of the shareholders’ meeting of April 27, 2012
set the total amount of Directors’ attendance fees for
the year at €120,000.
On this basis, for fiscal 2012 a total of €66,000 was paid
to the five non-salaried Directors for their attendance at
meetings. The other Directors expressly waived their rights
to receive attendance fees.
Directors Directors’ fees Directors’ fees
paid in 2011 paid in 2012
Maurice Alhadève €15,000 €15,000
Patrick Choël €12,000 €12,000
Dominique Cyrot - €9,000
Michel Dyens €9,000 €6,000
Jean Levy €15,000 €12,000
Chantal Roos €12,000 €12,000
Stock options and other compensation
- Stock-options
- Benefits in-kind
Rules for the grant of stock options to officers are based
on the level of responsibilities and the performance of the
company’s share. The quantity of stock options granted
to officers may vary from one year to another according
to the performance of the company over this period.
On December 17, 2009 and October 8, 2010, the Boards
of Directors decided to grant options to corporate officers
on those dates whose exercise will be contingent on criteria
of internal performance based on the company’s sales.
Under these terms, the number of options exercisable is
based on the average rate of actual growth for the company’s
sales relative to the target rate for average growth. This objective
is set by the Board of Directors for a period of reference
corresponding to the four year tax waiting period that
applies to the stock option plan established by this Board.
The Board of Directors has decided that these officers must
retain 10% of the shares resulting from the exercise of stock
options for the duration of their terms of office in accordance
with the provision of article L. 225-185 of the French
Commercial Code.
99
Philippe Bénacin receives benefits in-kind for the costs of
a company car representing a total amount of €10,800.
Frédéric Garcia-Pelayo receives benefits in-kind for the costs
of a company car for an amount of €6,840.
- Executive retirement plans
Senior executives benefit from a supplemental retirement
plan in the form of a defined contribution annuity fund.
The benefits of this defined benefit plan were subsequently
extended to senior management of the company. This
contribution to a private defined contribution pension
fund is paid in part by the beneficiaries and in part by the
employer for an amount equal four times French Social
Security ceiling. The annual contribution per beneficiary
is approximately €8,730. The supplemental retirement plan
is part of the overall compensation policy adopted by the
company for senior executives and managers.
- Other types of benefits
No executives benefit from forms of remuneration, indemnities
or benefits owed or which could be owed resulting from
the assumption, termination or change of functions of
corporate officer of the company or subsequent to these events.
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4.
SPECIAL REPORT OF THE BOARD OF DIRECTORS
ON STOCK OPTIONS
In compliance with article L. 225-184 of the French Commercial Code, this report is produced by the Board of Directors
to inform the combined shareholders’ meeting of April 22, 2013 of transactions carried out in fiscal 2012 by virtue
of the provisions under articles L. 225-177 to L. 225-186 of said Code.
Options granted on inception by Interparfums SA under plans in force to each corporate officer in
connection with appointments held
Plan 2009 Plan 2010
Grant date 12/17/2009 10/08/2010
Expiration date 12/17/2015 10/08/2016
Subscription price 17.60 22.95
13.25 18.95
Adjusted subscription price (1)
Options granted at inception
Philippe Bénacin 6,000 7,000
Jean Madar 6,000 7,000
Philippe Santi 6,000 7,000
Frédéric Garcia-Pelayo 6,000 7,000
Catherine Bénard-Lotz 2,500 3,000
Options outstanding at December 31, 2012 (1)
Philippe Bénacin 7,986 8,470
Jean Madar 7,986 8,470
Philippe Santi 7,986 8,470
Frédéric Garcia-Pelayo 7,986 8,470
Catherine Bénard-Lotz 3,328 3,630
100
(1) Adjusted for bonus share grants.
Options granted on inception by Interparfums Inc. under plans in force to each corporate officer
in connection with appointments held
Plan 2007 Plan 2008-1 Plan 2008-2 Plan 2009 Plan 2010-1 Plan 2010-2 Plan 2011 Plan 2012
Grant date 12/26/2007 02/13/2008 12/30/2008 12/30/2009 03/28/2010 12/30/2010 12/29/2011 12/30/2012
Subscription price $18.87 $16.95 $6.93 $12.14 $15.62 $19.03 $15.59 $19.33
$12.58 $11.30 $6.93 $12.14 $15.62 $19.03 $15.59 $19.33
Adjusted subscription price (1)
Options granted at inception
Philippe Bénacin 19,000 9,250 19,000 19,000 - 19,000 19,000 19,000
Jean Madar 19,000 9,250 19,000 19,000 - 19,000 19,000 19,000
Philippe Santi - 8,500 - - 3,000 3,000 3,000 3,000
Frédéric Garcia-Pelayo - 8,500 - - 3,000 3,000 3,000 3,000
Options outstanding at December 31, 2012
Philippe Bénacin 28,500 13,875 19,000 19,000 - 19,000 19,000 19,000
Jean Madar 28,500 13,875 19,000 19,000 - 19,000 19,000 19,000
Philippe Santi - 12,750 - - 3,000 3,000 3,000 3,000
Frédéric Garcia-Pelayo - 12,750 - - 3,000 3,000 3,000 3,000
(1) Adjusted for bonus share grants.
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Valuation of options granted
In fiscal 2011 In fiscal 2012
IPSA Options Black - Value of Options Black - Value of
Granted Scholes options granted Scholes options
valuation valuation
Philippe Bénacin - - - - - -
Jean Madar - - - - - -
Philippe Santi - - - - - -
Frédéric Garcia-Pelayo - - - - - -
Catherine Bénard-Lotz - - - - - -
Total - - - - - -
IP Inc.
Philippe Bénacin 19,000 $4.59 $87,210 19,000 $5.54 $105,260
Jean Madar 19,000 $4.59 $87,210 19,000 $5.54 $105,260
Philippe Santi 3,000 $4.59 $13,770 3,000 $5.54 $16,620
Frédéric Garcia-Pelayo 3,000 $4.59 $13,770 3,000 $5.54 $16,620
Total $201,960 $243,760
Options exercised by each corporate officer of the company in 2012 received in connection
with appointments held
Number of shares Subscription Expiration
granted/exercised price date
IP Inc. options exercised in the period by officers
Philippe Bénacin - - -
Jean Madar - - -
Philippe Santi - - -
101
IPSA options exercised in the period by officers (1)
Philippe Bénacin
Plan of June 1, 2006 19,327 €18.10 06/01/2012
Jean Madar
Plan of June 1, 2006 19,327 €18.10 06/01/2012
Frédéric Garcia-Pelayo
Plan of June 1, 2006 19,327 €18.10 06/01/2012
Catherine Bénard-Lotz
Plan of June 1, 2006 2,367 €18.10 06/01/2012
(1) Number and subscription price adjusted for the grant of new bonus shares (1 for 10) of June 18, 2012.
Stock options granted to the top 10 employed beneficiaries of the company who are not officers and
options exercised by the 10 employees of the company having exercised the greatest number in 2012
Number of shares Subscription Expiration
granted/exercised price date
Options exercised by the ten employees exercising the greatest number
Plan of June 1, 2006 38,672 €18.10 06/01/2012
Total 38,672 - -
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5.
CHAIRMAN’ REPORT ON
CORPORATE GOVERNANCE
AND INTERNAL CONTROL
AND RISK MANAGEMENT
PROCEDURES
Pursuant to the provisions of paragraph 6, article L. 225-37,
of the French Commercial Code the Chairman of the Board
of Directors hereby reports on the:
- the Board’s composition and application of the principle
with respect to the representation of women and men;
- preparation and organization of the Board’s work;
- limitations on the powers of the Chief Executive Officer
(Directeur Général) that may exist;
- internal controls and risk management procedures
implemented by the company.
This report has been produced on the basis of work
undertaken by the Finance and Corporate Affairs
Department, in collaboration with the operational
departments of the company and exchanges with
the Statutory Auditors.
This report was submitted for approval to the Board
of Directors on March 11, 2013.
102
5.1.
Preparation and organization
of the Board’s work
5.1.1.
The company’s Corporate Governance Code
On March 8, 2010 the Board of Directors decided to adopt
as its reference the Code of Corporate Governance for Small
and Mid Caps developed by Middlenext. Board members
also duly noted the points requiring special attention set forth
therein highlighting the main questions that must be raised
to ensure effective governance. The full text of this Corporate
Governance Code may be consulted at Middlenext’s
website: www.middlenext.com
Among the 15 recommendations of the Middlenext Code
and followed by the company, it has been decided to partially
apply the provisions of recommendation No. 12. on the
adoption of committees for reasons set forth below in the
section devoted to this topic.
5.1.2.
Procedures for exercising Executive
Management – Limitations on the powers
of the Chief Executive Officer
In line with the option adopted by the Board of Directors
on December 29, 2002, to effectively take into account
both the changing and highly competitive environment
of the sector in which the company operates and its business
model, the Board decided not to separate the functions
of Chairman of the Board of Directors with that of Chief
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Executive Officer (Directeur Général). Philippe Bénacin is
the Chairman-CEO (Président-Directeur Général) of
Interparfums SA. Philippe Bénacin actively participates
in the running the company’s operations, about which
he has possessed an in-depth knowledge since its creation,
that he co-founded with his partner, Jean Madar, CEO of
the US company, Interparfums Inc. This choice contributes
to efficient corporate governance by promoting an alignment
between the strategy and operating functions that is necessary
for a responsive and efficient decision-making process.
Chairman and Chief Executive Officer is vested with all
powers in respect to third parties to act under all circumstances
in the name of the company and within the limitations
expressly provided by law granted to the Board of Directors
or shareholders meetings, and in compliance with the general
and strategic orientations defined by the Board of Directors.
On the proposal of the Chairman and Chief Executive Officer,
on July 15, 2004 the Board of Directors appointed two
Executive Vice Presidents (Directeurs Généraux Délégués)
vested with the same powers with respect to third parties
as the Chief Executive Officer.
Decisions having a material impact on the scope of
consolidation or that could materially affect the company’s
strategy must be submitted to the Board of Directors
for approval or subject to a delegation of authority for this
purpose by the Board. This limitation is specified in the
Board Charter.
5.1.3.
Composition of the Board of Directors
Under the company’s bylaws, the Board of Directors may have
three to eighteen members.
At December 31, 2012, corporate governance of the company
was overseen by a Board that included eleven Directors four
of which qualified as Independent Directors. In addition
to their financial, commercial and managerial expertise and
their extensive experience in the area of corporate strategy,
their knowledge of the luxury sector contributes to
the quality and professionalism of the Board’s discussions.
Detailed information on the composition of the Board
of Directors and their offices is disclosed in Section 4 of the
registration document (annual report) under the heading
“corporate governance”.
Following the adoption of the twenty-fifth resolution of
the general Meeting of April 23, 2010 that voted to reduce
the terms of Directors when their appointments were
renewed at that meeting, Directors are appointed for terms
of office of four years.
5.1.4.
Gender diversity in Board membership
The French law of January 27, 2011 on the balanced
representation of men and women on Boards of Directors
and Supervisory Boards and professional gender equality
requires that listed companies meet a quota target for
the number of women on Boards of Directors. At the end
of 2012, the Board of Directors had 3 woman members
representing a rate above the 20% required by this law for
the first quota target to be reached by 2014.
5.1.5.
Independence of Directors
and rules of business conduct
5.2.
Charter of the Board of Directors
The company adheres to the criteria of independence of
recommendation No. 8 of the Middlenext Code defined
as the absence of any material financial, contractual or family
relationship that could affect their independence of
judgment. The Middlenext Code recommends that
the Board has at least 2 independent members. On the basis
of these criteria, four members of the Board of Directors are
considered to meet the definition of Independent Directors,
namely Dominique Cyrot, Chantal Roos, Maurice Aladhève
and Michel Dyens.
In accordance with recommendation No. 7 of the Middlenext
Code, each Director is made aware of the obligations
arising from his or her appointment and encouraged to
adhere
to the rules of conduct relating to his or her appointment
as set forth in the Board Charter. To this purpose, Directors
are provided with a copy of this Charter that includes the
Rules of Procedure and provisions of the bylaws that apply
to them.
5.1.6.
Charter of the Board of Directors
In compliance with recommendation No. 6 of the Middlenext
Corporate Governance Code, the Board of Directors
established a Charter (Rules of Procedure) defining
the operating rules of the Board and the terms of a code
of conduct for Directors that supplement the provisions
provided for by law and the company’s bylaws. The main
provisions of this Charter are as follows:
- the composition, role, organization and operating procedures
of the Board;
- the functions of Audit Committee exercised by the Board
of Directors in plenary session;
- the rules of conduct applicable to members of the Board
of Directors;
- compensation of directors;
- rules governing transactions involving the company’s shares
in accordance with the provisions of the French Monetary
and Financial Code and the AMF General Regulation.
This Board Charter is destined to regularly evolve to take
account into the application of new regulations and
recommendations in force and in response to proposals
by directors in order to ensure the optimal effectiveness of
the Board’s work. Modifications were made to this Charter
for the first time by the Board on March 8, 2010. This
Charter was again revised by decision of the Board of Directors
on March 11, 2013 to incorporate the provisions of the law
of January 27, 2011 on the balanced representation of men
and women on company boards.
The full text of this Board Charter is reproduced in the
registration document of the company.
5.2.1.
Meetings
The number of meetings held is in compliance with the
provisions of recommendation No. 13 of the Middlenext Code.
It meets as often as the interests of the company require
and at least five times a year at the request of the Chairman
and according to a calendar jointly established that may
be modified at the request of directors or when justified
by unforeseen events.
The Chairman represents the Board of Directors. He organizes
the work of the Board and reports on this work to the
general Meeting. The work of the Board is carried out
in a collegial framework and in a manner that complies with
the laws, regulations and recommendations. Accordingly,
the Chairman of the Board of Directors ensures directors are
provided with information in advance and on a regular basis
as an essential condition for the performance of their duties.
5.2.2.
Committees
The Board has not deemed it necessary to date to form
special committees, and notably nominating or compensation
committees, in part because of the nature of the company’s
organization, and in part because of the directors’ extensive
in-depth experience of the world of business and the
international markets of competitors. Their managerial input
is thus solicited on a collective basis for all significant items
relating to the running of the company.
With respect to the Audit Committee, the new provisions
of article L. 823-20 of the French Commercial Code resulting
from the ordinance of December 8, 2008 provides for
an exemption to create an independent Audit Committee
for companies with a corporate body that fulfills the functions
of this committee “that may be the Board of Directors,
on condition that use of this option is made public along with
the composition of its membership”.
To maintain its flexibility and decision-making processes
and the consultation of financial information and internal
controls, the company’s Board of Directors, decided to apply
the provisions for an exception under article L. 823-20 as
amended, and on that basis assume itself the tasks normally
exercised by an independent Audit Committee. This will
allow the Directors to remain more responsive and efficient
in monitoring the production of financial information and
the effectiveness of the systems of internal control.
The exercise of the Audit Committee functions by the Board
is assured by two members specifically appointed whose task
is to lead the discussions within the framework of monitoring
the preparation of accounting and financial information.
Patrick Choël, Director, serves as the Chairman and Maurice
Alhadève, Independent Director. On March 11, 2013,
the Board decided to expand the membership of this Audit
Committee by the addition of Dominique Cyrot, Independent
Director, whose recognized experience in the field of finance
will provide a valued contribution to the performance of
the Audit Committee’s missions.
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104
5.2.3.
Evaluation of the Board’s work
In accordance with recommendation No. 15 of the Middlenext
Code, on March 7, 2011, Board members performed their
first self-evaluation on the working of the Board and the
preparation of its work through a questionnaire sent to each
Director on notably:
This questionnaire covers notably:
- the missions assigned to the Board;
- the workings and composition of the Board;
For the fiscal year ended December 31, 2012, the Board
of Directors met six times with an attendance rate of 79%
for meetings lasting on average three hours and addressed
the following items of business:
- review of the parent company statutory and consolidated
financial statements for the fiscal year ended December 31, 2011
and the interim financial statements and the notice of the
annual general Meeting;
- review of the fiscal year 2012 budget and outlook;
- the capital increase through the capitalization of reserves
resulting from new bonus share grants;
- the meetings and quality of the discussions;
- setting the Chairman’s remuneration;
- Directors’ access to information;
- the Board’s participation in strategic decisions.
In accordance with the Middlenext Code recommendation,
a summary of this self-evaluation is recorded in the minutes
of the meeting.
Based on the information received in response to this annual
self-evaluation questionnaire, on March 11, 2013 the Board
reviewed its membership and evaluated the organizational
and operating effectiveness over the 2012 period.
The comments exchanged at this meeting confirmed
an assessment that was overall considered satisfactory.
The Directors in particular evaluated and confirmed the
quality and relevance of the information in their possession
to ensure their knowledge of the subjects to be discussed
in their meetings and reach informed decisions. Within
the framework of information communicated in between
meetings, when warranted by company events, it was
suggested that the frequency and scope of subjects be expanded
to other information relating to the company’s ordinary
operations. The current Board membership in terms
of the diversity and quality of the profiles of its members
and their experience is considered appropriate. Within this
framework, the Board considers that this goal must be
pursued by opening up its membership to outside figures
whose expertise would necessarily contribute to offering a
different perspective on the subjects discussed and its decisions.
5.3.
Powers and missions
of the Board of Directors
The Board of Directors determines strategic, economic, social
and financial priorities of the company and ensures that
they are implemented. Subject to the powers granted to
shareholders’ meetings and within the limits of the company’s
Charter, the Board considers any matter relating to the proper
management of the company.
It issues decisions concerning the holding of multiple
appointments or the separation of the appointments
of Chief Executive Officer (Directeur Général) and Chairman
of the Board, appoints corporate officers, imposes possible
limits on the authorities of the Chief Executive Officer,
approves the draft report of the Chairman, performs controls
and verifications it considers appropriate, in respect
of the fair presentation of accounts, reviews and approves
the financial statements, and ensures the quality of financial
information provided to shareholders and the market.
- authorizations concerning agreements in accordance with
articles L. 225-38 et seq. of the French Commercial Code;
- analysis of financial information disclosed by the
company to shareholders and the market;
- analysis of the major strategic, economic and financial
priorities of the company;
- strategic decisions within the framework of discussions
with Burberry on the future of the license agreement;
- examination and authorization of external growth
projects, notably new license agreements for brands or the
acquisition of interests;
- monitoring the implementation of the new information
system and the construction of a new warehouse.
Auditors attend Board of Directors’ meetings to consider
the company’s accounts or any other matters regarding which
they may provide Board members an informed opinion.
Within the framework of its Audit Committee functions,
in 2012 the Board of Directors reviewed the following points
relating to the audit of the annual and interim consolidated
financial statements:
- review of implementation of the financial statement audit
programs and financial information defined with respect to
risks identified in connection with the evaluation of accounting
systems, internal control and in particular, a review of the
following items:
- impairment tests for long-term assets and brands: review
of the assumptions underlying the business plans, discount
rates and terminal values used,
- review of provisions,
- review of legal risks and coverage,
- treatment of specific technical problems relating in
particular to foreign exchange and financial instruments;
- monitoring risk management on the basis of group risk
mapping;
- validation and review of separate and consolidated
financial information;
- valuation tests for the company’s assets;
- accounting treatment for currency hedges;
- review of the separate financial statements of subsidiaries.
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5.4.
Transmission of information
to Directors
Directors are provided with all relevant documents and
information to effectively perform their duties. Before each
Board meeting, Directors receive:
- a meeting agenda established by the Chairman in coordination
with General Management and, when applicable, Directors
proposing items to be discussed;
- an information file concerning issues to be addressed under
the agenda requiring particular analysis for the purpose
of an informed discussion, during which Directors may ask
relevant questions to ensure their adequate understanding
of the matters addressed;
- and, when useful, press releases that have been published
by the company as well as significant press articles and reports
of financial analysts.
In compliance with Middlenext Code recommendation No. 11,
outside of Board meetings, and when justified by events of
the company, Directors are regularly provided with all
important information about the company that could have
an impact on its commitments and financial position. They
may request any explanation or the issuance of additional
information, and in general, formulate any requests for access
to information they may consider useful.
5.5.
Directors’ fees
Directors’ fees are allocated exclusively to outside non-executive
officers of the Board of Directors, namely, Dominique Cyrot,
Chantal Roos, Maurice Alhadève, Patrick Choël, Michel
Dyens and Jean Levy. The total amount granted by the
general Meeting is freely allocated by the Board of Directors
to each member on the basis of their rate of attendance.
For fiscal 2012, based on the total amount of €120,000
allocated for Directors’ fees by the annual general Meeting of
April 27, 2012, €60,000 were paid to non-executive Directors.
5.6.
Shareholder participation
in general Meetings
Under the terms of article 19 of the company’s bylaws all
shareholders have a right to participate in general Meetings,
personally or through a proxy, regardless of the number of
shares they hold, upon simple justification of their identity
and ownership of the shares.
5.7.
Disclosures provided
for under article L. 225-100-3
of the French Commercial Code
To the best of the company’s knowledge there exist no items,
and notably those relating to the structure of the share capital
that could have a potential impact in the event of a public
offering. The structure of the share capital as well as the
equity interest that have been brought to the company’s
attention and any other information relating thereto are
described in chapter 2 of the section on shareholder information
of this registration document. Similarly, rules concerning
the appointment and revocation of members of the Board
of Directors are subject to the rules of common law.
5.8.
Internal control
and risk management procedures
5.8.1.
Definition
The company has implemented internal control and risk
management procedures in large part been based on the
guidelines established by article 404 of the Sarbanes Oxley
Act that applies to the US parent company because
it is listed on a New York Stock Exchange. The principles
determined therein are in part provided for under the AMF
guidelines of 2007 and updated in July 2010 and completed
by the guidelines for small and mid caps of January 9, 2008.
The company has defined and implemented comprehensive
internal control and risk management systems that include
a combination of resources, rules of conduct and procedures
adapted to the company’s organization to enable it to:
- limit risk to an acceptable and reasonable level to ensure its
continuing operation;
- better identify material operating and financial risks;
- manage its activities and ensure an efficient use of its
resources.
5.8.2.
Definition and objectives of risk management
and internal control
Risk is defined as the possibility of the occurrence of an event
with potential consequences affecting:
- the employees, assets, environment or reputation of the
company;
- the company’s values and ethical commitments and laws
and regulations;
- the achievement of the company’s objectives.
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The purpose of risk management procedures is to therefore:
- safeguard the value, assets and reputation of the company
and its brand licenses;
- secure the decision-making process and other processes of
the company to achieve its objectives through an objective
analysis of potential threats and opportunities;
- promote the coherence the company’s actions and values;
- deploy and motivate the company’s staff around a common
vision of the main risks.
The processes for defining and implementing internal
control procedures seek to ensure:
- compliance with laws and regulations and respect of the
company’s internal values;
- the application of instructions and priorities set by general
management;
- the effective application of internal processes notably
concerning the protection of corporate assets;
- the reliability of financial information.
However, no system of internal control can provide an
absolute guarantee of achieving these objectives. The probability
of achieving such objectives is subject to limits inherent in
any system of internal control, related notably to uncertainties
concerning the external environment, the exercise of judgment
or problems that may arise in response to human error or
simple error, and the need to perform cost-benefit analysis
before implementing any controls.
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5.8.3.
Components of the risk management
and internal control system
5.8.3.1.
The risk management system
The risk management system is based on processes including
three steps:
- identifying risks in order to determine and rank those
which are the most important. A risk is characterized by as
an event originating from one or several internal sources
or consequences. This identification process constitutes an
ongoing approach of the company;
- analyzing risks in order to examine the potential consequences
of the main risks that may be in particular financial, human
and legal in nature and assess their occurrence. This analysis
is performed by the company on an annual basis;
- handling the risk with the objective of defining action
plans most adapted to the company, and in particular by
trade-off between the opportunities and the cost of measures
for handling the risk. These action plans are accompanied
by the appropriate measures for prevention and reinforcing
existing controls relating to internal control processes.
Risk management responsibilities are exercised at every reporting
level of the company. Staff, line management and support
function management actively intervene as participants
with a direct stake in an approach focused on internal controls
of the processes they supervise, within the framework of
missions defined by Executive Management, their organization
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and contributions to critical decisions. Furthermore, the limited
number of levels in the decision-making process and the
contribution of line management to strategic considerations
facilitates the identification and handling of risks. To this
purpose, they possess the knowledge and information necessary
to establish, operate and oversee the internal control
procedures in relation to the objectives that have been set for
them. An in-depth analysis of the separation of operational
and control tasks was undertaken to effectively address the
objectives of control.
The mapping of group risks launched in 2004 and regularly
updated since, has made it possible to classify risks into four
categories: operating risks, risks related to international
operations, environmental and employee-related risks and
risks related to the financial environment that are presented
in detail in chapter 3 of the management report under the
heading “Risk Factors”. These regular updates keep pace with
the company’s activity and evolving organizational changes.
This mapping constitutes the basis for an analysis required
to verify the relevance of measures taken to improve and
strengthen the internal control system. This has made
it possible to highlight risk areas, and for each of these areas,
risks with a potential financial impact. Risks thus identified
are then evaluated to determine their potential impact and
likelihood of occurrence. Each risk identified and tested is
monitored to ensure that all action plans destined to reduce
its scope are correctly implemented.
The Board of Directors is informed of the features of this
risk mapping as well as the remedial action plans.
This risk management system is regularly reviewed to improve
the methodology for managing risks by drawing on the
information obtained about risks that have been identified,
analyzed and addressed.
5.8.3.2.
Coordination of risk management
and internal control systems
The base management system seeks to identify and analyze
the main risks. The risk management and internal control
systems both contribute in a complementary manner in
effectively managing the company’s operations. In effect,
within the framework of internal control processes, action
plans are implemented to address risks identified as having a
material impact on the company’s assets, image and reputation.
5.8.3.3.
Components of the internal control system
The company’s internal control system is deployed by a
team of managers and officers under the authority of the
Executive Management who in turn reports to the Board
of Directors. It is based on a combination of the following
actions and measures:
- clearly defined responsibilities in preparing, implementing
and ensuring the management of internal control
procedures;
- risk mapping: identifying, analyzing and handling risks;
- ad hoc tests conducted on a periodic basis of the
effectiveness of internal controls.
Organization of the company
The Internal Procedures Manual
The company is organized around two divisions.
The operational division encompasses the line management
departments for Export Sales and French Sales, Marketing
and Production and Development whereas the division
for support functions is organized through the Finance,
Human Resources, Information Technology and Legal Affairs
departments.
The line management departments, assisted by the technical
expertise provided by the support functions, coordinate the
implementation of objectives and achievement of the operating
results set by Executive Management. To this purpose,
they participate in the internal control procedures and risk
management when key operating processes associated with
sales to distributors and the management of the company’s
image have an impact on assets and/or results.
Support function departments cover all processes relating
to the management of resources (cash management, human
resources, compliance with tax obligations, settlement
of trade payables, the processing and communication of
accounting and financial information, information systems,
monitoring legal and regulatory developments, etc.). They
also have a role in defining and communicating policies and
information about good practices for the company’s activity
and ensure their effective application, maintaining a safe
and secure environment, the reliability of financial information
and compliance with laws and regulations. The reliability of
information is in particular guaranteed by the Information
Technology department. This department is organized into
two units: Systems and Networks responsible for maintaining
and securing information technology infrastructure (hardware)
and Information Systems responsible for managing
applications (software).
This organization has demonstrated its strength and relevance
based through its success in achieving real synergies between
the Operational and Support Service departments. It is based
on the staff ’s knowledge and understanding of the processes
for operating and overseeing the internal control system in
relation to the objectives having been set for them. Its strength
is also the result of the convergence of the resources of the
different divisions involved and a decentralized organization
that combines the advantages of flexibility and the delegation
of responsibilities necessary for ensuring the optimal
and coherent application of the strategic objectives set by
general management.
The company also consolidates seven foreign subsidiaries
that apply the group’s internal procedures relating to
the preparation and processing of accounting and financial
information. The US subsidiary Interparfums Luxury
Brand Inc., formed in September 2010, in light of the size
of its operating entity, has been included in the scope of
tests conducted on the effectiveness of the internal control
system in 2011.
Key components of the internal control system
These features are based on documentary tools, a set of rules
and procedures as well as awareness raising initiatives for
management bodies and staff about the internal control and
risk management principles adopted within the company.
These rules and procedures make it possible to ensure that the
instructions of Executive Management are concretely implemented
at the level of the operating and support function activities.
This tool formalizes a certain number of internal procedures
considered essential for the effective operations of the company
in a secure environment. This manual details the main operating
and financial processes covering notably sales/customers,
sourcing/suppliers, inventory, cash management/budget,
accounting procedures, IT systems and personnel/payroll.
This manual also describes the procedure for expense requests
and bank accounts signature authorizations. The Internal
Procedures Manual is accompanied by guidelines for key
controls specific to the company that are subject to annual
self-assessments according to procedures described below.
Code of good conduct
A priority for managing human resources is to ensure that
profiles effectively match the corresponding responsibilities
while adhering to the key values: prudence, pragmatism,
responsiveness, high standards, transparency and loyalty.
Contributing to the expertise and know-how of a team of
men and women sharing a common culture of commitment
to integrity and high standards that distinguish the company
thus constitutes an important part of internal control.
These values are set forth in a Code of Good Conduct that
provides guidelines on professional conduct to be adopted,
notably in the areas of compliance with laws and regulations,
preventing conflicts of interest and financial transparency
in order to prevent situations of fraud. This Code is signed
by employees and remitted to each new employee when
joining the company.
Information System Charter
This document defines the rights and obligations of employees,
users of the information system, to ensure that the information
technology resources are used in a secure environment
complying with the procedures of internal control. It is
signed by all users and made available to all new employees
who undertake to comply with its provisions.
5.8.4.
Key participants in internal control procedures
5.8.4.1.
The Board of Directors
In connection with information provided to the Board,
its members review all characteristics of the internal control
and risk management systems and more particularly
examine them in accordance with their Audit Committee
functions exercised in plenary session. The Board is kept
regularly informed about internal control and risk management
methodologies The Board may exercise its authority to
request verifications and controls it considers appropriate
to ensure the transparency, effectiveness and security of the
internal control environment.
5.8.4.2.
Executive Management
This includes the Chairman and Chief Executive Officer,
assisted by two Executive Vice Presidents. They define
the major strategic priorities, discussed and approved by the
Board of Directors, to achieve the commercial and financial
objectives of the company. This is done by providing clearly
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defined internal procedures and an internal control system
for which they are directly responsible. They define
the general principles, oversee their coordination and ensure
that measures to implement the different components are
effectively taken.
5.8.4.3.
Management Committee
This Committee includes management from the operating
and support function departments who report directly to
the Chairman and Chief Executive Officer. This corporate
governance body focuses on strategic issues through medium-
term plans, monitors budgets and addresses important
issues relating to the company’s organization and projects.
It is informed on internal control policy’s implementation
and monitors the work carried out for this purpose as well
as the corresponding action plans. Each Management
Committee member is responsible for ensuring that the
common rules and principles comprising the framework
of the internal control system are applied and understood
in the departments under his or her responsibility.
5.8.4.4.
The Finance and Corporate Affairs Department
Operating under the responsibility of Executive Management,
this Division includes several departments and notably
Consolidation, Accounting, Management Control,
Information Systems, Human Resources and Legal Affairs.
As the corporate treasury management function has significantly
evolved in line with the growing needs of the company,
in 2013 it was decided to create a department specifically
responsible for managing liquid assets, hedging transactions
and the company’s banking policies. The corporate treasury
department reports to the Finance Department.
The Finance and Corporate Affairs Department is responsible
for implementing the internal control to prevent and
manage risks resulting from the company’s activities,
and notably risks of accounting errors and fraud in the area
of accounting and finance. To this purpose, it must ensure
that the ongoing controls having been defined and implemented
are necessary and adequate and are correctly applied and
effective in safeguarding the company’s assets against all
potential incidents.
It also provides technical support to operating departments
by establishing operating procedures, defining and promoting
the use of information tools, procedures and good practices
essential for the effective application of the objectives defined
by Executive Management.
It centralizes and consolidates financial and accounting
information for all group entities. It furthermore ensures
the consistent nature of this information in relation to
the budget approved by General Management and the Board
of Directors and that such information is adequately supported.
It is also responsible for ensuring that Executive Management
and the operating departments are aware of legal issues.
To this purpose, it monitors legal and regulatory developments
and takes measures to avoid exposure to potential criminal
risks and risks related to commercial law and intellectual
property rights. It is also responsible for managing litigation
and disputes in close collaboration with outside legal counsel
and attorneys, as well as drawing up and reviewing the main
contracts of the company.
5.8.4.5.
Internal Audit
The company has implemented a flexible organization for
its internal control system and risk management processes
adapted to the needs and organization of its operational and
support function divisions. To ensure the continuing
relevance and effectiveness of this methodology and with
the objective of maintaining the processes adopted in
consequence, the company has not considered it useful
to create an independent audit department which could
potentially disrupt the proper functioning of internal
control processes in place.
The evaluation of the internal control system is assured
by an internal control manager, with the assistance of an
outside consulting firm and in coordination with the Finance
Department operating under the authority of Executive
Management that defines the general principles and
objectives. This manager performs ad hoc missions that
consist in examining the internal control system and proposing
recommendations for improving its effectiveness both with
regards to purely financial aspects as well as operational
issues relating to processes for purchasing, sales and the
management of the company’s image. In addition to these
missions, this manager spearheads and coordinates risk
management by producing a risk map that is monitored
by implementing an action plan. Within the framework of
these responsibilities, this manager coordinates, harmonizes
and optimizes the methodology for internal control and risk
management processes, drawing on information obtained
from self-evaluation procedures to validate or reassess existing
controls, and the analysis and recommendations provided
by the outside consulting firm intervening in this area.
5.8.5.
Internal control procedures
Internal control procedures, spearheaded and coordinated
by the Finance Department in cooperation with Executive
Management, are designed to secure the different processes
used to achieve the objectives set by the company. To this
purpose, controls performed at every level of responsibility,
are based primarily on the application of standards and
procedures. Since 2011, internal control procedures have
been significantly modified following the implementation of
a new SAP ERP that has permitted the automation of certain
controls and in this way strengthened their effectiveness.
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These procedures are organized around the following key
areas identified as areas of potential risk:
5.8.5.1.
Operating processes
Sales/trade receivables management/collection: this process
ensures that all deliveries made and/or services rendered are
invoiced within the specified period and invoices are properly
recorded in the trade receivables accounts. It also determines
procedures for issuing credits which must be justified
and controlled before being booked. This procedure makes
it possible to identify potential doubtful trade receivables
and anticipate risks of default.
Purchasing/management of trade payables: this process
is formalized by procedures based, on the one hand, on the
separation of the functions for placing orders and for authorizing
orders, acceptance, the recording of the transactions in the
accounts and payment of suppliers, and on the other hand
a process for monitoring and reconciling purchase orders,
receiving slips and invoices (quantity, price, terms of payment)
supplemented by a procedure for preventing dual
recognition/payment of supplier invoices. Anomalies that
may be identified are analyzed and monitored;
5.8.5.2.
Accounting and financial processes
Cash management: controls in place are destined to ensure
that bank accounts are reconciled on a regular basis with
information received from the banks and reviewed periodically
in order to document and explain eventual variances. The
company has also implemented a system for hedging foreign
exchange risk related notably to transactions conducted in
US dollars and pounds sterling. The amount of hedges
as well as the exchange rate targets are the subject of regular
discussions between the Finance Department and Executive
Management are reported to the Board of Directors.
Budget process: control, in this context, consists of ensuring
that annual budget is established according to the instructions
of Executive Management and that actual performances
are monitored through regular reporting tools based on data
obtained from the operating departments with the primary
objective of analyzing actual performances in relation to
forecast and prior periods. This review of “forecasts versus
actual” makes it possible to identify potential inconsistencies,
errors or omissions and make the appropriate management
decisions to correct the corresponding data (revenue, operating
expenses, etc.).
Preparing financial and accounting information: this process
consists in reviewing the fair presentation and consistency of
account closing procedures to ensure a reliable consolidation
consistent with data collected and submitted to the Finance
Department;
Information systems management: the company has an
ERP-type management system that permits integrated
information management for the purchasing, sales, logistics
and finance processes. This tool is supplemented by other
applications with which it interfaces, such as the tools for cash
management, payroll administration as well as applications
of our partners (suppliers, warehouse logistics, customers).
In addition, the company is equipped with fully independent
applications such as the accounting consolidation tool.
These different applications have been configured to
guarantee an effective separation of tasks which is
the foundation for any internal control system. In effect,
user access to these applications is rigorously managed
to ensure that access is strictly limited to the scope required
for the performance of its functions.
In 2012, SAP, the company’s main software application
was subject to a thorough audit which identified no material
weaknesses in terms of access management for the separation
of tasks. Furthermore, a thorough and automated analysis
was performed of the general ledger to identify irregularities
based on tests involving transactions qualified as abnormal.
This review did not identify any errors whose nature could
call into question the effectiveness of the company’s internal
control systems.
5.8.5.3.
Oversight of the internal control
and risk management procedures
This oversight is ensured through an internal procedures
self-assessment plan that is necessary for a better understanding
and appropriation of internal control procedures, ensure
their correct application and, if necessary, improve procedures
currently in force.
These periodic reviews make it possible to measure progress
in implementing programmed actions, changes since the
previous self-assessment and adopt new procedures that may
be identified as necessary through this process.
This self-assessment process is performed annually with
the assistance of an independent outside consulting firm.
This involves identifying assets of key importance for the
company, analyzing potential risks, existing or emerging,
by type of task assigned to each department concerned and
meetings with the operating departments concerned.
Internal control procedures have been carried out in
accordance with the provisions of US law of the Sarbanes
Oxley Act.
If processes and the associated controls are not formalized
or are considered insufficient, a remediation plan or corrective
actions are implemented and monitored by the manager
concerned.
At the end of this self-evaluation process, the results were
provided both to the Finance Department and Executive
Management who provided a summary to the Board
of Directors. Executive Management also communicates
these results to the Management Committee so its members
can ensure that management of the respective divisions
is aware of the results of the work and the issues at stake
in implementing remediation plans in response to the
dysfunctions identified or those that could result from
inadequate controls.
The new tools available to the company to perform these tests
of internal control procedures made it possible to strengthen
methods for carrying out its work in 2012. On this basis,
131 controls were carried out focusing on 47 areas of risk
relating to sales and purchasing activity, license royalties,
advertising expenses, inventory, cash management, closing
activities, payroll management and information systems.
In 2012, the scope for this evaluation was the same as the
prior year.
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TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
For its US subsidiary, Interparfums Luxury Brands,
44 checkpoints were subject to these same tests. The guidelines
for internal control and evaluation for the subsidiary
were implemented in collaboration with an outside US
consulting firm.
Self-evaluations carried out within the company did not
indicate any incidents of a significant or noteworthy nature
that might call into question the relevance of internal controls.
In line with its policy of strengthening internal control
procedures, the company has continued to analyze priorities
for improving existing procedures and developing
remediation plans.
This work also concerns the organization of Information
Systems Department, the evaluation of general IT controls,
the management of operations, projects and security
and the policy for ensuring the availability and continuity
of service of systems. The satisfactory results for information
systems security management noted in 2011 were confirmed
in 2012.
5.9.
Internal control procedures
relating to accounting
and financial information
5.9.1.
Process for managing the accounting
and financial organization
110
5.9.1.1.
Organization
Internal control procedures applicable to accounting and
financial data are prepared and implemented under the
responsibility of the Finance Department and the oversight
of General Management in the following areas: Financial
communications, accounting, consolidation, management
control, cash management, information systems and compliance
with laws and regulations. To achieve this objective, it is
supported by the managers of the different teams of the
Finance Department (Finance, Accounting, Management
Control, Consolidation, Human Resources, Cash Management,
Information Systems and Legal Affairs).
5.9.1.2.
Application of accounting standards
The accounting department has a process for identifying
and processing changes in accounting standards and the
approval of the resulting procedures for accounting treatment.
Similarly, there exist procedures to ensure the accounting
department is informed of changes in group practices that
could affect the methodology or procedures for recording
transactions. The scope of accounting management is
constantly updated.
5.9.1.3.
Organization and security of information systems
The organization of the Information Systems Department
was designed to ensure in particular management of
authorization for access to Information Systems through a
rigorous control of compliance of the principle of the separation
of tasks and the management of infrastructure services
and governance of the information technology department.
The company uses an ERP application that integrates sales
management, logistics, purchasing management, financial
accounting, subsidiary accounts and cost accounting
information. The organization and operating of the entire
information system is subject to measures that limit
the conditions of access to the system, the validation of
processing and closing procedures, conservation of data,
and verification of entries.
To ensure continuity in processing accounting data, backup
systems and a continuity plan have been implemented
in the event of a sudden dysfunction. In addition, all data
is backed up daily. In terms of conservation and protection
of data, a procedure for secure access to accounting and
financial data has been developed involving the designation
of individual and personal rights assigned to specific persons
accompanied by passwords.
In 2009, a Business Continuity Planning (BCP) was
implemented involving the use of virtualization technology
on internal servers in order to ensure efficient backup
system in the event of any equipment failure. In 2010 and
early 2011, an IT recovery plan was deployed to strengthen
these measures to secure the information system, duplicating
computer data at an external “secure dormant site” as a
precaution in the event of malfunctions.
The revamping the information system by integrating
the SAP enterprise application responds to needs related to
the company’s growth and covers virtually all the operational
and functional processes of its business (finance, sales,
inventory and production planning). This application that
has been operational since May 2011 meets the following
objectives:
- systematize internal procedures; By way of example, a
customer order cannot be processed until it has been validated
within the system by authorized persons.
- shortening the logistics cycle for improved customer service.
For example, because information flows are automated and
transit through the computer system, the logistics warehouse
receives all information from Interparfums in real time;
- strict monitoring of flows for the sourcing, inventories
and real-time access to physical inventory;
- reinforcing the decision-making processes and cost
accounting for optimized management accounting;
- ensuring compliance with the rules of traceability and
security through the harmonization of information processing
tools. All users log onto the information system with a
unique identifier that permits them to execute a limited
number of tasks. In this way, a user can be linked to each
transaction generated by the application.
Corporate governance
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
5.10.
Relations with Statutory Auditors
In connection with the half yearly and annual closings
of the accounts, the Statutory Auditors organize their work
by undertaking:
- a prior review of procedures and internal control tests;
- a meeting prior to the approval of the accounts to define
the program of reviews and the calendar and organization
of their work;
- a limited review or audit of the financial statements
prepared by the Finance Department;
- a meeting presenting a summary of their work to General
Management.
On this basis, the Statutory Auditors certify the fair
presentation of the separate parent company and consolidated
financial statements.
5.11.
Trend forecasts for 2013
The company assures permanent oversight of all organizational
changes to anticipate, adapt and optimize internal control
procedures in real time and to facilitate the appropriation
of these procedures by operational teams. Its internal control
procedures are also designed to respond to both regulatory
requirements and future issues facing the company.
Priorities for the company for the year 2013 include
implementing:
111
- EDI (Electronic Data Interchange) flows between the
company and suppliers, with the objective of strengthening
the security and reliability of information relating to the
purchasing process cycle (from the order to the invoice);
- electronic invoicing for suppliers. This project seeks in
particular to computerize the approval of invoices to shorten
the validation process for invoices and ensure the reliability
of the authorization for payment;
- cash pooling for optimized cash management at group level.
5.9.2.
Process contributing to the preparation
of accounting and financial information
5.9.2.1.
Operating process for producing the accounting
information
Internal control processes at this level have been implemented
through the following measures based on previously defined
procedures and approval mechanisms:
- a planned program for account closings subsequently
communicated to operating departments;
- close collaboration between the different managers of the
support function and operating departments;
- analysis of the relevance of information reported particularly
concerning sales, orders and the examination of margins;
- a detailed review of the accounts by Executive Management
in view of their approval before the final closing
Meetings are organized to coordinate activity with the different
departments concerned in order to ensure the exhaustive
nature of information provided to prepare the accounts.
5.9.2.2.
Process for account closings and the production
of consolidated financial statements
Account cut-off procedures are subject to precise instructions
provided by the Finance Department in respect to the closing
process, indicating information to be entered, restatements
required, the timetable of activity as well as the planning
for precise tasks for each party participating in this process.
These procedures are accompanied by a process for
validating key items of the consolidation process and
notably the reconciliation of separate financial statements
with restated financial statements included in consolidation,
the consistency of management data and accounting, the
identification and analysis of changes in consolidated net equity.
Procedures for producing interim and annual financial
consolidated financial statements are based on IFRS guidelines.
At the level of subsidiaries, local management provides
detailed reporting that includes financial statements, audited
by local outside auditors, and analysis of business performances.
This information is in turn subject to in-depth analysis
by Executive Management with the technical support of
the Finance Department.
5.9.2.3.
Financial communications
The financial communications process is subject to a clearly
defined reporting schedule for information destined for
financial markets and market authorities. This schedule
ensures that communications complies with the requirements
of applicable laws and regulations relating to financial
disclosures both concerning the nature of information to
be disclosed, the required deadlines and compliance with
the principle of equal access to information by all shareholders.
Corporate governance
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
SHAREHOLDER
INFORMATION
STATUTORY INFORMATION P. 113
CAPITAL STOCK P. 115
ANNUAL GENERAL MEETING: RESOLUTIONS
SUBMITTED TO THE EXTRAORDINARY AND ORDINARY
SHAREHOLDERS’ MEETING OF APRIL 22, 2013 P. 120
112
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TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1.
STATUTORY INFORMATION
1.2.
Main legal provisions and bylaws
1.1.
The company
1.1.1.
General information
Company name: Interparfums
Registered office:
4 rond-point des Champs Élysées 75008 Paris, France
Tel.: +33 (0) 1 53 77 00 00
Date of incorporation: April 5, 1989
Date of expiration: April 5, 2088
Legal form:
French corporation (société anonyme) with a Board of
Directors governed by the provisions of Livre II of the
French Commercial Code and Companies Act No. 67-236
of March 23, 1967.
Corporate Charter:
The company’s business purpose in France and all other
countries includes:
- the purchase, sale, manufacture, import and export
of all products related to perfumes and cosmetics;
- the use of license agreements;
- providing all services related to the above-mentioned
activities;
- the company’s participation by all means, directly or
indirectly, in all transactions that may relate to its business
purpose through the creation of new companies, the
contribution, subscription or purchase of company shares
or rights, mergers or other, through the creation, acquisition,
rental or lease management of all rights to conduct business
or establishments, and through the acquisition, operation or
disposal of all procedures and patents related to these activities;
- and, generally, all commercial, industrial, financial, civil,
securities and real estate transactions that relate directly or
indirectly to the company’s business purpose or to any
similar and related activities.
Fiscal year: January 1 - December 31
Siret No.: 350 219 382 00032
Trade register No. (RCS): 1989 B 04913
Place of registration: Registrar of the Commercial
Court of Paris.
Activity code: 46.45 Z Wholesale perfume
and beauty product.
1.1.2.
Share account registration
At the option of their owners, shares in France are registered
in a standard personal account (compte nominatif pur), an
administered personal account (compte nominatif adiministré)
or to the bearer identifiable at an authorized intermediary.
Euro Emetteurs Finances handles share services and
management exclusively for personal accounts. Questions
may be addressed to the registered office.
1.2.1.
Shareholders’ meetings (article 19 of the bylaws)
All shareholders have the right to participate in shareholders’
Meetings or to be represented, regardless of the number
of shares owned, provided the shares are fully paid up and
registered in the shareholder’s name for at least three days
prior to the shareholders’ Meeting upon presentation of
a certificate filed by an approved intermediary at the sites
mentioned in the Meeting notice, confirming that the
shares are not available up until the date of the Meeting.
All shareholders may be represented by a spouse or another
shareholder. All shareholders may vote by correspondence
using a proxy statement that complies with legal provisions
and is obtainable by returning the Meeting notice.
1.2.2.
Special shareholder disclosure obligations
(article 20 of the bylaws)
In accordance with the provisions of L. 233-7 of the French
Commercial Code (Code de commerce), all shareholders,
natural persons or legal entities, acting alone or in concert,
who cross thresholds in either direction in respect to the
number of shares owned representing more than one twentieth,
one tenth, three twentieths, one fifth, one quarter, one
third, one half, two thirds, eighteen twentieths or nineteen
twentieths of the capital or voting rights of the company
they hold, must notify the company by registered mail
with return receipt of the number of shares and voting rights
they hold within five trading days. The disclosure requirement
referred to in the preceding paragraph is also mandatory
within the same time limits whenever the percentage of
capital or voting rights held falls below one of the thresholds
mentioned above.
Under article L. 233-7 subsection VII of the French
Commercial Code, said shareholders must also state their
intentions with regard to share ownership for the next
twelve months whenever the thresholds of one tenth or one
fifth of the capital or voting rights have been crossed.
1.2.3.
Appropriation and distribution of earnings
(article 24 of the bylaws)
If the financial statements approved by the shareholders’
Meeting show a distributable profit as defined by law, the
shareholders’ Meeting decides whether to make appropriations
to one or more retained earnings or reserve accounts
under its control, to carry it forward or to distribute it.
The shareholders’ Meeting may grant shareholders the choice
of receiving a dividend in cash or in shares for all or part
of the dividend or interim dividends to be distributed, subject
to the applicable legal provisions.
Following the approval of the financial statements by the
general Meeting of the shareholders, any losses that may
occur are carried forward to be offset against future earnings
until these losses have been fully used.
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1.2.4.
Double voting rights (article 11 of the bylaws)
1.2.5.
Documents on display
In accordance with the provisions of article L. 225-123 of
the French Commercial Code, the extraordinary shareholders’
Meeting of September 29, 1995 created shares with double
voting rights. These shares must be fully paid up and
recorded in the company’s share register in registered form
for at least three years.
The bylaws, minutes and other company documents are
available at Interparfums’ registered office.
1.2.6.
Legal jurisdiction
In the event of litigation, the courts having jurisdiction are
those of the registered office in cases where the company
is a defendant. They are designated according to the nature
of the litigation, barring any contrary provisions of the new
Civil Procedure Code.
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TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
2.
CAPITAL STOCK
2.1.
Five-year history of capital stock transactions
Year Transaction type Number Shares Total Share capital
of shares created shares (in €)
2008 Exercise of 2001 stock options 39,857 39,857 12,140,224 36,420,672
Exercise of 2002 stock options 26,638 26,638 12,166,862 36,500,586
Exercise of 2003 stock options 8,711 8,711 12,175,573 36,526,719
Exercise of 2004 stock options 1,862 1,862 12,177,435 36,532,305
Bonus share issue 1,214,545 1,214,545 13,391,980 40,175,940
2009 Exercise of 2002 stock options 51,368 51,368 13,443,348 40,330,044
Exercise of 2003 stock options 99,828 99,828 13,543,176 40,629,528
Exercise of 2004 stock options 987 987 13,544,163 40,632,489
Exercise of 2005 stock options 408 408 13,544,571 40,633,713
Bonus share issue 2,678,942 2,678,942 16,223,513 48,670,539
2010 Exercise of 2004 stock options 148,464 148,464 16,371,977 49,115,931
Exercise of 2005 stock options 68,347 68,347 16,440,324 49,320,972
Exercise of 2006 stock options 4,723 4,723 16,445,047 49,335,141
Capital decrease (157,150) (157,150) 16,287,897 48,863,691
Bonus share issue 1,638,298 1,638,298 17,926,195 53,778,585
2011 Exercise of 2005 stock options 96,076 96,076 18,022,271 54,066,813
Exercise of 2006 stock options 41,204 41,204 18,063,475 54,190,425
Bonus share issue 1,803,851 1,803,851 19,867,326 59,601,978
2012 Exercise of 2006 stock options 132,948 132,948 20,000,274 60,000,822
Bonus share issue 2,000,027 2,000,027 22,000,301 66,000,903
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As of December 31, 2012, Interparfums’ capital was composed of 22,000,301 shares with a par value of €3.
Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
2.2.
Authorized capital
2.2.1.
Previous authorizations
The shareholders’ Meeting of April 27, 2012 authorized
the Board of Directors to increase the capital stock by issuing
ordinary shares with or without shareholders’ preemptive
rights for maximum nominal amounts respectively of
€25 million. These authorizations are valid for a period of
26 months. To date, the Board of Directors has not made
use of these authorizations.
The shareholders’ Meeting of April 29, 2011 also authorized
the Board of Directors to increase the capital by an amount
not exceeding €50 million through the capitalization of
earnings, additional paid-in capital and reserves.
The Board of Directors made use of this authorization:
- pursuant to its decision of June 14, 2011 to increase
the capital stock by €5,411,533 through the creation
of 1,803,851 new bonus shares granted to shareholders
on the basis of one new share for every ten shares held;
- pursuant to its decision of June 14, 2012 to increase
the capital stock by €6,000,081 through the creation
of 2,000,027 new bonus shares granted to shareholders
on the basis of one new share for every ten shares held.
The maximum amount of present or future capital increases
that may result from all issuances authorized by the
shareholders’ Meeting of April 27, 2012 is €75,500,000
that includes the €500,000 authorized in connection with
the capital increase reserved for employees proposed in the
resolution that was rejected by this meeting.
2.2.2.
Breakdown of option holders as of December 31, 2012
Plan 09 Plan 10
Management Committee members 37,270 39,930
Employees 75,827 94,149
Total 113,097 134,079
2.3.
Ownership of Interparfums capital stock and voting rights
116
2.3.1.
Situation at February 28, 2013
Shares % of Voting % of voting
held capital rights rights
Interparfums Holding SA 16,087,056 73.1% 32,149,913 84.4%
French investors 2,288,865 10.4% 2,290,955 6.0%
Foreign investors 2,089,257 9.5% 2,089,257 5.5%
Individuals 1,508,099 6.9% 1,562,439 4.1%
Treasury shares 27,024 0.1% - -
Total 22,000,301 100.0% 38,092,564 100.0%
Based on a survey of shareholder ownership, there were
6,500 shareholders at February 28, 2013. Excluding
Interparfums Holding, Interparfums’ shareholder base
breaks down as follows:
- 200 French institutional investors and mutual funds
owning 3.6% of the capital stock compared with 200 in
2011 owning 3.6%;
- 100 foreign investors located mainly in the UK, Switzerland,
the US, Luxembourg and Belgium, who own 3.5% of the
capital stock compared with 90 in 2011 with 3.5%;
- 6,200 individual shareholders owning 3% of the capital
stock compared with 6,750 in 2011 owning 3%.
To the company’s knowledge, there are no other shareholders
that possess directly, indirectly or together, 5% or more of
the capital or voting rights.
Four Independent Directors serve on the Board of Directors
providing a mechanism for preventing an abusive exercise
of control of the company.
Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
2.3.2.
Changes in Interparfums Holding’s ownership over four years
At 31 December 2009 2010 2011 2012
Interparfums Holding 74.56% 74.15% 73.81% 73.23%
Free float and employees 25.44% 25.85% 26.19% 26.77%
Total 100.00% 100.00% 100.00% 100.00%
2.4.
Breakdown of Interparfums
Holding’s capital stock
as of December 31, 2012
2.6.
Shareholders’ agreements
No shareholders’ agreements exist at the level of Interparfums
Holding.
Interparfums Holding, whose sole equity holding is
Interparfums, is itself wholly owned by Interparfums Inc.,
listed on NASDAQ in the United States with approximately
3,070 shareholders. As of December 31, 2012 it had the
following ownership structure:
2.7.
Special shareholder
disclosure obligations
- Philippe Bénacin and Jean Madar: 46.21%;
- Free float: 53.79%.
2.5.
Dividends
Since 1998, the company has adopted a policy of distributing
dividends that today represents more than 30% of consolidated
earnings to reward shareholders while at the same time
associating them with the group’s expansion. In early
May 2012, a dividend of €0.50 per share was paid or a
total amount of €9,9 million.
In compliance with article L. 233-7 of the French Commercial
Code, all shareholders acquiring a number of shares that
increases above or below certain statutory disclosure thresholds
are required to notify the French financial market authority
(Autorité des Marchés Financiers) within five trading days.
If such notifications are not made in accordance with
the applicable legal provisions, the company will apply the
provisions of article L. 233-14 relating to the cancellation
of voting rights. In 2012, the company was not informed
of any changes in share ownership involving the crossing of
these statutory thresholds.
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2.8.
Key stock market data
In number of shares and euros 2008 2009 2010 2011 2012
Shares outstanding as of 31 December 13,391,980 16,223,513 17,926,195 19,867,326 22,000,301
Market capitalization as of December 31 €242m €292m €490m €325m €510m
High (1)
31.55 20.49 27.84 28.12 23.45
Low (1)
17.00 13.06 17.19 16.25 16.00
Average (1)
23.63 16.67 23.05 23.41 19.72
Year-end (1) 18.05 18.01 27.35 16.38 23.16
Average daily volume (1)
6,220 6,022 10,146 19,414 15,016
Earnings per share (1)
1.66 1.52 1.57 1.69 6.48
Dividend per share (1) 0.38 0.39 0.48 0.50 0.54
Average number of shares outstanding (2) 12,719,676 14,880,583 17,089,880 17,956,051 20,957,788
(1) Historical data (not restated for bonus share issues undertaken each year).
(2) Excluding treasury shares.
2.9.
Share price
For the year to date, trends for Interparfums’ share price
in 2012 can be divided into three distinct phases:
- a rise over the first half back up to the €20 range following
the significant drop in December 2011 in conjunction with
the discussions initiated by Burberry on the creation of
a new operational structure for the fragrance and beauty
business;
Bolstered by the signature of a 20-year license agreement
with the Karl Lagerfeld brand in November 2012, the share
price has traded at around €25 since the publication of the
2012 annual results for a market capitalization of
approximately €550 million.
Trading volume has remained resilient with an average of
15,000 shares per day.
118
- the share price fell back to around €17 following the
announcement of the discontinuation of these discussions
between the two companies;
- finally, a slow but steady uptrend to reach €23 by the end
of the year with the announcement of good half-year
results, strong gains by Montblanc, Jimmy Choo and
Boucheron in particular and positive trends for the years ahead.
Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
2.10.
Share price and trading activity trends since 2010
In euros High Low Trading Trading
volume volume
(number (€ millions)
of shares)
2010
January 18.90 17.55 140,550 2,555
February 18.22 17.19 138,609 2,463
March 21.47 18.11 395,479 8,056
April 24.20 21.59 299,489 6,905
May 24.10 21.30 143,032 3,290
June 25.15 23.35 256,451 6,119
July 24.30 22.10 196,903 4,611
August 23.70 22.49 112,060 2,595
September 24.95 23.30 231,283 5,622
October 27.23 23.79 258,428 6,741
November 27.84 26.30 219,711 5,981
December 27.69 25.85 245,845 6,641
2011
January 28.12 23.83 1,255,044 1,254
February 26.27 24.45 446,906 11,431
March 25.45 22.63 350,561 8,519
April 27.18 24.70 248,530 6,455
May 27.83 26.30 240,610 6,517
June 27.62 23.43 287,176 7,428
July 26.43 24.10 393,953 10,015
August 24.10 19.27 248,758 5,172
September 21.50 18.90 240,598 4,954
October 22.28 18.80 319,309 6,724
November 21.99 18.85 281,591 5,783
December 19.96 16.25 676,414 12,041
2012
January 17.75 16.00 593,682 10,144
February 19.24 17.90 269,187 5,090
March 21.71 19.17 401,751 8,231
April 21.51 20.00 281,325 5,929
May 22.00 20.26 282,431 6,011
June 22.23 21.17 226,008 7,070
July 20.10 16.99 318,156 5,747
August 18.19 17.19 354,644 6,264
September 19.44 17.90 253,758 4,675
October 21.14 18.98 351,064 6,945
November 22.63 20.45 275,919 5,954
December 23.45 22.69 239,167 5,523
2013
January 24.48 23.50 361,281 8,697
February 25.08 24.08 245,002 6,008
Historical data (not restated for bonus share issues).
A capital increase through a bonus share issue on the basis
of one new share for ten existing shares in June 2010
resulted in the automatic division of the share price from
this date by 1.10.
A capital increase through a bonus share issue on the basis
of one new share for ten existing shares in June 2011
resulted in the automatic division of the share price from
this date by 1.10.
A capital increase through a bonus share issue on the basis
of one new share for ten existing shares in June 2012
resulted in the automatic division of the share price from
this date by 1.10.
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3.
ANNUAL GENERAL MEETING: RESOLUTIONS SUBMITTED
TO THE EXTRAORDINARY AND ORDINARY SHAREHOLDERS’
MEETING OF APRIL 22, 2013
3.1.
Ordinary resolutions
Purpose of the resolutions
Purpose of the resolution
Approval of the separate and consolidated financial
statements for the period ended December 31, 2012
(1st and 2nd resolution)
We hereby request that you approve the separate and
consolidated financial statements for the period ended
December 31, 2012. Information on revenue and
earning performances for the period are presented in
the 2012 registration document.
First resolution
Review and approval of the parent company separate financial
statements for the period ended December 31, 2012
The shareholders, in accordance with the conditions of
quorum and majority that apply at ordinary general Meetings,
after reviewing the Board of Directors’ report, including the
Chairman’s report on the functioning of the Board of
Directors and balanced representation of men and women
on the Board and on internal control and risk management
procedures, as well as the Auditors’ report on the financial
statements for the period ended December 31, 2012, approve
the annual financial statements, as presented showing a net
income of €126,668,355. They also approve the transactions
described in the accounts and summarized in these reports.
In consequence, the shareholders grant discharge for
the period ended December 31, 2012 to the Chairman,
the Executive Vice President and the Directors for their
management.
They furthermore approve the total amount of disallowed
deductions under article 39-4 of the French General Tax
Code of €22,7688 for 2012.
Second resolution
Review and approval of the consolidated financial
statements for the period ended December 31, 2012
The shareholders, in accordance with the conditions of
quorum and majority that apply at ordinary general
Meetings, after reviewing the report of the Board of
Directors and the Auditors’ report on the consolidated
financial statements of the group for the period ended
December 31, 2012, approve the financial statements as
presented showing an IFRS net income of €135,862,000.
They also approve the transactions described in the
accounts and summarized in these reports.
Appropriation of net income and distribution
of dividends (3rd resolution)
You are requested to duly note that the net income for
2012 of €126,668,335, with this exceptional increase
moreover resulting from the recognition of items
linked to the discontinuation of the Burberry license
agreement. From this amount, it is proposed that
€639,892 be appropriated to the “Legal reserve” and
€102,302,247 to “Retained earnings”. The Board of
Directors proposes that you set an ordinary dividend
per share of €0.54, a 19% increase on the prior year.
The Board of Directors furthermore submits for your
approval a proposal to distribute an exceptional
dividend of €0.54 per share.
If your general Meeting approves this proposal,
the total dividend per share will be €1.08 with an
ex-dividend date for both the ordinary and exceptional
dividends of April 29, 2013 and a payment date of
May 3, 2013 after a dividend record date on May 2, 2013.
The breakdown of amounts of dividends paid
for the last three financial periods are presented in this
resolution. The ordinary and exceptional dividends
are eligible for the 40% rebate for individual investors
having their tax residence in France provided for under
article 158-3-2° of the French General Tax Code
(Code Général des Impôts).
Third resolution
Appropriation of net income of the period, setting the
ordinary dividend of €0.54 and an exceptional dividend
of €0.54 per share
The shareholders, in accordance with the conditions
of quorum and majority that apply at ordinary general
Meetings, approving the Board of Directors’ proposal,
decide to appropriate net income of the period of
€126,668,355 as follows:
Net income of the period €126,668,355
Appropriation to the legal reserve €639,892
Retained earnings €102,302,247
Ordinary dividend per share of €0.54 €11,863,108
Exceptional dividend per share of €0.54 €11,863,108
Total appropriation €126,668,355
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Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
The shareholders decide in consequence, for fiscal 2012
to distribute for each of the shares of the capital stock
conferring dividend rights, an ordinary dividend of €0.54
per share and an exceptional dividend of €0.54 per share,
or a total amount of €1.08 per share, it being specified that
if the number of shares conferring dividend rights differs
in relation to the number of 22,000,301 shares comprising
the share capital of December 31, 2012, the total amount
of dividends will be adjusted in consequence and the amount
allocated to “Retained earnings” will be determined on the
basis of dividends actually paid.
If on the dividend payment date the company holds a certain
number of treasury shares not destined to serve as such,
the amount corresponding to dividends not distributed for
said shares will be allocated to “retained earnings”.
This amount thus allocated among shareholders shall
qualify for the full 40% tax allowance provided for under
article 158.3.2 of the French General Tax Code to
individuals with their tax residence in France.
The shares will have an ex-dividend date of April 29, 2013
and a payment date of May 3, 2013 based on the dividend
record date of May 2, 2013.
As required by law the shareholders duly note that
dividends for the last three periods were as follows:
Year Number of shares Dividend
2011 19,867,326 €0.50
2010 17,926,195 €0.48
2009 16,223,513 €0.39
Purpose of the resolution
Regulated agreements subject to articles
L. 225-38 et seq. of the French Commercial Code
(4th resolution)
You are requested to duly note the agreements
remaining in force in the period in progress and
presented to you in the Auditors’ special report.
Your Board of Directors informs you that no new
agreements covered by articles L. 225-38 of the French
Commercial Code have been concluded in 2012.
Fourth resolution
Approval of regulated agreements under articles
L. 225-38 et seq. of the French Commercial Code
The shareholders, in accordance with the conditions of
quorum and majority that apply at ordinary general
Meetings and after reviewing the auditors’ special report
on related-party agreements governed by articles L. 225-38
et seq. of the French Commercial Code, duly note the
information provided on agreements concluded in prior
periods remaining in force in the period in progress and
approved by prior general Meetings. The shareholders
furthermore note that no new regulated agreements were
concluded in the period ended December 31, 2012.
Purpose of the resolution
Directors’ fees (5th resolution)
We propose that the total annual amount of €120,000
for Directors fees as approved by the general Meeting
of April 27, 2012 be maintained for 2013.
Fifth resolution
Setting of Directors’ fees
The shareholders, in accordance with the conditions
of quorum and majority applicable to ordinary general
Meetings, after having reviewed the Board of Directors’
report, set annual Directors fees for the year in progress
at €120,000 and grant full power to the Board of Directors
to determine the criteria for allocating these fees among
Board members within the limit of this amount and
the date of their payment for the fiscal year commencing
on January 1, 2013.
Purpose of the resolution
Authorization for trading in own shares
(6th resolution)
As the authorization granted by the general Meeting
of April 27, 2012 expires on October 27, 2013, it is
advisable that a new authorization be granted to your
Board of Directors for a new period of 18 months
commencing on the general Meeting date, for the
purpose of continuing the share buyback program in
accordance with the terms and conditions and in line
with the objectives hereby submitted for your
approval, and namely:
- a maximum purchase price of €40;
- limitation of the maximum number of shares able to
be acquired to 5% of the number of shares
comprising the capital stock. By way of indication,
and excluding shares already held by the company,
based on a capital stock of 21,968,718 shares at
December 31, 2012 and a purchase price of €40 per
share, the theoretical maximum amount of funds that
may be allocated to financing this program would be
€43,937,436.
During the period from May 30, 2012 to
February 28, 2013, the company acquired
135,103 shares at an average price of €21.15 and
sold 152,108 shares at an average price of €21.41
within the framework of the liquidity agreement.
No shares acquired through this program were
canceled. At December 31, 2012, shares held in
treasury by the company represented 0.14% of the
capital stock. These treasury shares do not carry voting
rights or entitlement to dividend payments which will
be allocated in consequence to “retained earnings”.
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Shareholder information
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122
Sixth resolution
Renewal of the authorization for dealing in own shares
within the framework of article L. 225-209 of the French
Commercial Code
The shareholders, in accordance with the conditions of
quorum and majority that apply at ordinary meetings and
after reviewing the report of the Board of Directors and in
accordance with the provisions of article L. 225-209 et seq.
of the French Commercial Code and the provisions of
articles 241-1 to 241-6 of the AMF General Regulation
and Commission Regulation (EC) No. 2273/2003 of
December 22, 2003 implementing Directive 2003/6/EC,
grant the Board of Directors the authority, which it may
further delegate, to acquire or sell shares of the company in
connection with a share buyback program to be implemented
and according to the terms and conditions set forth below.
The purpose of this authorization is to permit the company
trade in its own shares for all uses provided for by law. On
this basis, the shareholders decide that this share buyback
program may be used for the following purposes:
- market-making or ensuring the liquidity of the company’s
shares through an independent investment services provider
within the framework of a liquidity agreement in
compliance with the conduct of business rules of the French
association of financial market professionals (AMAFI)
recognized by the AMF;
- grant employees or officers of the company and/or the
group stock options (articles L. 225-177 et seq. of the French
Commercial Code) and/or bonus shares (articles L. 225-197-1
et seq. of the French Commercial Code);
- remit shares pursuant to the exercise of rights attached
to securities conferring rights by redemption, conversion,
exchange, presentation of warrants or any other means,
to grants of the company’s shares;
- use such shares for payment or exchange in connection with
financial transactions or acquisitions in compliance with the
financial market regulations;
- cancel shares to increase the return on equity and earnings
per share and/or eliminate the impact of dilution for
shareholders from capital increases subject to adoption of
the twelfth resolution of the extraordinary general Meeting
presented below authorizing this cancellation;
This program is also destined to enable the company to trade
in its own shares for any other purposes authorized by
applicable laws or regulations including any market practice
permitted by the AMF, the French financial market authority,
subsequent to this general Meeting. In such cases, the
company will inform its shareholders by the issuance
of an announcement or any other means provided for by
applicable regulations.
Shares acquired shall be subject to the following limits:
- the maximum purchase price is €40 per share, excluding
execution costs;
- the total number of shares acquired may not exceed 5% of
the capital stock outstanding at any time. This 5% limit
applies to an amount of capital that will be adjusted as
applicable for corporate actions affecting the capital stock
after this meeting, whereby acquisitions by the company
shall under no circumstances increase its holding, directly
and indirectly through subsidiaries, to more than 5% of the
capital stock;
- pursuant to the above, by way of indication and excluding
shares already held by the company on December 31, 2012,
21,968,718 shares would represent 5% of the capital stock
corresponding to a maximum theoretical purchase price of
€43,937,436 on the basis of a maximum purchase price of
€40 per share.
The Board of Directors may adjust the above-mentioned
prices pursuant to modifications in the par value of the
share, the capitalization of retained earnings and bonus
issues, stock splits or reverse splits, repayment or reduction
of capital, distribution of retained earnings or other assets
and any other transactions involving the company’s capital
stock, to reflect the impact of these transactions on the
share’s value.
In accordance with applicable regulations, said shares may
be purchased, held, sold or transferred, according to the
case, through one or more transactions, at any time the
Board of Directors so chooses including when tender offers
are in effect subject to applicable regulations, by any means,
on or off market, and notably through block trades.
Shares purchased and held by the company must, in
compliance with the law, be maintained in registered form.
In addition said shares that will not confer pre-emptive
rights or entitlement to dividends shall be deprived of
voting rights.
The shareholders grant all powers to the Board of Directors
that may in turn delegate such authority to:
- place all stock orders on or off the market;
- sign any agreements notably with a view to maintaining
registers of purchases and sales;
- submit all declarations to the Autorité des Marchés Financiers
(AMF) or any other such entity, carry out all formalities and,
in general, make all necessary arrangements.
The shareholders decide that this authorization:
- shall take effect from the date of the Board of Directors’
meeting that decides to implement this decision that will
automatically result in the expiration of the previous
authorization granted under the seventh resolution of the
shareholders’ Meeting of April 27, 2012;
- will expire after a period of 18 months from the date
of this Meeting, i.e. on October 22, 2014.
The Board of Directors will notify the general Meeting
of all transactions carried out under this resolution.
Purpose of the resolutions
Reappointment of statutory and deputy auditors
(7th, 8th, 9th and 10th resolutions)
It is requested that you renew the respective terms
of office of Mazars and SFECO & Fiducia Audit as
Statutory Auditors and Serge Azan as deputy auditor,
and appoint Jean-Maurice El Nouchi to replace
Guillaume Potel as deputy auditor.
Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Seventh resolution
Eleventh resolution
Reappointment of Mazars as Statutory Auditor
Powers
The shareholders, in accordance with the conditions of
quorum and majority that apply at ordinary general Meetings,
and duly noting that the term of office of Mazars – 61, rue
Henri Regnault – 92075 Paris La Défense Cedex expires at
the close of this meeting, decide to reappoint Mazars for a
term of six years, i.e. until the close of the ordinary general
Meeting called to approve the financial statements for the
period ending December 31, 2018.
Eighth resolution
Reappointment of SFECO & Fiducia Audit
as Statutory Auditor
The shareholders, in accordance with the conditions
of quorum and majority that apply at ordinary general
Meetings, and duly noting that the term of office of the
firm SFECO & Fiducia Audit – 50, rue de Picpus – 75012
Paris expires at the close of this meeting, decide to reappoint
SFECO & Fiducia Auditfor a term of six years, i.e.
until the close of the ordinary general Meeting called
to approve the financial statements for the period ending
December 31, 2018.
Ninth resolution
Appointment of Jean-Maurice El Nouchi as deputy auditor
The shareholders, in accordance with the conditions of
quorum and majority that apply at ordinary general Meetings,
and duly noting that the term of office of Guillaume Potel
– 39, rue Marius Aufan – 92300 Levallois Perret expires
at the close of this meeting, decide not to renew his term
of office and appoint Jean-Maurice El Nouchi for a term of
six years, i.e. until the close of the ordinary general Meeting
called to approve the financial statements for the period
ending December 31, 2018.
Tenth resolution
Reappointment of Serge Azan as deputy auditor
The shareholders, in accordance with the conditions
of quorum and majority that apply at ordinary general
Meetings, and duly noting that the term of office of Serge
Azan –16, rue Daubigny – 75017 Paris expires at the close
of this meeting, decide to reappoint Serge Azan for a term
of six years, i.e. until the close of the ordinary general
Meeting called to approve the financial statements for
the period ending December 31, 2018.
Purpose of the resolutions
Powers for formalities (11th and 15th resolutions)
The purpose of these two standard resolutions with
respect to both ordinary and extraordinary resolutions
is to grant the necessary powers to carry out formalities
required by law.
All powers are granted to the bearer of copies or extracts
of the minutes of this shareholders’ Meeting ruling in
accordance with the conditions of quorum and majority
that apply at ordinary general Meetings to perform all legal
formalities relating to the above resolutions.
3.2.
Extraordinary resolutions
Purpose of the resolution
Cancellation of shares by reduction of capital for
shares acquired by the company (12th resolution)
As the authorization previously granted by the general
Meeting of April 27, 2012 expires on October 27, 2013,
your Board of Directors hereby requests you authorize
it to cancel all or part of shares acquired through the
share buyback program and reduce the share capital in
accordance with the terms and conditions set forth in
this resolution, and namely within the limit of 5% of
the capital stock. This cancellation will enable in
particular the company to offset possible dilutions
resulting from various capital increases.
The difference between the carrying value of the
canceled shares and their par value will be allocated to
reserves or additional paid-in capital. This authorization
would be granted for a term of 18 months from the
date of this general Meeting.
Twelfth resolution
Authority granted to the board of Directors to reduce
the capital through the cancellation of treasury shares
The shareholders, in accordance with the conditions
of quorum and majority that apply at extraordinary
shareholders meetings, and after reviewing the report
of the Board of Directors and the special report of the
Auditors and the sixth resolution of the ordinary general
Meeting of this day authorizing the company to purchase
its own shares:
- Authorize the Board of Directors to cancel, at its own
discretion, through one or more transactions, at amounts
and times of its choosing, treasury shares acquired within
the framework of article L. 225-209 of the French
Commercial Code, not to exceed 5% of the common stock
outstanding on the transaction date and by period of 24
months, reducing the authorized capital in due proportion,
in accordance with applicable laws and regulations;
- This authorization is valid for a term of eighteen months
from this meeting, or until October 22, 2014, and replaces
the previous authorization granted by the shareholders’
Meeting of April 27, 2012, that was not used;
- Grant full authority to the Board of Directors, with the
possibility of further delegating to any person so authorized
by law, to reduce the capital through one or more
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Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
The shareholders grant full authority to the Board of
Directors, which the latter may further delegate as provided
for by law, for the purpose of implementing this resolution
and notably to:
- determine the procedures and conditions for transactions
thus authorized, and notably the amount and nature of
reserves and additional paid in capital, the number of new
shares to be issued or the amount by which the nominal
value of existing shares comprising the capital stock will be
increased, establish the date of record as of which new
shares will carry rights or the date from which the increase
in the nominal value will take effect;
- perform all formalities to record the completion of the
capital increase and amend the bylaws in consequence
and undertake all formalities in regards to disclosure
requirements;
- and, in general, take all measures and perform all formalities
required to ensure the completion of the capital increase
and amend the bylaws in consequence.
The shareholders duly note that effective from the date
of this meeting, this authorization replaces and supersedes,
for the unused portion, the authorization granted by the
shareholders’ Meeting of April 29, 2011 and implemented
for a total amount of €11,411,634 by the respective decisions
of the Board of Directors of June 14, 2011 and June 14, 2012.
This authorization is valid for a term of 26 months from
the date of this meeting, i.e. until June 22, 2015.
Purpose of the resolution
Capital increase reserved for employees
(14th resolution)
In accordance with the provisions of articles
L. 225-129-6 of the French Commercial Code,
when the general Meeting is called to vote upon a
resolution authorizing a capital increase by delegating
its authority to the Board, it is legally required to also
rule on a resolution proposing a capital increase
reserved for employees participating in a company
savings plan.
The 14th resolution is accordingly submitted to you
on that basis, by requesting that you rule on an
authorization to be granted to the Board of Directors,
for the purpose of a capital increase reserved for
employees participating in a company savings plan
having been set up by the company, for a maximum
amount of €500,000. This authorization for which
the Board of Directors has indicated it is not in favor
would be valid for a term of 26 months from the date
of this general Meeting.
transactions, to notably determine the final amount of
the capital reduction and the terms and procedures
thereof and record the completion of the capital reduction,
amending in consequence the bylaws, performing all
necessary formalities, and notably filings with all bodies
and in general doing everything necessary.
Purpose of the resolution
Capital increase through the capitalization of additional
paid-in capital, reserves, earnings or other amounts
(13th resolution)
By this resolution, we propose that you grant your
Board of Directors a new authorization to increase the
capital stock, through one or more transactions, for
an amount not exceeding €25 million through the
capitalization of additional paid-in capital, reserves or
other amounts, notably for the purpose of new bonus
share issues for its shareholders. This authorization
would be valid for a term of 26 months from the date
of this general Meeting, i.e. until June 22, 2015.
If this authorization were to be approved, your Board
would carry out for the14th consecutive year a new
bonus share issue for its shareholders.
The authorization granted by the general Meeting of
April 29, 2011 expires on June 29, 2013. It was used
in part in 2011 by the creation of 1,803,051 new
shares granted on the basis of one new share for ten
existing shares pursuant to the capital increase from
the capitalization of €5,411,553. In 2012, this same
authorization was again used for an amount of
€6,000,081 to create 2,000,027 shares granted by the
company on the basis of one new share for ten
existing shares.
Thirteenth resolution
Authority granted to the Board of Directors to issue shares
through the capitalization of additional paid-in capital,
reserves or profit
The extraordinary shareholders’ Meeting, in accordance
with the conditions of quorum and majority applicable to
ordinary shareholders meetings, after having reviewed the
Board of Directors’ report and ruling in accordance with
the provisions of articles L. 225-129 to L. 225-129-6 and
L. 225-130 of the French Commercial Code, grants
authority to said Board to increase the capital, through one
or more tranches, by an amount not to exceed €25 million
by the capitalization of all or part of the share premium,
reserves or profits or the capitalization of any other amounts
permitted, followed by the issuance and grant of bonus shares
or an increase in the par value of existing ordinary shares,
or, when applicable, a combination of these two methods.
The shareholders decide that the rights resulting from
fractional amounts shall not be negotiable and that the
corresponding shares will be sold with the proceeds from
such sale to be allocated to holders of rights no later than
30 days after the registration date in their name of the
whole number of shares allotted to them.
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Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Fourteenth resolution
Authority granted to the Board of Directors to proceed
with capital increases reserved for employees participating
in a company savings plan in accordance with article
L. 225-129-6 of the French Commercial Code and entailing
the suspension of shareholders’ pre-emptive rights in favor
of employees
The shareholders, in accordance with the conditions of
quorum and majority applicable to extraordinary shareholders’
Meetings and after reviewing the Board of Directors’
report and the auditors’ report in accordance with articles
L. 225-129-6 and L. 225-138-1 of the French Commercial
Code and articles L. 3332-18 et seq. of the French Labor Code:
- grant authority to the Board of Directors, which the latter
may further delegate as permitted by law, at its sole discretion,
to increase the capital, in one or more transactions in amounts
and at times of its choosing through the issue of common
stock reserved for employees of the company or affiliated
companies in accordance with applicable laws participating
in a company savings plan;
- cancel in favor of employees entitled to benefit from rights
issues that may be decided by virtue of this authorization,
the preemptive rights of shareholders to new shares that shall
be issued in consequence;
- resolve that the maximum nominal amount of capital
increase(s) that may be carried out by virtue of this resolution
shall be €500,000, whereby this amount may however be
increased as necessary by the amount of additional securities
that must be issued to preserve, as required by law the
rights of holders of securities, giving access to the shares
of the company;
- Grant full authority to the Board of Directors within
the above limits and conditions for the purpose of
implementing the authority hereby granted, including
notably to:
- Determine the list of grantees benefiting from the
suspension of preemptive subscription rights, the number
of shares to be granted to each qualifying employee and
the issue price subject to the limits imposed by articles
L. 225-138-1 of the French Commercial Code and articles
L. 3332-19 et seq. of the French Labor Code,
- Determine the dates and procedures for the capital increase(s),
- Receive applications for shares and determine the procedures
for their payment,
- Produce a supplemental report describing the final terms
of the offering, and in general, take all measures and undertake
all formalities required for the issue, the listing of the securities
and custodial and related services for securities covered
by this authorization, and amend the articles of the bylaws
in consequence;
- Grant the authorization provided for under this resolution
for 26 months from the date of this meeting or until
June 22, 2015.
Fifteenth resolution
Powers for formalities
All powers are granted to the bearer of copies or extracts
of the minutes of this shareholders’ Meeting ruling in
accordance with the conditions of quorum and majority
that apply at extraordinary general Meetings to perform
all legal formalities relating to the above resolutions.
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Shareholder information
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
HISTORY OF
THE COMPANY
126
History of the company
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
1982
Creation of Interparfums SA in France by Philippe Benacin and Jean Madar.
1985
Creation of Interparfums Inc. in the United States, parent company of Interparfums SA.
1988
Beginning of the selective perfume activity with the signature of a license agreement for the Régine’s brand.
Initial public offering of Interparfums Inc. on Nasdaq in New York.
1993
Signature of a license agreement to create and produce perfumes under the Burberry name and distribute them worldwide.
1994
Listing of Interparfums SA on the over-the-counter market of the Paris Stock Exchanges.
1995
Transfer of the company from the over-the-counter market to the Second Market of Paris Stock Exchange with a rights issue.
1997
Signature of a license agreement to create and produce perfumes under the S.T. Dupont name and distribute them worldwide.
1998
Signature of a license agreement to create and produce perfumes under the Paul Smith and distribute them worldwide.
2000
Extension of the license agreement for the Burberry brand.
2004
Signature of a new Burberry license agreement for the Burberry brand.
Signature of a license agreement for the Nickel brand, specialized in skincare and personal hygiene products for men.
Signature of a license agreement to create and produce perfumes under the Lanvin brand and distribute them worldwide.
127
2006
Extension of the S.T. Dupont license agreement.
2007
Signature of a license agreement to create and produce perfumes under the Van Cleef & Arpels brand and distribute them worldwide.
Acquisition of the Lanvin trademark and brand name for class 3 products (fragrances and make-up).
2008
Extension of the Paul Smith license agreement.
2009
Signature of a license agreement to create and produce perfumes under the Jimmy Choo brand and distribute them worldwide.
2010
Signature of a license agreement to create and produce perfumes under the Montblanc brand and distribute them worldwide.
Extension of the license agreement for the Burberry brand.
Signature of a worldwide license agreement to create and manage new and existing fragrances under the Boucheron brand.
2011
Signature of a license agreement to create and produce perfumes under the Balmain brand and distribute them worldwide.
Signature of a license agreement to create and produce perfumes under the Repetto brand and distribute them worldwide.
Extension of the S.T. Dupont license agreement.
2012
Discontinuation of the Burberry license agreement before the expiry date.
Signature of a license agreement to create and produce perfumes under the Karl Lagerfeld brand and distribute them worldwide.
2013
Discontinuation of operations for Burberry fragrances.
History of the company
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
NOMINATIONS
AND CORPORATE
AWARDS
128
Nominations and Corporate Awards
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1997
“Prix Cristal” for the transparency in financial information.
(French Institute of Statutory Auditors – Compagnie Nationale des Commissaires aux Comptes).
1998
Nomination for the award for the best annual report
(La Vie Financière).
1999
“Grand Prize for Entrepreneurs” award for international growth
(Ernst & Young – L’Entreprise).
2001
Oscar for financial performance
(Cosmétique Magazine).
2002
Nomination for the award for innovation
(KPMG – La Tribune).
Nomination for the “Boldness and Creativity Prize”
(Fimalac – Journal des Finances).
2003
Nomination for the “Boldness and Creativity Prize”
(Fimalac – Journal des Finances).
2005
Nomination for the “Boldness and Creativity Prize”
(Fimalac – Journal des Finances).
2007
Investor Relations Prize for the Small and Mid Caps category
(Forum de la communication financière).
3rd Prix Boursoscan award for financial communications for the Small and Mid Caps category
(Boursorama – Opinion Way).
2010
Trophée Relations Investisseurs – Best Investor Relations Award for the Mid Cap category
(Forum des Relations Investisseurs et Communication Financière).
2011
Special Award for Inspiration of the Great Place to Work Institute
(Institut Great Place to Work® – Le Figaro Économie).
Mid Cap Corporate Governance Prize
(Agefi).
“Boldness and Creativity Prize” given at an award ceremony by French Prime Minister, François Fillon
(Fimalac – Journal des Finances).
2012
Trophée Relations Investisseurs – Best Investor Relations Award for the Mid Cap category
(Forum des Relations Investisseurs et Communication Financière).
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Nominations and Corporate Awards
AUDITORS AND
RESPONSIBILITY
STATEMENT
AUDITORS P. 131
RESPONSIBILITY STATEMENT
FOR THE REGISTRATION DOCUMENT P. 131
EXECUTIVE OFFICER RESPONSIBLE
FOR FINANCIAL INFORMATION P. 131
130
Auditors and responsibility statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Auditors
The Statutory Auditors having issued reports on the parent company and consolidated financial statements are:
Mazars
61 rue Henri Regnault
92400 Courbevoie
represented by Simon Beillevaire
appointed by the AGM of December 1, 2004
reappointed by the AGM of April 20, 2007
expiration date: 2013 AGM
The alternate auditors are respectively:
SFECO & Fiducia Audit
50 rue de Picpus
75012 Paris
represented by Gilbert Métoudi
appointed by the AGM of May 19, 1995
reappointed by the AGM of April 20, 2007
expiration date: 2013 AGM
Mr. Guillaume Potel
Mr. Serge Azan
61 rue Henri Regnault
92400 Courbevoie
appointed by the AGM of December 1, 2004
reappointed by the AGM of April 20, 2007
expiration date: 2013 AGM
16 rue Daubigny
75017 Paris
appointed by the AGM of May 19, 1995
reappointed by the AGM of April 20, 2007
expiration date: 2013 AGM
Auditors’ fees are described in section 6.7 of the notes to the consolidated financial statements.
Responsibility statement for the registration document
I hereby certify that, to my knowledge and after all due diligence, the information contained in this registration document
is true and accurate and contains no omissions likely to affect the import thereof.
I declare that, to the best of my knowledge, the financial statements have been prepared in accordance with the applicable
financial reporting standards and give a true and fair view of the assets and liabilities, financial position and results of the
operations of the Company and consolidated companies and that the management report included this registration document
faithfully presents business trends, the results and financial position of the company and the description of the main risks
and uncertainties.
131
The Statutory Auditors’ Report of the original French language version of the consolidated and separate financial statements
for the fiscal year ended December 31, 2012 for which they issued unqualified opinions without reservations.
I have obtained a completion of work letter from the Statutory Auditors indicating that they have read this document in its
entirety and reviewed the information contained herein regarding the company’s financial position and financial statements.
The Statutory Auditors have issued reports on the historical financial information for 2011 and 2010, included on respectively
pages 46 and 67 of the 2011 French language original of the registration document (Document de référence) filed with
the AMF on April 6, 2012 and pages 47 and 67 of the 2010 registration document filed with the AMF on April 6, 2011,
without qualified opinions or comments.
Philippe Bénacin
Chairman & Chief Executive Officer
Executive officer responsible for financial information
Philippe Santi
Chief Financial and Administrative Officer
psanti@interparfums.fr
00 (33)1 53 77 00 00
Auditors and responsibility statements
TWO THOUSAND TWELVE REGISTRATION DOCUMENT INTERPARFUMS
Requests for information
To receive information or be added
to the company’s financial communications
mailing list contact the Investor Relations
department (attention: Karine Marty):
Telephone: +33 800 47 47 47
Fax: +33 (0)1 40 74 08 42
Via the website: www.interparfums.fr
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PEFC/10-31-2043
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