Table of ConTenTs
Financial Highlights 02
Letter to our Shareholders 04
The Company 08
The Products 14
The Organization 64
INTER PARFUMS, INC. 2015 ANNUAL REPORT 2
financial
Highlights
$654.1
$615.2
$563.6
$499.3
$468.5
$131.1
$407.2
$381.5
$382.1
$365.6
$252.7
$39.2
$32.3
$29.4
$30.4
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
NET SALES
(In millions )
NET INCOME ATTRIBUTABLE TO
INTER PARFUMS, INC.
(In millions )
INTER PARFUMS, INC.
STOCKHOLDERS’ EQUITY
(In millions )
financial highlights
3
selected financial data
The following selected financial data have been derived from our financial statements, and should be read in conjunction with those
financial statements, including the related footnotes.
(In thousands, except per share data)
Years Ended December 31,
income statement data:
Net Sales
Cost of Sales
Selling, General and Administrative
Expenses
Operating Income
Income Before Taxes
228,268
61,203
60,496
Net Income Attributable to the
8,532
Noncontrolling Interest
Net Income Attributable to Inter Parfums, Inc. 30,437
Net Income Attributable to Inter Parfums, Inc.
Common Shareholders’ per Share:
Basic
Diluted
Average Common Shares Outstanding:
Basic
Diluted
Depreciation and Amortization
Balance sheet and other data:
Cash and Cash Equivalents
Short-Term Investments
Working Capital
Total Assets
Short-Term Bank Debt
Long-Term Debt (including current portion)
Inter Parfums, Inc. Shareholders’ Equity
Dividends Declared per Share
0.98
0.98
30,996
31,100
9,078
176,967
82,847
337,674
687,659
–
98,606
365,587
0.52
2015
2014
2013
2012
2011
$468,540
179,069
$499,261
212,224
$563,579
$654,117
$615,220
234,800
246,931
231,746
233,634
53,403
56,715
7,909
29,436
0.95
0.95
30,931
31,060
10,166
90,138
190,152
382,935
604,506
298
–
382,065
0.48
250,025
78,754
80,646
11,755
39,211
1.27
1.27
30,764
30,954
11,110
125,650
181,677
399,344
664,058
6,104
–
407,211
0.96
325,799
278,414
274,765
45,754
131,136
4.29
4.26
30,575
30,716
15,554
307,335
–
366,680
759,920
27,776
–
381,476
0.32
315,698
66,939
67,393
10,646
32,303
1.06
1.05
30,515
30,678
13,073
35,856
–
205,730
516,034
11,826
4,480
252,674
0.32
INTER PARFUMS, INC. 2015 ANNUAL REPORT
4
2015
letter to our
Shareholders
dear fellow shareholders,
2015 financial hiGhliGhts compared to 2014
Much was accomplished at Inter Parfums, Inc., in 2015, including:
• Net sales declined 6.2% to $468.5 million from $499.3
• Steady sales growth for most major brands;
million in 2014; at comparable foreign currency
• Improved profitability;
exchange rates, net sales actually increased 1.5% year-
• The addition of two prominent names, Rochas and Coach,
over-year.
to our brand portfolio;
• Sales by European based operations were $362.7 million
• The extension of our license agreement with Montblanc,
versus $394.0 million in 2014, but at comparable foreign
our largest fragrance brand; and,
currency exchange rates, net sales for European based
• The launch of new scents for Montblanc, Jimmy Choo,
operations were up a modest 1.8%.
Lanvin, Paul Smith, Balmain, Boucheron, Repetto, Karl
• U.S. based operations generated net sales of $105.8,
Lagerfeld, Dunhill, Oscar de La Renta and Anna Sui.
up 1% from 2014’s $105.3 million.
financial oVerView
• Gross margin was 61.8% compared to 57.5% in 2014.
• S, G & A expense as a percentage of sales was 48.7%
In a review of our performance for the year, it is useful to keep in
compared to 46.8%.
mind that our reported financial results were impacted by chang-
• Net income attributable to Inter Parfums, Inc. was $30.4
es in foreign currency exchange rates. In that regard, the average
million or $0.98 per diluted share, up from $29.4 million
dollar/euro exchange rate for 2015 was 1.11, as compared to
or $0.95 per diluted share in 2014.
1.33 for 2014. The strong U.S. dollar in 2015 had a negative im-
• Our business generated cash flows from operating activities
pact on our net sales. However, earnings were positively affected
of approximately $50.1 million in 2015, up from 2014’s
by the strong dollar, because approximately 40% of net sales of
$36.6 million.
our European operations are denominated in U.S. dollars, while
• We closed the year with working capital of $338
almost all costs of our European operations are incurred in euro.
million, including approximately $260 million in cash,
letter to shareholders
5
When we look at our three largest European based brands, we
see a similar story. For our largest brand, Montblanc, sales in-
creased 6% in local currency in 2015, but declined 12% in dol-
lars to just under $100 million. Even in dollars, Montblanc brand
sales growth has been nothing short of phenomenal, producing a
four year compound annual growth rate of 23.1%. Therefore we
were delighted to extend our license agreement with Montblanc
by five years through December 31, 2025.
Similarly we recorded $92.4 million in Jimmy Choo fragrance
sales in 2015, an 18% year-over-year increase in dollars, but in
local currency, the increase was a far more impressive 41%. For
Jimmy Choo fragrances, our second largest brand, our track re-
cord in dollars is nearly as impressive with a four year compound
annual growth rate of 22.7%. With only line extensions and flank-
ers in 2015, Lanvin brand sales were off 6% in local currency as
compared to 2014, but in dollars the decline was 21%.
We had a number of new product launches and brand exten-
sions in 2015. These include the Lady Emblem line for Mont-
blanc, which was built upon the brand’s foundational fragrance
families, Legend and Emblem. The Jimmy Choo Blossom flanker,
Jimmy Choo Illicit, and the excellent performance of Jimmy Choo
Man which debuted in 2014, were the catalysts for brand growth
in 2015. In 2015, although there were no major launches for our
Philippe Benacin and Jean Madar
third largest brand, Lanvin, we brought to market two brand ex-
tensions for the very enduring Éclat Lanvin pillar, Éclat de Fleurs
and Éclat d’Arpège Pour Homme. It’s interesting to note, if not
cash equivalents and short-term investments, resulting
counterintuitive, that the brand turned in a good performance in
in a working capital ratio of 3.6 to 1.
Eastern Europe, including Russia, one of its dominant markets,
• At year-end, long-term debt including current maturities
despite prevailing difficult economic conditions.
aggregated $98.6 million, which relates to the financing of
Also in 2015, two men’s and women’s fragrance duos de-
our May 2015 acquisition of the Rochas brand. Once again,
buted, Quatre for Boucheron and Private Klub for Karl Lager-
based on our strong balance sheet, consistent cash flows, and
feld. In addition, there were new scents created and introduced
favorable outlook, our Board of Directors increased our
for some of our smaller niche brands, including Paul Smith,
regular quarterly cash dividend, this time by 15% to $0.15
Balmain and Repetto.
per share, or $0.60 per share annually.
Two major events took place in 2015 for our European
BUsiness oVerView
based operations. The first was in April 2015 when we an-
nounced an 11-year exclusive worldwide fragrance license
hiGhliGhts of eUropean-Based operations
agreement with Coach, Inc., a leading New York design house
It is hard to understate the currency impact and its obscu-
of modern luxury accessories and lifestyle collections. Since
ration of the performance on sales of our European oper-
signing that agreement, we have begun the development and
ations in 2015. As noted, our reported sales were down
production of new Coach perfumes for international distribu-
year-over-year, however, in local currency, our sales in our
tion to department stores, specialty stores, duty free shops
three largest markets for European operations, namely
and Coach retail stores. Our first new Coach fragrance launch
North America, Western Europe and Asia turned in growth
will be a women’s scent scheduled for the fall of 2016, initial-
of 25%, 10% and 3%, respectively. Top line growth was also
ly debuting in the U.S. and Asia. Then in 2017, the first new
achieved in some of the smaller markets, such as Middle
men’s line, which is now in the works, will come to market in
East and Eastern Europe.
the second half of the year.
INTER PARFUMS, INC. 2015 ANNUAL REPORT
6
The other major event of 2015 was the May acquisition of the
the brand, the geographic market where the product is sold and
Rochas brand and trademarks for $108 million. Founded as a lux-
the demographics of the target customer. We will have the oppor-
ury fashion house by Marcel Rochas in 1925, the brand expanded
tunity to put this observation, backed by past experience, to the
into fragrance in the 1950s, which remains the largest part of the
test with the Abercrombie & Fitch and Hollister brands. Under the
Rochas business, with, among others, the enduring Eau de Rochas
7-year agreement inked in December 2014, we are developing and
fragrance line. In addition to the fragrance business, we acquired
producing new perfumes and fragrance-related products under the
the fashion and accessory business operating through a portfolio
Abercrombie & Fitch and Hollister brand names. Abercrombie &
of license agreements. The purchase price was financed by a five-
Fitch Co. is a leading global specialty retailer of high-quality, casual
year €100 million loan; however, we subsequently entered into a
apparel for men, women and children with an active, youthful life-
swap transaction effectively exchanging the variable interest rate to
style under its Abercrombie & Fitch and Hollister brands. We are
a fixed rate of approximately 1.2%, thus reducing our exposure to
gearing up for our initial fragrance launches in 2016, starting with a
rising variable interest rates while keeping high levels of cash, cash
men’s scent for Abercrombie & Fitch and a duo for Hollister during
equivalents and short-term investments intact, ready for future op-
the spring and summer time frame, which will be sold in depart-
portunities that may require quick responsiveness.
ment stores and duty free shops internationally and in Abercrombie
Our initial focus for Rochas was on existing fragrance lines, and
& Fitch and Hollister retail and on-line stores.
we updated and refreshed the brand’s images from packaging to ad-
2016 should be an excellent year for our U.S. operations.
vertising. By year-end the Rochas brand was successfully integrated
In addition to initial product launches for Abercrombie & Fitch
and produced $13.4 million in brand sales, including over $1 million
and Hollister, Dunhill is building on its Icon pillar with still an-
in royalties, most of which were recorded in the fourth quarter. It is
other flanker, Icon Elite. For the Oscar de la Renta brand, our
worth noting that Spain and France are dominant markets for Ro-
first flanker for Extraordinary, Extraordinary Pétale, is now in
chas. Therefore, we have a very large opportunity ahead when we
stores. Oscar Gentleman will make its debut as will two varia-
launch our first new women’s scent in 50 countries in 2017.
tions of the 1977 signature women’s scent, customized for the
Coming to market in 2016, we have Montblanc and Jimmy
geographic markets where they will be sold. Agent Provoca-
Choo brand extensions, Legend Spirit and Illicit Flower, respec-
teur unveils Aphrodisiaque and Pure Aphrodisiaque, and new
tively; a new women’s line for Lanvin unveiling in France with
scents for Anna Sui are also in the works.
global distribution to follow in 2017; a new men’s and wom-
en’s line for Van Cleef & Arpels; and as noted earlier, our first
conclUsion
Coach scent for women. We are also well along in our planning
We have every reason for confidence in the future of Inter
for 2017, which will include launches for a new women’s scent
Parfums. This confidence comes from the breadth of our
for Lanvin, a new collection for Boucheron, a line extension for
established brand portfolio, our track record of turning new
the Jimmy Choo signature scent along with, as already noted,
brand associations into successful partnerships, our global
a men’s scent for Coach, and a women’s scent for Rochas.
distribution footprint, our more than 300 members of our high-
ly disciplined, dedicated and creative staff, and a very strong
hiGhliGhts of U.s.-Based operations
financial position. We have the flexibility to disengage from
The transition of our U.S. based operations into a prestige fra-
brands and businesses that no longer fit our model along with
grance business has made it an increasingly important contrib-
the know-how and resources to evaluate and act upon potential
utor to our overall growth and success. For example, our Dunhill
promising new opportunities.
fragrance business achieved 2015 sales of $22.3 million, up
nearly 37% from 2014 due in great part to the launch of Dunhill
Sincerely yours,
Icon and flanker Icon Absolute. Similarly, 2015 sales of Oscar
de la Renta fragrances were up 18% to $18.6 million from
one year earlier benefitting from the launch of Extraordinary.
Disappointing but understandable, Anna Sui fragrance sales suf-
fered a significant decline as the brand’s primary market, China,
is undergoing economic difficulties.
Jean madar
philippe Benacin
We have come to recognize that in the world of fragrance, the
Chairman of the Board
Vice Chairman of the Board
line between specialty retail and prestige often blurs depending
Chief Executive Officer
& President
7
Montblanc Legend Spirit
INTER PARFUMS, INC. 2015 ANNUAL REPORT 8
the
Company
Balmain Homme
We aRe InTeR PaRfUMs, InC. We oPeRaTe In THe fRaGRanCe bUsIness, anD ManUfaCTURe, MaRKeT anD
DIsTRIbUTe a WIDe aRRaY of fRaGRanCes anD fRaGRanCe RelaTeD PRoDUCTs. oRGanIZeD UnDeR THe
laWs of THe sTaTe of DelaWaRe In MaY 1985 as Jean PHIlIPPe fRaGRanCes, InC., We CHanGeD oUR naMe
To InTeR PaRfUMs, InC. In JUlY 1999. We HaVe also ReTaIneD oUR bRanD naMe, Jean PHIlIPPe fRaGRanCes,
foR soMe of oUR Mass MaRKeT PRoDUCTs.
Our worldwide headquarters and the office of our three (3) whol-
(3) distribution subsidiaries, Inter Parfums srl for Italy, Inter España
ly-owned United States subsidiaries, Jean Philippe Fragrances, LLC
Parfums et Cosmetiques, SL, covering the territory of Spain, and
and Inter Parfums USA, LLC, both New York limited liability com-
Interparfums Luxury Brands, Inc., a Delaware corporation for distri-
panies, and IP Beauty, Inc. (formerly Nickel USA, Inc.), a Delaware
bution of prestige brands in the United States. In connection with
corporation, are located at 551 Fifth Avenue, New York, New York
the recent acquisition of the Rochas brand, Interparfums SA has
10176, and our telephone number is 212.983.2640. We also own
also formed Parfums Rochas Spain, SL, a Spanish limited liability
100% of Inter Parfums USA Hong Kong Limited indirectly through
company, 51% owned by Interparfums SA. Interparfums SA is also
our 100% owned subsidiary, Inter Parfums USA, LLC.
the sole owner of Interparfums (Suisse) SARL, a company formed to
Our consolidated wholly-owned subsidiary, Inter Parfums Hold-
hold and manage certain brand names, and Interparfums Singapore
ings S.A., and its majority-owned subsidiary, Interparfums SA, main-
Pte., Ltd., an Asian sales and marketing office.
tain executive offices at 4, Rond Point des Champs Elysées, 75008
Our common stock is listed on The Nasdaq Global Select
Paris, France. Our telephone number in Paris is 331.5377.0000.
Market under the trading symbol “IPAR”. The common shares
Interparfums SA is the majority owner of Inter Parfums Gmbh, a
of our subsidiary, Interparfums SA, are traded on the NYSE
distr bution subsidiary for Germany, and is the sole owner of three
Euronext Exchange.
the company
9
Rochas
We maintain our internet website at www.interparfumsinc.
Our business is not capital intensive, and it is important to
com, which is linked to the Securities and Exchange Com-
note that we do not own manufacturing facilities. We act as a
mission Edgar database. You can obtain through our website,
general contractor and source our needed components from
free of charge, our annual reports on Form 10-K, quarterly
our suppliers. These components are received at one of our
reports on Form 10-Q, interactive data files, current reports
distribution centers and then, based upon production needs,
on Form 8-K, beneficial ownership reports (Forms 3, 4 and 5)
the components are sent to one of several third party fillers
and amendments to those reports filed or furnished pursuant
which manufacture the finished product for us and deliver
to Section 13(a) of the Securities Exchange Act of 1934 as
them to one of our distribution centers.
soon as reasonably practicable after they have been electron-
Our prestige products focus on niche brands, each with
ically filed with or furnished to the SEC.
a devoted following. By concentrating in markets where the
We operate in the fragrance business and manufacture,
brands are best known, we have had many successful launch-
market and distribute a wide array of fragrance and fra-
es. We typically launch new fragrance families for our brands
grance related products. We manage our business in two
every year or two, with some frequent “seasonal” fragrances
segments, European-based operations and United States-
introduced as well.
based operations. Prestige fragrance products are produced
The creation and marketing of each product family is in-
and marketed by both our United States operations, and our
timately linked with the brand’s name, its past and present
European operations, the latter, through our 73% owned
positioning, customer base and, more generally, the prevailing
subsidiary in Paris, Interparfums SA, which is also a public-
market atmosphere. Accordingly, we generally study the mar-
ly traded company, as 27% of Interparfums SA shares trade
ket for each proposed family of fragrance products for almost
on the NYSE Euronext.
a full year before we introduce any new product into the mar-
INTER PARFUMS, INC. 2015 ANNUAL REPORT 10
ket. This study is intended to define the general position of
of the brand, we have had a history of successful launches.
the fragrance family and more particularly its scent, bottle,
Certain fashion designers and other licensors choose us as a
packaging and appeal to the buyer. In our opinion, the unity
partner because our Company’s size enables us to work more
of these four elements of the marketing mix makes for a
closely with them in the product development process as well
successful product.
as our successful track record.
As with any business, many aspects of our operations
are subject to influences outside our control. We discuss
GRoW PoRTfolIo bRanDs THRoUGH
in greater detail risk factors relating to our business in
neW PRoDUCT DeVeloPMenT anD MaRKeTInG
Item 1A of our Annual Report on Form 10-K for the fiscal
We grow through the creation of fragrance family extensions
year ended December 31, 2015, and the reports that we
within the existing brands in our portfolio. Every year or two,
file from time to time with the Securities and Exchange
we create a new family of fragrances for each brand in our
Commission.
eURoPean oPeRaTIons
portfolio. We frequently introduce “seasonal” fragrances as
well. With new introductions, we leverage our ability and expe-
rience to gauge trends in the market and further leverage the
We produce and distribute our fragrance products primarily
brand name into different product families in order to maxi-
under license agreements with brand owners, and fragrance
mize sales and profit potential. We have had success in intro-
product sales through our European operations represented
ducing new fragrance families (sub-brands, flanker brands or
approximately 77% of net sales for 2015. We have built
flankers) within our brand franchises. Furthermore, we pro-
a portfolio of prestige brands, which include Balmain,
mote the smooth and consistent performance of our prestige
Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Lanvin,
perfume operations through knowledge of the market, detailed
Montblanc, Paul Smith, S.T. Dupont, Repetto, Rochas and Van
analysis of the image and potential of each brand name, a
Cleef & Arpels, whose products are distributed in over 100
“good dose” of creativity and a highly professional approach
countries around the world.
to international distribution channels.
We own the Lanvin brand name for our class of trade,
and license the Montblanc and Jimmy Choo brand names;
ConTInUe To aDD neW bRanDs
for the year ended December 31, 2015, sales of product for
To oUR PoRTfolIo THRoUGH neW lICenses
these brands represented 15%, 21% and 20% of net sales,
oR aCQUIsITIons
respectively.
Prestige brands are the core of our business and we intend
to add new prestige beauty brands to our portfolio. Over
UnITeD sTaTes oPeRaTIons
the past twenty years, we have built our portfolio of well-
Prestige brand fragrance products are also marketed through
known prestige brands through acquisitions and new license
our United States operations, and represented 23% of sales
agreements. We intend to further build on our success in
for the year ended December 31, 2015. These fragrance prod-
prestige fragrances and pursue new licenses and acquire
ucts are sold under trademarks owned by us or pursuant to
new brands to strengthen our position in the prestige beauty
license or other agreements with the owners of brands, which
market. To that end, during 2014, we signed fragrance li-
include Abercrombie & Fitch, Agent Provocateur, Anna Sui,
censes for Abercrombie & Fitch and Hollister brands, and in
Banana Republic, bebe, Dunhill, Hollister, French Connection,
2015, we signed the fragrance license for Coach and French
Oscar de la Renta, and Shanghai Tang brands.
Connection, extended our Montblanc fragrance license and
BUsiness strateGy
purchased the Rochas brand. As of December 31, 2015, we
had cash, cash equivalents and short-term investments of
foCUs on PResTIGe beaUTY bRanDs
approximately $260 million, which we believe should assist
Prestige beauty brands are expected to contribute significantly
us in entering new brand licenses or outright acquisitions.
to our growth. We focus on developing and launching quality
However, we cannot assure you that we will be able to enter
fragrances utilizing internationally renowned brand names.
into any future agreements, or acquire brands or assets on
By identifying and concentrating in the most receptive mar-
terms favorable to us, or if we do, that any such transaction
ket segments and territories where our brands are known, and
will be successful. We identify prestige brands that can be
executing highly targeted launches that capture the essence
developed and marketed into a full and varied product fam-
the company
11
Abercrombie & Fitch First Instinct
INTER PARFUMS, INC. 2015 ANNUAL REPORT 12
ilies and, with our technical knowledge and practical expe-
advertising expenditures and royalty payments as are cus-
rience gained over time, take licensed brand names through
tomary in our industry.
all phases of concept, development, manufacturing, market-
ing and distribution.
fRenCH ConneCTIon
eXPanD eXIsTInG PoRTfolIo
InTo neW CaTeGoRIes
In September 2015, we entered into a 12-year license agree-
ment to create, produce and distribute fragrances and fra-
grance related products under the French Connection brand
We intend to continue to broaden our product offering beyond
names. The agreement is subject to certain minimum adver-
the fragrance category and offer other fragrance related prod-
tising expenditures and royalty payments as are customary in
ucts and personal care products under some of our existing
our industry. The license agreement was subject to certain
brands. We believe such product offerings meet customer
conditions precedent, which have now been satisfied, and the
needs and further strengthen customer loyalty.
Company took over distribution of selected fragrances within
the brand’s existing fragrance portfolio in 2016.
ConTInUe To bUIlD
Global DIsTRIbUTIon fooTPRInT
RoCHas
Our business is a global business and we intend to continue
In May 2015, we acquired the Rochas brand from The
to build our global distribution footprint. In order to adapt
Procter & Gamble Company. This transaction includes
to changes in the environment and our business, we have
all brand names and registered trademarks for Rochas
formed and are operating joint ventures or distribution sub-
(Femme, Madame, Eau de Rochas, etc.), mainly for class
sidiaries in the major markets of the United States, Italy,
3 (cosmetics) and class 25 (fashion). Substantially the
Spain and Germany for distribution of prestige fragrances.
entire €106 million purchase price for the assets ac-
We may look into future joint ventures arrangements or ac-
quired (approximately $118 million), including approxi-
quire distribution companies within other key markets to
mately $5.4 million in acquisition related expenses, was
distribute certain of our prestige brands. While building a
allocated to trademarks with indefinite lives including
global distribution footprint is part of our long-term strat-
approximately $21 million of which was allocated to fash-
egy, we may need to make certain decisions based on the
ion trademarks. An additional $4.4 million was paid for
short-term needs of the business. We believe that in certain
related inventory.
markets, vertical integration of our distribution network may
The cost of the acquisition was paid in cash on the clos-
be one of the keys to future growth of our Company, and
ing date and was financed entirely through a 5-year term
ownership of such distribution should enable us to better
loan payable in equal quarterly installments plus interest.
serve our customers’ needs in local markets and adapt more
In order to reduce exposure to rising variable interest
quickly as situations may determine.
rates, the Company entered into a swap transaction effec-
recent deVelopments
MonTblanC
tively exchanging the variable interest rate to a fixed rate
of approximately 1.2%. The swap is a derivative instru-
ment and is therefore recorded at fair value and changes
In October 2015, we extended our license agreement with
in fair value are reflected in the accompanying consolidat-
Montblanc by five years. The original agreement, signed
ed statements of income.
in 2010, provided us with the exclusive worldwide license
rights to create, produce and distribute fragrances and
CoaCH
fragrance related products under the Montblanc brand
In April 2015, we entered into an 11-year exclusive world-
through December 31, 2020. The new 10-year agreement,
wide license with Coach, Inc. to create, produce and dis-
which went into effect on January 1, 2016, extends the
tribute new men’s and women’s fragrances and fragrance
partnership through December 31, 2025 without any mate-
related products under the Coach brand name. We will
rial changes in operating conditions from the prior license.
distribute these fragrances globally to department stores,
The license agreement is subject to certain minimum sales,
specialty stores and duty free shops, as well as in Coach
the company
13
retail stores beginning in 2016. The agreement is subject to
contract filling needs are purchased from many different sup-
certain minimum sales, advertising expenditures and royalty
pliers located around the world. For United States operations,
payments as are customary in our industry.
components for our prestige fragrances are primarily sourced,
produced and filled in the United States, and our mass market
prodUction and sUpply
products are primarily manufactured, produced or filled in the
THe sTaGes of THe DeVeloPMenT
United States or China.
anD PRoDUCTIon PRoCess
foR all fRaGRanCes aRe as folloWs:
marketinG and distriBUtion
• Simultaneous discussions with perfume designers and
Our products are distributed in over 100 countries around
creators (includes analysis of aesthetic and olfactory trends,
the world through a selective distribution network. For the
target clientele and market communication approach)
majority of our international distribution, we contract with
• Concept choice
independent distribution companies specializing in luxury
• Produce mock-ups for final acceptance of bottles
goods. In each country, we designate anywhere from one to
and packaging
three distributors on an exclusive basis for one or more of
• Receive bids from component suppliers (glass makers,
our name brands. We also distribute our products through
plastic processors, printers, etc.)
variety of duty free operators, such as airports and airlines
and packaging companies
• Choose suppliers
• Schedule production and packaging
• Issue component purchase orders
• Follow quality control procedures for
and select vacation destinations.
As our business is a global one, we intend to continue to build
our global distribution footprint. For distribution of brands within
our European based operations we operate through our distri-
bution subsidiaries in the major markets of the United States,
incoming components; and
Italy, Spain and Germany. Our third party distributors vary in
• Follow packaging and inventory control procedures.
size depending on the number of competing brands they repre-
sent. This extensive and diverse network together with our own
sUPPlIeRs WHo assIsT Us WITH PRoDUCT
distribution subsidiaries provides us with a significant presence
DeVeloPMenT InClUDe:
in over 100 countries around the world.
• Independent perfumery design companies
Approximately 40% of our European based prestige fra-
(Aesthete, Carré Basset, PI Design, Cent Degres)
grance net sales are denominated in U.S. dollars. We address
• Perfumers (IFF, Givaudan, Firmenich, Robertet,
certain financial exposures through a controlled program of
Takasago, Mane) which create a fragrance consistent
risk management that includes the use of derivative financial
with our expectations and, that of the fragrance designers
instruments. We primarily enter into foreign currency forward
and creators;
exchange contracts to reduce the effects of fluctuating foreign
• Bottle manufacturers (Pochet du Courval, SGD,
currency exchange rates.
Verreries Brosse, Bormioli Luigi, Stoelzle Masnières),
The business of our European operations has become in-
caps (Qualipac, ALBEA, RPC, Codiplas, Jackel, CMSI)
creasingly seasonal due to the timing of shipments by our
or boxes (Edelmann, Autajon, Alliora, Nortier, Draeger);
majority-owned distribution subsidiaries to their customers,
• Production specialists who carry out packaging
which are weighted to the second half of the year.
(CCI, Edipar, Jacomo, SDPP, MF Productions, Biopack)
For our United States operations, we distribute product to
or logistics (SAGA for storage, order preparation
approved retailers and distributors in the United States as
and shipment).
well as internationally, including duty free and other travel-re-
lated retailers. We utilize our in house sales team to reach
Suppliers’ accounts for our European operations are pri-
our third party distributors and customers outside the United
marily settled in euro and for our United States operations,
States. In addition, the business of our United States oper-
suppliers’ accounts are primarily settled in U.S. dollars. For
ations has become increasingly seasonal as shipments are
our European operations, prestige fragrances, components and
weighted toward the second half of the year.
INTER PARFUMS, INC. 2015 ANNUAL REPORT
14
the
Products
We aRe THe oWneR of THe RoCHas bRanD, anD lanVIn bRanD naMe anD TRaDeMaRK foR oUR Class of
TRaDe. In aDDITIon, We HaVe bUIlT a PoRTfolIo of lICenseD PResTIGe bRanDs WHeRebY We PRoDUCe
anD DIsTRIbUTe oUR PResTIGe fRaGRanCe PRoDUCTs UnDeR lICense aGReeMenTs WITH bRanD oWneRs.
UnDeR lICense aGReeMenTs, We obTaIn THe RIGHT To Use THe bRanD naMe, CReaTe neW fRaGRanCes
anD PaCKaGInG, DeTeRMIne PosITIonInG anD DIsTRIbUTIon, anD MaRKeT anD sell THe lICenseD
PRoDUCTs, In eXCHanGe foR THe PaYMenT of RoYalTIes. oUR RIGHTs UnDeR lICense aGReeMenTs aRe
also GeneRallY sUbJeCT To CeRTaIn MInIMUM sales ReQUIReMenTs anD aDVeRTIsInG eXPenDITURes as
aRe CUsToMaRY In oUR InDUsTRY.
Our exclusive worldwide licenses for these brands expire on the following dates:
Brand Name
Expiration Date
Abercrombie & Fitch
December 31, 2021
Agent Provocateur
December 31, 2023
Anna Sui
Balmain
December 31, 2021, plus two 5-year optional terms if certain conditions are met
December 31, 2023
Banana Republic
December 31, 2016
bebe Stores
Boucheron
Coach
Dunhill
Hollister
Jimmy Choo
Karl Lagerfeld
Montblanc
June 30, 2017
December 31, 2025, plus a 5-year optional term if certain sales targets are met
June 30, 2026
September 30, 2023, subject to earlier termination on September 30, 2019, if certain
minimum sales are not met
December 31, 2021
December 31, 2021
October 31, 2032
December 31, 2025
Oscar de la Renta
December 31, 2025, plus a 5-year optional term if certain sales targets are met
Paul Smith
Repetto
December 31, 2017
December 31, 2024
Shanghai Tang
December 31, 2025, subject to earlier termination on December 31, 2019, if certain minimum
sales are not met; subject to 2-year extensions unless 1-year advance notice not to renew is provided
S.T. Dupont
December 31, 2016
Van Cleef & Arpels
December 31, 2018, plus a 5-year optional term if certain sales targets are met
In connection with the acquisition of the Lanvin brand names and trademarks, we granted Lanvin the right to repurchase the
brand names and trademarks in 2025 for the greater of €70 million (approximately $76 million) or one times the average of the
annual sales for the years ending December 31, 2023 and 2024.
the products
15
fragrance
Portfolio
INTER PARFUMS, INC. 2015 ANNUAL REPORT 16
abeRCRoMbIe & fITCH
In December 2014, we entered into a 7-year exclusive world-
wide license to create, produce and distribute new fragrances
and ancillaries under the Abercrombie & Fitch brand name.
The Company will distribute these fragrances internationally
in specialty stores, high-end department stores and duty free
shops, and in the U.S., in duty free shops and in Abercrombie
& Fitch retail and on-line stores. A new men’s scent is planned
for Abercrombie & Fitch in 2016. A women’s Abercrombie &
Fitch scent is in development for 2017.
Abercrombie & Fitch stands for effortless American style.
Since 1892, the brand has been known for its attention to detail
with designs that embody simplicity and casual luxury. Rooted
in a heritage of quality craftsmanship, Abercrombie & Fitch con-
tinues to bring its customers iconic, modern classics with an
aspirational look, feel, and attitude.
the products
17
Abercrombie & Fitch Fierce
INTER PARFUMS, INC. 2015 ANNUAL REPORT 18
Agent Provocateur Fatale Intense
the products
19
aGenT PRoVoCaTeUR
In July 2013, we entered into a 10.5-year exclusive worldwide
breaking new ground with every collection and rightfully earn-
license to create, produce and distribute fragrances and fra-
ing its place as a benchmark brand in the world of lingerie.
grance related products under London-based luxury lingerie
It is a brand that is confident, sensual and irreverent. Agent
brand, Agent Provocateur. In 2013, we commenced distribution
Provocateur celebrates and empowers women with a unique
of selected fragrances within the brand’s legacy fragrance port-
brand image renowned for being provocative and yet always
folio and in 2014, we launched our first new Agent Provocateur
leaving something to the imagination.
scents, Fatale and Fatale Pink. In 2016, we plan to launch Agent
In recent years, Agent Provocateur has been opening
Provocateur Aphrodisiaque, our second fragrance family for the
doors at a steady growth and plans to continue to grow its
brand. Agent Provocateur fragrance sales are concentrated in
door count, especially in Asia. Currently, its products which
the United Kingdom and the Middle East.
extend into swimwear, bridal and accessories, are sold glob-
Founded in 1994 by Joseph Corré, and Serena Rees and
ally, at 100 of its own boutiques and shop-in-shops within
acquired by the private equity firm, 3i Group plc in 2007,
the finest department stores, as well as specialty stores
Agent Provocateur is an iconic, globally-recognized brand,
and on-line.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 20
anna sUI
In June 2011, we entered into a 10-year exclusive worldwide
bined with touch of nostalgia, hipness and rock-and-roll.
fragrance license agreement to produce and distribute fragranc-
Anna Sui’s devoted customer base, which spans the world, is
es and fragrance related products under the Anna Sui brand.
especially strong in Asia.
Our rights under the agreement commenced on January 1, 2012
Anna Sui product sales have declined in the past two years
when we took over production and distribution of the existing
primarily owing to the slowdown in the Chinese economy
Anna Sui fragrance collections.
where the brand is especially popular. We have continued to
We are working in partnership with American designer,
build the brand after our 2013 successful launch of La Vie
Anna Sui, and her creative team to build upon the brand’s
de Bohème. In 2015, we released our second new Anna Sui
growing customer appeal, and develop new fragrances that
fragrance family, Romantica, and we have several flankers in
capture the brand’s very sweet feminine girly aspect, com-
development for 2016.
the products
21
Anna Sui Romantica
INTER PARFUMS, INC. 2015 ANNUAL REPORT 22
Balmain Extatic
the products
23
balMaIn
In July 2011, we entered into a 12-year exclusive worldwide
a significant transformation. With the redefinition of its
license agreement to create, produce and distribute fragranc-
image in ready-to-wear, the brand has become a reference
es and fragrance related products under the Balmain brand.
for style, while retaining its distinctive design codes from
Our rights under the agreement commenced on January 1,
the haute couture universe. In doing so, the brand has be-
2012 when we took over the production and distribution of
come a major trendsetter. Our first new Balmain women’s
existing Balmain fragrances for men and women.
fragrance, Extatic, made its debut in 2014 in selective
The Balmain couture house was founded in 1945 by
distribution and in 2015, we launched a new men’s scent
Pierre Balmain. In recent years, Balmain has undergone
Balmain Homme.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 24
banana RePUblIC
Our relationship with the Gap and Banana Republic brands
ada and our license agreement for international distribution
dates back to 2005. Our rights to produce and sell Gap
of Banana Republic product to specialty and department
branded products to Gap retail stores in the United States
stores outside the United States, including duty free and
and Canada expired in December 2014, and international
other travel related retailers through December 31, 2016. If
rights expired December 31, 2015.
the agreement is not renewed, then we would have until De-
In 2015, we renewed our agreement with Banana Re-
cember 31, 2017 to sell off all remaining inventory. Banana
public to develop, produce, manufacture and distribute fra-
Republic products currently available include: Classic, W,
grances for Banana Republic branded products to be sold in
Alabaster, Rosewood, Slate, Black Walnut, Cordovan, Wild-
Banana Republic retail stores in the United States and Can-
bloom and Modern.
the products
25
Banana Republic Modern
INTER PARFUMS, INC. 2015 ANNUAL REPORT 26
bebe Glam
the products
27
bebe sToRes
In July 2008, we entered into an exclusive 6-year worldwide
agreement with bebe Stores, Inc., that was renewed through
June 30, 2017, under which we design, manufacture and sup-
ply fragrances for company-owned bebe stores in the United
States and Canada, as well as select specialty and department
stores worldwide. We have incorporated bebe’s signature look
into fragrances for the brand’s strong, hip, sexy, and sophis-
ticated clientele. Scents currently available for domestic and
international markets include: bebe, bebe Sheer, bebe Gold
and bebe Glam.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 28
boUCHeRon
In December 2010, we entered into an exclusive world-
through over 40 boutiques worldwide as well as an e-com-
wide license agreement for the creation, development
merce site.
and distribution of fragrances under the Boucheron
Our first new fragrance under the Boucheron brand, Jaïpur
brand. Boucheron is the French jeweler “par excellence”.
Bracelet, debuted in 2012, and Boucheron Place Vendôme,
Founded by Frederic Boucheron in 1858, the House has
which has a beautiful glasswork bottle with a cabochon, the
produced some of the world’s most beautiful and pre-
emblematic stone of House Boucheron, was released in 2013.
cious creations. Today Boucheron creates jewelry and
In 2015, we launched a new fragrance duo for the Boucheron
timepieces and, under license from global brand leaders,
brand around its iconic Quatre ring, Boucheron Quatre, which
fragrances and sunglasses. Currently Boucheron operates
received a favorable market response.
the products
29
Boucheron Quatre
INTER PARFUMS, INC. 2015 ANNUAL REPORT 42
the products
Montblanc Lady Emblem
43
MonTblanC
In October 2015, we extended our license agreement with
presence in more than 70 countries, network of more than
Montblanc by five years. The original agreement, signed in
350 boutiques worldwide and high standards of product de-
2010, provided us with the exclusive worldwide license rights
sign and quality, Montblanc has quickly grown to be our largest
to create, produce and distribute fragrances and fragrance re-
and fastest growing fragrance brand.
lated products under the Montblanc brand through December
In 2011, we launched our first new Montblanc fragrance,
31, 2020. The new 10-year agreement, which went into ef-
Legend, which quickly became our best-selling men’s line. In
fect on January 1, 2016, extends the partnership through
2012, we launched our first women’s fragrance under the Mont-
December 31, 2025 without any material changes in operating
blanc brand, and our second men’s line, Emblem, was launched
conditions from the prior license.
in 2014. Montblanc has quickly become our largest selling
Montblanc has achieved a world-renowned position in the
brand, and for 2015, the Montblanc Legend line was the 11th
luxury segment and has become a purveyor of exclusive prod-
best-selling fragrance line in the United States. The Emblem
ucts, which reflect today’s exacting demands for timeless
line was expanded in 2015 to include, Montblanc Emblem In-
design, tradition and master craftsmanship. Through its lead-
tense and the new women’s scent, Lady Emblem. For 2016, we
ership positions in writing instruments, watches and leather
are further extending our successful Montblanc Legend line with
goods, promising growth outlook in women’s jewelry, active
a new men’s scent, Montblanc Legend Spirit.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 44
the products
osCaR De la RenTa
In October 2013, we entered into a 12-year exclusive world-
Oscar de la Renta is one of the world’s leading luxury
wide license to create, produce and distribute fragrances and
goods firms. The New York-based company was established in
fragrance related products under the Oscar de la Renta brand,
1965, and encompasses a full line of women’s accessories,
which closed in December 2013. In 2014, we took over distribu-
bridal, childrenswear, fragrance, beauty and home goods, in
tion of fragrances within the brand’s legacy fragrance portfolio.
addition to its internationally renowned signature women’s
Our first new women’s fragrance under the Oscar de la Renta
ready-to-wear collection. Oscar de la Renta products are sold
brand, Extraordinary, was launched in 2015. For 2016, in ad-
globally in fine department and specialty stores, www.oscar-
dition to several flankers that are launching throughout the year
delarenta.com and through wholesale channels. The Oscar
in certain markets, we are planning to debut a new men’s fra-
de la Renta brand has a loyal following in the United States,
grance family, Oscar de la Renta Gentlemen.
Canada and Latin America.
45
Oscar de la Renta Extraordinary Pétale
INTER PARFUMS, INC. 2015 ANNUAL REPORT 46
the products
Paul Smith Essential
47
PaUl sMITH
We signed an exclusive worldwide license agreement with Paul
Smith in December 1998 for the creation, development and distri-
bution of Paul Smith fragrances. In 2008, we extended this license
for an additional seven years through December 31, 2017.
Paul Smith is an internationally renowned British designer who
creates fashion with a clear identity. Paul Smith has a modern
style which combines elegance, inventiveness and a sense of
humor and enjoys a loyal following, especially in the UK and
Japan. Fragrances include: Paul Smith, Paul Smith Extreme, Paul
Smith Rose, Paul Smith Man 2 and Paul Smith Essential.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 48
the products
RePeTTo
In December 2011, we entered into a 13-year exclusive world-
recently handbags and high-end accessories.
wide license agreement to create, produce and distribute fra-
With Repetto boutiques in 37 countries, the brand is bran-
grances under the Repetto brand.
ching out into Asia, notably China, Hong Kong, Singapore,
Created in 1947 by Rose Repetto at the request of her
Thailand, South Korea and Japan where its mix of cross-gener-
son, dancer and choreographer Roland Petit, Repetto is today
ational appeal and French chic has been met with unprecedent-
a legendary name in the world of dance. For a number
ed enthusiasm. Our first Repetto fragrance line was launched
of years, it has developed timeless and must-have collec-
in 2013 and a floral scent was added in 2015. The brand has
tions with a fully modernized signature style ranging from
experienced gradual sales penetration in France, but slower ac-
dance shoes, ballet slippers, flat shoes, and sandals to more
ceptance internationally.
49
Repetto Eau Florale
INTER PARFUMS, INC. 2015 ANNUAL REPORT 50
the products
Rochas Eau de Rochas
51
RoCHas
In May 2015, we acquired the Rochas brand from The Procter
This acquisition opens up a new page in the Company’s histo-
& Gamble Company. Founded by Marcel Rochas in 1925, the
ry by integrating for the first time both fragrances and fashion.
brand began as a fashion house and expanded into perfumery
This will allow us to apply a global approach to managing a fra-
in the 1950s under Hélène Rochas’ direction. This transac-
grance brand with complete freedom in terms of creativity and
tion included all brand names and registered trademarks for
aesthetic choices, as well as a very high degree of visibility to
Rochas (Femme, Madame, Eau de Rochas, etc.), mainly for
establish a position of even greater preeminence for Rochas in
class 3 (cosmetics) and class 25 (fashion). Substantially the
the luxury goods universe. Rochas brand sales currently include
entire €106 million purchase price for the assets acquired
approximately $2 million of royalties generated by the fashion
(approximately $118 million) was allocated to trademarks with
and accessory business via its portfolio of license agreements.
indefinite lives, including approximately $5.4 million in acqui-
Our first new fragrance for Rochas is under development, and is
sition related expenses.
expected to launch 2017.
INTER PARFUMS, INC. 2015 ANNUAL REPORT
52
the products
sHanGHaI TanG
In July 2013, we created a wholly-owned Hong Kong subsid-
As the global curator of modern Chinese chic, Shanghai Tang
iary, Inter Parfums USA Hong Kong Limited, which entered
champions the richness and beauty of the Chinese culture through
into a 12-year exclusive worldwide license to create, produce
its contemporary lifestyle offer of apparel and accessories for
and distribute fragrances under China’s leading luxury
men, women and children, as well as home collections. Shang-
brand, Shanghai Tang. Our first Shanghai Tang fragrance
hai Tang supports an international network of 45 boutiques,
collection for men and women debuted in 2015.
including the world’s largest lifestyle flagship–The Shanghai
Founded in 1994, Shanghai Tang is the leading Chinese
Tang Mansion in Hong Kong, and its largest flagship Boutique,
luxury brand with international recognition and distribution.
The Cathay Mansion in Shanghai, China and on-line.
53
Shanghai Tang Gold Lily
INTER PARFUMS, INC. 2015 ANNUAL REPORT 54
the products
S.T. Dupont So Dupont
55
s.T. DUPonT
In June 1997, we signed an exclusive worldwide license agree-
ment with S.T. Dupont for the creation, manufacture and dis-
tribution of S.T. Dupont fragrances. In 2011, the agreement
was renewed and now runs through December 31, 2016. S.T.
Dupont is a French luxury goods house founded in 1872,
which is known for its fine writing instruments, lighters and
leather goods.
S.T. Dupont fragrances include: S.T. Dupont, S.T. Dupont
Essence Pure, S.T. Dupont Noir, S.T. Dupont Blanc, S.T.
Dupont Passenger, S.T. Dupont Intense, S.T. Dupont Pas-
senger Cruise, 58 avenue Montaigne, So Dupont and Paris
Saint-Germain.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 56
the products
Van Cleef & aRPels
In September 2006, we entered into an exclusive worldwide
license agreement for the creation, development and distribu-
tion of fragrance products under the Van Cleef & Arpels brand
and related trademarks.
Van Cleef & Arpels fragrances in current distribution in-
clude: First, Van Cleef pour Homme, Tsar, Van Cleef, First 1er
Bouquet, Féerie, Collection Extraordinaire, Oriens, Midnight in
Paris and Rêve. For 2016, we anticipate launching a new men’s
line, In New York, and a new women’s line, So First.
57
Van Cleef & Arpels Ambre Impérial
INTER PARFUMS, INC. 2015 ANNUAL REPORT 58
59
INTER PARFUMS, INC. 2015 ANNUAL REPORT 60
Lanvin Éclat d’Arpège Pour Homme
quarterly financial data
61
qUarterly data: (UnaUdited)
for the year ended decemBer 31, 2015
(In Thousands, Except Per Share Data)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Full Year
Net Sales $109,249 $102,021 $138,944 $118,326 $468,540
289,471
Gross Margin
38,969
67,610
13,305
60,325
5,520
85,826
18,634
75,710
1,510
Net Income
Net Income Attributable to
Inter Parfums, Inc.
Net Income Attributable to
Inter Parfums, Inc. per Share:
Basic
Diluted
Average Common Shares Outstanding:
Basic
Diluted
10,007
4,351
14,220
1,859
30,437
$0.32
$0.32
30,979
31,072
$0.14
$0.14
30,988
31,107
$0.46
$0.46
31,005
31,098
$0.06
$0.06
31,012
31,125
$0.98
$0.98
30,996
31,100
qUarterly data: (UnaUdited)
for the year ended decemBer 31, 2014
(In Thousands, Except Per Share Data)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Full Year
$121,730
$118,192
$134,206
$125,133
$499,261
69,230
12,150
68,116
7,667
75,328
13,764
74,363
3,764
287,037
37,345
Net Sales
Gross Margin
Net Income
Net Income Attributable to
Inter Parfums, Inc.
8,894
6,109
11,113
3,320
29,436
Net Income Attributable to
Inter Parfums, Inc. per Share:
Basic
Diluted
Average Common Shares Outstanding:
Basic
Diluted
$0.29
$0.29
30,900
31,058
$0.20
$0.20
30,938
31,069
$0.36
$0.36
30,941
31,054
$0.11
$0.11
30,945
31,061
$0.95
$0.95
30,931
31,060
INTER PARFUMS, INC. 2015 ANNUAL REPORT
noRTH aMeRICa
27%
United States export sales were approximately $66.3
million, $61.0 million and $58.8 million in 2015, 2014 and
2013, respectively. Consolidated net sales to customers by
region are as follows:
Year Ended December 31,
consolidated net sales to cUstomers By reGion
(in thousands)
2015
$125,700
170,600
North America
2013
$145,900
$125,900
177,900
215,700
2014
Europe
CenTRal & soUTH
aMeRICa
9%
Central and
South America
Middle East
Asia
Other
57,700
50,600
40,300
43,300
85,600
98,700
41,100
41,900
78,200
11,000
11,900
$468,500 $499,300
consolidated net sales to cUstomers
in maJor coUntries are as follows:
(in thousands)
Year Ended December 31,
2015
United States
United Kingdom
France
2014
$122,000 $119,000
37,000
32,000
34,000
50,000
47,000
9,400
$563,600
2013
$142,000
46,000
eURoPe
36%
asIa
17%
MIDDle easT
9%
INTER PARFUMS, INC. 2015 ANNUAL REPORT 64
the
Organization
all CoRPoRaTe fUnCTIons,
oPeRaTIons:
Including product analysis and development, production and
Henry B. Clarke and Alex Canavan in the United States, and
sales, and finance are coordinated at the Company’s corpo-
Axel Marot in France:
rate headquarters in New York and at the corporate offic-
• Product development;
es of Interparfums SA in Paris. Each company is organized
• Logistics and transportation;
into two operational units that report directly to general
• Purchasing and industrial relations;
management, and European operations ultimately report to
• Quality control and inventory cost supervision.
Mr. Benacin and United States operations ultimately report
to Mr. Madar.
eXPoRT sales:
Herve Bouillonnec in the United States and Frédéric Garcia-
fInanCe, InVesToR RelaTIons
Pelayo in France:
anD aDMInIsTRaTIon:
• International development strategy;
Russell Greenberg in the United States and Philippe Santi
• Establishment of distributor networks and negotiation of
in France:
contracts;
• Financial policy and communication, investor relations;
• Monitoring of profit margins and advertising expenditures.
• Financial accounting, cost accounting, budgeting and cash
flow management;
DoMesTIC (HoMe CoUnTRY) sales:
• Disclosure requirements of the Securities and Exchange
Michel Bes in the United States and Jérôme Thermoz
Commission and Commission des Operations de Bourse;
in France:
• Labor relations, tax and legal matters and management
• Establish and apply domestic sales strategy and
information systems.
distribution policy;
• Sales team management and development;
• Monitoring of profit margins and advertising expenditures.
the organization
65
simplified chart of the orGaniZation
45%
55%
philippe benacin
jean madar
inter parfums, inc.
(nasdaq - “ipar”)
public
shareholders
100%
100%
100%
interparfums
holdings, sa
jean philippe
fragrances, llc
inter parfums
usa, llc
100%
inter parfums
usa hong kong ltd
73%
interparfums sa
(euronext – paris)
100%
100%
100%
100%
100%
interparfums
luxury
brands, inc.
interparfums
(suisse) sarl
interparfums
singapore
pte, ltd
51%
51%
interparfums
deutschland
gmbh
(germany)
parfums rochas
spain, sl
pãna
inter es
pa
rfums
et cosmetiques, sl
(spain)
interparfums
srl
(italy)
INTER PARFUMS, INC. 2015 ANNUAL REPORT 66
ConTenTs
Management’s Discussion and Analysis of
Financial Condition and Results of Operations 67
Reports on Internal Control Over Financial Reporting 78
Report of Independent Registered Public Accounting Firm 80
Financial Statements 81
Directors and Executive Officers 99
Corporate and Market Information 100
management’s discussion and analysis
of financial condition and results of operations
67
management’s discussion
and analysis of
financial condition and
Results of Operations
manaGement’s discUssion and analysis of
financial condition and resUlts of operations
oVeRVIeW
We operate in the fragrance business, and manufacture, mar-
brand names. As a percentage of net sales, product sales for
ket and distribute a wide array of fragrances and fragrance
the Company’s largest brands were as follows:
related products. We manage our business in two segments,
European based operations and United States based opera-
Year Ended December 31,
tions. Certain prestige fragrance products are produced and
Montblanc
marketed by our European operations through our 73% owned
Lanvin
subsidiary in Paris, Interparfums SA, which is also a publicly
Jimmy Choo
traded company as 27% of Interparfums SA shares trade on
2015
21%
15%
20%
2014
2013
22%
18%
16%
15%
15%
13%
the NYSE Euronext.
Through our United States operations we also market fragrance
We produce and distribute our European based fragrance
and fragrance related products. United States operations rep-
products primarily under license agreements with brand owners,
resented 23%, 21% and 18% of net sales in 2015, 2014 and
and European based fragrance product sales represented ap-
2013, respectively. These fragrance products are sold or to be
proximately 77%, 79% and 82% of net sales for 2015, 2014 and
sold primarily pursuant to license or other agreements with the
2013, respectively. We have built a portfolio of prestige brands,
owners of the Abercrombie & Fitch, Agent Provocateur, Anna Sui,
which include Balmain, Boucheron, Coach, Jimmy Choo, Karl
Banana Republic, bebe, Dunhill, French Connection, Hollister, Os-
Lagerfeld, Lanvin, Montblanc, Paul Smith, S.T. Dupont, Repetto,
car de la Renta, and Shanghai Tang brands.
Rochas and Van Cleef & Arpels, whose products are distributed
Quarterly sales fluctuations are influenced by the timing of
in over 100 countries around the world.
new product launches as well as the third and fourth quarter
Until early 2013, Burberry was our most significant license
holiday season. In certain markets where we sell directly to re-
as Burberry products represented 23% of net sales for the
tailers, seasonality is more evident. We sell directly to retailers
year ended December 31, 2013. (See Note 2 “Termination
in France as well as through our own distribution subsidiaries
of Burberry License” in notes to consolidated financial state-
in Italy, Germany, Spain and the United States.
ments on page 89 of this Annual Report). With respect to the
We grow our business in two distinct ways. First, we grow by add-
Company’s largest brands, we own the Lanvin brand name for
ing new brands to our portfolio, either through new licenses or other
its class of trade, and license the Montblanc and Jimmy Choo
arrangements or outright acquisitions of brands. Second, we grow
INTER PARFUMS, INC. 2015 ANNUAL REPORT
68
through the introduction of new products and supporting new and
recent important eVents
established products through advertising, merchandising and sam-
MonTblanC
pling as well as phasing out existing products that no longer meet
In October 2015, we extended our license agreement with
the needs of our consumers. The economics of developing, produc-
Montblanc by five years. The original agreement, signed in 2010,
ing, launching and supporting products influence our sales and op-
provided us with the exclusive worldwide license rights to create, pro-
erating performance each year. Our introduction of new products
duce and distribute fragrances and fragrance related products under
may have some cannibalizing effect on sales of existing products,
the Montblanc brand through December 31, 2020. The new 10-
which we take into account in our business planning.
year agreement, which went into effect on January 1, 2016, extends
Our business is not capital intensive, and it is important to
the partnership through December 31, 2025 without any material
note that we do not own manufacturing facilities. We act as a
changes in operating conditions from the prior license. The license
general contractor and source our needed components from our
agreement is subject to certain minimum sales, advertising expendi-
suppliers. These components are received at one of our dis-
tures and royalty payments as are customary in our industry.
tribution centers and then, based upon production needs, the
components are sent to one of several third party fillers, which
fRenCH ConneCTIon
manufacture the finished product for us and then deliver them
In September 2015, we entered into a 12-year license agreement
to one of our distribution centers.
to create, produce and distribute fragrances and fragrance related
As with any global business, many aspects of our operations
products under the French Connection brand names. The agree-
are subject to influences outside our control. We believe we have
ment is subject to certain minimum advertising expenditures and
a strong brand portfolio with global reach and potential. As part
royalty payments as are customary in our industry. The license
of our strategy, we plan to continue to make investments behind
agreement was subject to certain conditions precedent, which
fast-growing markets and channels to grow market share.
have now been satisfied, and we took over distribution of selected
During 2015, the economic and political uncertainty and fi-
fragrances within the brand’s existing fragrance portfolio in 2016.
nancial market volatility taking place in certain European coun-
tries, the Middle East, China and Brazil had a small negative
RoCHas
impact on our business, and at this time we do not believe it
In May 2015, we acquired the Rochas brand from The Procter
will significantly affect our overall business for the foreseeable
& Gamble Company. This transaction includes all brand names
future. However, if the degree of uncertainty or volatility wors-
and registered trademarks for Rochas (Femme, Madame, Eau de
ens or is prolonged, then there will likely be a negative effect on
Rochas, etc.), mainly for class 3 (cosmetics) and class 25 (fash-
ongoing consumer confidence, demand and spending and as a
ion). Substantially the entire €106 million purchase price for the
result, our business. Currently, we believe general economic and
assets acquired (approximately $118 million), including approx-
other uncertainties still exist in select markets in which we do
imately $5.4 million in acquisition related expenses, was allo-
business, and we continue to monitor global economic uncer-
cated to trademarks with indefinite lives including approximately
tainties and other risks that may affect our business.
$21 million of which was allocated to fashion trademarks. An
Our reported net sales are impacted by changes in foreign
additional $4.4 million was paid for related inventory.
currency exchange rates. A strong U.S. dollar has a negative im-
pact on our net sales. However, earnings are positively affected
CoaCH
by a strong dollar, because approximately 40% of net sales of
In April 2015, we entered into an 11-year exclusive worldwide li-
our European operations are denominated in U.S. dollars, while
cense with Coach, Inc. to create, produce and distribute new men’s
almost all costs of our European operations are incurred in euro.
and women’s fragrances and fragrance related products under the
Our Company addresses certain financial exposures through a
Coach brand name. We will distribute these fragrances globally to
controlled program of risk management that includes the use of
department stores, specialty stores and duty free shops, as well as
derivative financial instruments. We primarily enter into foreign
in Coach retail stores beginning in 2016. The agreement is sub-
currency forward exchange contracts to reduce the effects of
ject to certain minimum sales, advertising expenditures and
fluctuating foreign currency exchange rates.
royalty payments as are customary in our industry.
management’s discussion and analysis
of financial condition and results of operations
69
discUssion of critical accoUntinG policies
We make estimates and assumptions in the preparation of
ucts, we allow returns if properly requested, authorized and
our financial statements in conformity with accounting prin-
approved. We regularly review and revise, as deemed neces-
ciples generally accepted in the United States of America.
sary, our estimate of reserves for future sales returns based
Actual results could differ significantly from those estimates
primarily upon historic trends and relevant current data, in-
under different assumptions and conditions. We believe the
cluding information provided by retailers regarding their inven-
following discussion addresses our most critical accounting
tory levels. In addition, as necessary, specific accruals may be
policies, which are those that are most important to the por-
established for significant future known or anticipated events.
trayal of our financial condition and results of operations.
The types of known or anticipated events that we have consid-
These accounting policies generally require our manage-
ered, and will continue to consider, include, but are not limited
ment’s most difficult and subjective judgments, often as
to, the financial condition of our customers, store closings by
a result of the need to make estimates about the effect of
retailers, changes in the retail environment and our decision
matters that are inherently uncertain. Management of the
to continue to support new and existing products. We record
Company has discussed the selection of significant ac-
estimated reserves for sales returns as a reduction of sales,
counting policies and the effect of estimates with the Audit
cost of sales and accounts receivable. Returned products are
Committee of the Board of Directors.
recorded as inventories and are valued based upon estimated
ReVenUe ReCoGnITIon
realizable value. The physical condition and marketability of
returned products are the major factors we consider in esti-
We sell our products to department stores, perfumeries,
mating realizable value. Actual returns, as well as estimated
specialty stores, mass market retailers, supermarkets and
realizable values of returned products, may differ significantly,
domestic and international wholesalers and distributors.
either favorably or unfavorably, from our estimates, if factors
Sales of such products by our domestic subsidiaries are de-
such as economic conditions, inventory levels or competitive
nominated in U.S. dollars and sales of such products by our
conditions differ from our expectations.
foreign subsidiaries are primarily denominated in either euro
or U.S. dollars. We recognize revenues when merchandise
InVenToRIes
is shipped and the risk of loss passes to the customer. Net
Inventories are stated at the lower of cost or market value.
sales are comprised of gross revenues less returns, trade dis-
Cost is principally determined by the first-in, first-out meth-
counts and allowances.
aCCoUnTs ReCeIVable
od. We record adjustments to the cost of inventories based
upon our sales forecast and the physical condition of the
inventories. These adjustments are estimates, which could
Accounts receivable represent payments due to the Company
vary significantly, either favorably or unfavorably, from actu-
for previously recognized net sales, reduced by allowances
al requirements if future economic conditions or competitive
for sales returns and doubtful accounts. Accounts receivable
conditions differ from our expectations.
balances are written-off against the allowance for doubtful
accounts when they become uncollectible. Recoveries of ac-
eQUIPMenT anD oTHeR lonG-lIVeD asseTs
counts receivable previously recorded against the allowance
Equipment, which includes tools and molds, is recorded at cost
are recorded in the consolidated statement of income when
and is depreciated on a straight-line basis over the estimated
received. We generally grant credit based upon our analysis
useful lives of such assets. Changes in circumstances such
of the customer’s financial position as well as previously es-
as technological advances, changes to our business model or
tablished buying patterns.
changes in our capital spending strategy can result in the ac-
sales ReTURns
tual useful lives differing from our estimates. In those cases
where we determine that the useful life of equipment should be
Generally, we do not permit customers to return their unsold
shortened, we would depreciate the net book value in excess of
products. However, for U.S. distribution of our prestige prod-
the salvage value, over its revised remaining useful life, thereby
INTER PARFUMS, INC. 2015 ANNUAL REPORT 70
increasing depreciation expense. Factors such as changes in the
service potential of the asset are compared to the carrying
planned use of equipment, or market acceptance of products,
value of the asset. If our projection of undiscounted future
could result in shortened useful lives.
cash flows is in excess of the carrying value of the intangible
We evaluate indefinite-lived intangible assets for impair-
asset, no impairment charge is recorded. If our projection
ment at least annually during the fourth quarter, or more fre-
of undiscounted future cash flows is less than the carrying
quently when events occur or circumstances change, such as
value of the intangible asset, an impairment charge would be
an unexpected decline in sales, that would more likely than not
recorded to reduce the intangible asset to its fair value. The
indicate that the carrying value of an indefinite-lived intangible
cash flow projections are based upon a number of assump-
asset may not be recoverable. When testing indefinite-lived in-
tions, including future sales levels and future cost of goods
tangible assets for impairment, the evaluation requires a com-
and operating expense levels, as well as economic conditions,
parison of the estimated fair value of the asset to the carrying
changes to our business model or changes in consumer ac-
value of the asset. The fair values used in our evaluations are
ceptance of our products which are more subjective in nature.
estimated based upon discounted future cash flow projections
We believe that the assumptions we have made in projecting
using a weighted average cost of capital of 8.02%. The cash
future cash flows for the evaluations described above are
flow projections are based upon a number of assumptions, in-
reasonable and currently no impairment indicators exist for
cluding, future sales levels and future cost of goods and oper-
our intangible assets subject to amortization. In those cases
ating expense levels, as well as economic conditions, changes
where we determine that the useful life of long-lived assets
to our business model or changes in consumer acceptance of
should be shortened, we would depreciate the net book value
our products which are more subjective in nature. If the carry-
in excess of the salvage value (after testing for impairment
ing value of an indefinite-lived intangible asset exceeds its fair
as described above), over the revised remaining useful life of
value, an impairment charge is recorded.
such asset thereby increasing amortization expense.
We believe that the assumptions we have made in project-
In determining the useful life of our Lanvin brand names
ing future cash flows for the evaluations described above are
and trademarks, we applied the provisions of ASC topic
reasonable and currently no impairment indicators exist for
350-30-35-3. The only factor that prevented us from de-
our indefinite-lived intangible assets. However, if future actu-
termining that the Lanvin brand names and trademarks were
al results do not meet our expectations, we may be required
indefinite life intangible assets was Item c. “Any legal, reg-
to record an impairment charge, the amount of which could
ulatory, or contractual provisions that may limit the useful
be material to our results of operations.
life.” The existence of a repurchase option in 2025 may
At December 31, 2015 indefinite-lived intangible assets
limit the useful life of the Lanvin brand names and trade-
aggregated $119.5 million. The following table presents the
marks to the Company. However, this limitation would only
impact a change in the following significant assumptions
take effect if the repurchase option were to be exercised and
would have had on the calculated fair value in 2015 assuming
the repurchase price was paid. If the repurchase option is
all other assumptions remained constant:
not exercised, then the Lanvin brand names and trademarks
increase
are expected to continue to contribute directly to the future
(decrease)
cash flows of our Company and their useful life would be
change to fair value
considered to be indefinite.
Weighted average cost of capital
Weighted average cost of capital
Future sales levels
Future sales levels
+10%
-10%
+10%
-10%
$(12.3)
$ 15.1
$ 12.4
With respect to the application of ASC topic 350-30-35-
8, the Lanvin brand names and trademarks would only have
a finite life to our Company if the repurchase option were
$(12.4)
exercised, and in applying ASC topic 350-30-35-8, we as-
sumed that the repurchase option is exercised. When exer-
Intangible assets subject to amortization are evaluated for
cised, Lanvin has an obligation to pay the exercise price and
impairment testing whenever events or changes in circum-
the Company would be required to convey the Lanvin brand
stances indicate that the carrying amount of an amortizable
names and trademarks back to Lanvin. The exercise price to
intangible asset may not be recoverable. If impairment in-
be received (Residual Value) is well in excess of the carrying
dicators exist for an amortizable intangible asset, the un-
value of the Lanvin brand names and trademarks, therefore
discounted future cash flows associated with the expected
no amortization is required.
management’s discussion and analysis
of financial condition and results of operations
71
DeRIVaTIVes
jurisdiction. If the Company determines that a deferred tax
We account for derivative financial instruments in accor-
asset will not be realizable, an adjustment to the deferred tax
dance with ASC topic 815, which establishes accounting
asset will result in a reduction of net income at that time. In
and reporting standards for derivative instruments, includ-
addition, the Company follows the provisions of uncertain tax
ing certain derivative instruments embedded in other contracts,
positions as addressed in ASC topic 740-10-65-1.
and for hedging activities. This topic also requires the recogni-
tion of all derivative instruments as either assets or liabilities
QUanTITaTIV e analYsIs
on the balance sheet and that they are measured at fair value.
During the three-year period ended December 31, 2015, we have
We currently use derivative financial instruments to hedge
not made any material changes in our assumptions underlying these
certain anticipated transactions and interest rates, as well as
critical accounting policies or to the related significant estimates.
receivables denominated in foreign currencies. We do not utilize
The results of our business underlying these assumptions have not
derivatives for trading or speculative purposes. Hedge effective-
differed significantly from our expectations.
ness is documented, assessed and monitored by employees who
While we believe the estimates we have made are proper and
are qualified to make such assessments and monitor the instru-
the related results of operations for the period are presented
ments. Variables that are external to us such as social, political
fairly in all material respects, other assumptions could reason-
and economic risks may have an impact on our hedging program
ably be justified that would change the amount of reported net
and the results thereof.
InCoMe TaXes
sales, cost of sales, and selling, general and administrative
expenses as they relate to the provisions for anticipated sales
returns, allowance for doubtful accounts and inventory obsoles-
The Company accounts for income taxes using an asset and
cence reserves. For 2015, had these estimates been changed
liability approach that requires the recognition of deferred tax
simultaneously by 5% in either direction, our reported gross
assets and liabilities for the expected future tax consequences
profit would have increased or decreased by approximately $0.5
of events that have been recognized in its financial statements
million and selling, general and administrative expenses would
or tax returns. The net deferred tax assets assume sufficient
have changed by approximately $0.02 million. The collective
future earnings for their realization, as well as the continued
impact of these changes on 2015 operating income, net income
application of currently anticipated tax rates. Included in net
attributable to Inter Parfums, Inc., and net income attributable
deferred tax assets is a valuation allowance for deferred tax
to Inter Parfums, Inc. per diluted common share would be an
assets, where management believes it is more-likely-than-not
increase or decrease of approximately $0.5 million, $0.2 million
that the deferred tax assets will not be realized in the relevant
and $0.01, respectively.
resUlts of operations
neT sales
(in millions)
Years Ended December 31,
European-based ongoing brand
product sales
United States-based product sales
Total ongoing brand net sales
Burberry brand net sales
Total net sales
2015
$362.7
105.8
468.5
–
$468.5
% Change
2014
% Change
2013
(8)%
1%
(6)%
n/a
(6)%
$394.0
105.3
$499.3
–
18%
6%
15%
n/a
$499.3
(11)%
$334.0
99.3
$433.3
130.3
$563.6
Net sales decreased 6% in 2015 to $468.5 million, as compared to $499.3 million in 2014. At comparable foreign currency
exchange rates, net sales increased 1.5%. Net sales in 2014 declined 11% to $499.3 million, as compared to $563.6 million in
2013. However, with respect to the Company’s ongoing brands (excluding Burberry brand sales), net sales in 2014 increased 15%
to $499.3 million, as compared to $433.3 million in 2013. At comparable foreign currency exchange rates, ongoing brand net
sales increased 16% in 2014, as there was no discernible effect of currency rates on net sales in 2013. The average U.S. dollar/
euro exchange rates were 1.11 in 2015 and 1.33 in both 2014 and 2013.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 72
European based prestige product sales decreased 8% in
strength of the U.S. dollar began early on in 2015 and its
2015 to $362.7 million, as compared to $394.0 million in
effect on currency exchange rates continued throughout the
2014. At comparable foreign currency exchange rates, Eu-
year. As mentioned above, the average U.S. dollar/euro ex-
ropean based prestige product sales increased 1.8%. The
change rate for all of 2015 was 1.11, as compared to 1.33 for
strength of the U.S. dollar versus the euro has impacted
both 2014 and 2013. Irrespective of the strong U.S. dollar
our European based prestige product sales for the entire
environment continuing thus far in 2016, we maintain confi-
year. The currency impact was most apparent with our three
dence in our future as we continue to strengthen advertising
largest brands, led by Jimmy Choo, where brand sales for
and promotional investments supporting all portfolio brands,
2015 increased 41% in local currency, but only 18% in
accelerate brand development and build upon the strength of
dollars, as compared to 2014. The excellent performance
our worldwide distribution network.
in Jimmy Choo fragrance sales reflects robust gains from
For 2016, we expect most of the growth for our European
the Jimmy Choo Man line, and the launch of Jimmy Choo
operations to come from our newest brands Coach and Ro-
Illicit, the brand’s third women’s fragrance initiative. With
chas. Our first Coach women’s line is set to launch in Septem-
only a new line extension launched for the Lanvin brand in
ber 2016 and we have ramped up our distribution network for
2015, sales were off only 6% in local currency, but 21% in
our Rochas current product lines while we prepare our new Ro-
dollars, in 2015 as compared to 2014. Montblanc brand
chas line for 2017. Of our other European based brands, only
sales increased 6% in local currency but declined 12% in
Lanvin and Van Cleef & Arpels will see launches of a new scent
dollars in 2015, as compared to 2014. The brand bene-
family. For our other brands, line extensions and/or flankers
fitted from both established scents, such as Legend and
are in the works. Lastly, we hope to benefit from our strong
Emblem along with initial sales for the Lady Emblem line.
financial position to potentially acquire one or more brands,
While the Montblanc brands growth rate slowed somewhat
either on a proprietary basis or as a licensee.
in 2015, it followed the exceptional 2012 through 2014
United States based product sales increased 1% in 2015
year-over-year growth rates in local currency of 51%, 35%
to $105.8 million, as compared to $105.3 million in 2014.
and 33%, respectively. The excellent market response to
Dunhill fragrances had an exceptionally strong performance
Boucheron Quatre enhanced that brands performance in
with brand sales aggregating $22.3 million, up 37% in 2015
2015 with sales up 6% to $19.7 million in 2015 as com-
as compared to 2014. The success of the 2015 launch of
pared to $18.5 million in 2014. The most disappointing
Dunhill Icon has enabled Dunhill to quickly become our larg-
performance was that of the Karl Lagerfeld brand, which
est brand within our United States operations. Oscar de la
saw brand sales decline 43% in local currency or 53% in
Renta brand sales increased 18%, aggregating $18.6 million
dollars, as its initial 2014 launch did not gain the traction
in 2015, benefitting from the 2015 launch of Extraordinary
originally anticipated.
by Oscar de la Renta. With a very difficult comparison from
Ongoing European based prestige product sales increased
last year’s new product launch, Agent Provocateur performed
18% in 2014 to $394.0 million, as compared to 2013. New
well with sales up 6% reaching $5.6 million in 2015. De-
product launches were the primary catalyst for sales growth in
clines in our specialty retail and mass market product lines
2014. Karl Lagerfeld’s signature scents for both men and wom-
mitigated some of these gains. In addition, sales of Anna Sui
en yielded $24.2 million in incremental sales in 2014. Steady
fragrances, which were down nearly 23% in 2015, as com-
gains from Legend fragrances along with the 2014 launch of
pared to 2014, continue to be depressed by negative market
Emblem, enabled Montblanc brand sales to continue to outper-
conditions in China.
form expectations with sales reaching $110.8 million in 2014,
United States based product sales increased 6% in 2014
up 33% as compared to 2013. The successful 2014 launch
to $105.3 million as compared to $99.3 million in 2013.
of Jimmy Choo Man enabled Jimmy Choo brand sales in 2014
Dunhill legacy scents added $16.2 million to 2014 sales,
to reach $78.5 million, up 8% as compared to 2013. With a
up 25% from $13.0 million in 2013. Sales of Oscar de la
strong performance by Éclat d’Arpège and the launch of Lanvin
Renta legacy products began in 2014 and aggregated $15.8
Me L’Eau in 2014, Lanvin brand sales increased 5% to $90.3
million for the year. In addition, the spring launches, Fatale
million in 2014 as compared to 2013.
and Fatale Pink for Agent Provocateur, were well received in
It was anticipated that 2015 was going to be a very chal-
international markets, generating $5.3 million in 2014 sales.
lenging year from a currency perspective. The significant
Declines in our specialty retail and mass market product
management’s discussion and analysis
of financial condition and results of operations
73
lines mitigated some of these gains. In addition, a difficult
As a percentage of net sales, gross profit margins were
Asian market resulted in a 16% decline in Anna Sui brand sales
61.8%, 57.5%, and 58.3% in 2015, 2014 and 2013,
aggregating $21.5 million in 2014.
respectively. For European operations, gross profit mar-
Future growth within our United States based operations
gin was 65%, 60% and 61% in 2015, 2014 and 2013,
is expected to come from our prestige fragrance licenses.
respectively. The margin fluctuation for European opera-
We plan to grow our brands by launching new products and
tions is directly related to currency fluctuation. We care-
pursuing expanded distribution. For 2016, a new women’s
fully monitor movements in foreign currency exchange
scent for Agent Provocateur and a new men’s scent for Oscar
rates as almost 40% of our European based operations
de la Renta are expected to fuel growth. In addition, we are
net sales in 2015 were denominated in U.S. dollars, while
well on our way in the development of a men’s and women’s
most of our costs are incurred in euro. From a margin
scent for the Hollister brand as well as a new men’s scent
standpoint, a strong U.S. dollar has a positive effect on
for Abercrombie & Fitch, which are all expected to launch
our gross margin while a weak U.S. dollar has a negative
this summer.
onGoInG bRanD neT sales To CUsToMeRs bY ReGIon
(In millions)
Years Ended December 31,
North America
Western Europe
Eastern Europe
Central & South America
2014
$125.9
130.9
2013
47.0
57.7
46.4
41.4
$110.1
114.4
2015
$125.7
123.6
47.0
41.1
41.9
78.2
11.0
$468.5
Middle East
Asia
Other
effect. The average dollar/euro exchange rate was 1.11 in
2015 and 1.33 in both 2014 and 2013. The small gross
margin decline for European based operations in 2014
was directly related to the termination of the Burberry
license. The discontinuance of Burberry product sales,
which were sold at higher margins than ongoing brand
sales, resulted in that small decline in 2014.
For United States operations, gross profit margin was
50%, 48% and 46% in 2015, 2014 and 2013, respectively.
40.3
85.6
11.9
34.1
78.4
Sales growth for our United States operations has primari-
ly come from higher margin prestige product licenses while
8.5
sales of other lower margin fragrance products have been in
$499.3
$433.3
a decline.
Costs relating to purchase with purchase and gift with
The chart above demonstrates the effect of negative market
purchase promotions are reflected in cost of sales and
conditions in China and South America in 2015. The decline in
aggregated $25.4 million, $24.4 million and $25.7 million
Western Europe in 2015 includes the effect of the 17% devalu-
in 2015, 2014 and 2013, respectively, and represented 5.4%,
ation of the euro against the dollar and the difficult comparison
4.9% and 4.6% of net sales, respectively.
for Karl Lagerfeld brand sales in 2015 compared to the initial
Generally, we do not bill customers for shipping and han-
launch of that brand in the 2014 period.
dling costs and such costs, which aggregated $4.7 million,
In 2014, ongoing brand sales were ahead in all regions. Our
$5.2 million and $6.1 million in 2015, 2014 and 2013, re-
three largest markets Western Europe, North America and Asia
spectively, are included in selling, general and administrative
had sales growth of 14.4%, 14.4% and 9.2%, respectively.
expenses in the consolidated statements of income. As such,
Eastern Europe, which had been a difficult market that year as
our Company’s gross margins may not be comparable to other
a result of political and economic turmoil in the area, was up
companies, which may include these expenses as a component
1.3% in 2014.
of cost of goods sold.
GRoss MaRGIns
(In millions)
Years Ended December 31,
Net sales
Cost of sales
Gross margin
Gross margin as a
2015
$468.5
179.0
$289.5
2014
$499.3
212.3
$287.0
2013
$563.6
234.8
$328.8
sellInG, GeneRal & aDMInIsTRaTIVe eXPenses
(In millions)
Years Ended December 31,
Selling, general &
2015
2014 2013
administrative expenses
Selling, general &
administrative expenses
$228.3
$233.6 $250.0
percent of net sales
61.8%
57.5%
58.3%
as a percent of net sales
49%
47% 44%
INTER PARFUMS, INC. 2015 ANNUAL REPORT
74
Selling, general and administrative expenses decreased 2%
2014 and 2013, respectively. Approximately two-thirds of
in 2015 as compared to 2014 and decreased 7% in 2014 as
the 2015 increase is the result of higher service fees paid in
compared to 2013. As a percentage of sales, selling, gen-
the U.S. resulting from increased sales. The balance is from
eral and administrative expenses were 49%, 47% and 44%
the addition of our newly formed distribution subsidiary in
in 2015, 2014 and 2013, respectively. For European opera-
Spain, Parfums Rochas. The decline in 2014, as compared
tions, selling, general and administrative expenses decreased
to 2013 is directly related to the termination of the Burberry
4% in 2015, as compared to 2014 and represented 52% of
license and related discontinuation of our United Kingdom
sales in 2015 as compared to 50% in 2014. With European
distribution subsidiary.
based constant currency sales up only 1.8%, it is very diffi-
Income from operations increased 15% to $61.2 mil-
cult to gain leverage over fixed costs while still trying to drive
lion in 2015 as compared to 2014, rebounding from the
the business.
32% decrease to $53.4 million in 2014 from $78.8 mil-
For United States operations, selling, general and adminis-
lion in 2013. Operating margins aggregated 13.1%, 10.7%
trative expenses increased 9% in 2015 and represented 39%
and 14.0% for the years ended December 31, 2015, 2014
of sales, as compared to 36% in 2014. This increase is related
and 2013, respectively. As discussed above, the increase
to the sales growth within our United States operations, which
in gross margin partially mitigated by the increase in sell-
comes primarily from our newest, prestige product licenses,
ing, general and administrative expenses explains the effect
such as Oscar de la Renta and Dunhill, which bear royalty and
on operating margin in 2015 as compared to 2014. Results
advertising expenses.
for 2013 were influenced by an exceptional first quarter,
Promotion and advertising included in selling, general and
whereby operating pursuant to the transition agreement
administrative expenses aggregated $83.8 million, $86.7
with Burberry, profits were extraordinarily strong due to a
million and $94.0 million in 2015, 2014 and 2013, respec-
substantial increase in sales, coupled with low promotional
tively. Promotion and advertising as a percentage of sales
expenses. In 2014, we experienced a slight decline in gross
represented 17.9%, 17.4% and 16.7% of net sales in 2015,
margin, as compared to 2013; however, sales levels were
2014 and 2013, respectively. As planned, we invest heavily
not high enough to gain leverage of our selling, general and
in promotional spending to support new product launches
administrative expenses.
and continued worldwide building of brand awareness for our
With only limited reorganization measures employed,
brand portfolio.
the Company’s business model is expected to continue to
Royalty expense included in selling, general and ad-
demonstrate effectiveness. A significant portion of the ex-
ministrative expenses aggregated $33.8 million, $35.6
penses associated with the Burberry brand were variable in
million and $40.5 million in 2015, 2014 and 2013, re-
nature. The Company plans to continue to absorb substan-
spectively. Royalty expense as a percentage of sales
tially all of its fixed costs through increased sales of other
represented 7.2%, 7.1% and 7.2% of net sales in 2015,
brands in our prestige fragrance portfolio as well as with
2014 and 2013, respectively. Royalty expense in 2014
the sale of products of recently licensed new brands. Our
includes a $2.3 million increase to the estimated royalty
goal is to reach an operating margin of at least 14% in the
liability due to Burberry. Without this adjustment, royal-
coming years.
ty expense would have represented 6.7% of net sales in
2014. Slightly less than half of the 2015 increase is the
oTHeR InCoMe anD eXPenses
result of increased licensing activities within our U.S. op-
Interest expense aggregated $2.8 million, $1.5 million and
erations, while the balance represents a shift in sales mix
$1.4 million in 2015, 2014 and 2013, respectively. The
within our European operations. The decline in 2014, as
increase in 2015 is primarily related to the financing of
compared to 2013, is directly related to the termination
the Rochas brand acquisition and includes an approximate
of the Burberry license.
$1.0 million loss relating to the interest rate swap. We use
Service fees, which are fees paid to third parties relating
the credit lines available to us, as needed, to finance our
to the activities of our distribution subsidiaries, aggregat-
working capital needs as well as our financing needs for
ed $12.3 million, $11.1 million and $15.1 million in 2015,
acquisitions. Loans payable – banks and long-term debt
management’s discussion and analysis
of financial condition and results of operations
75
including current maturities aggregated $98.6 million,
French Government equal to 3% on any dividend paid by
$0.3 million and $6.1 million as of December 31, 2015,
a French company to its shareholders. This tax aggregated
2014 and 2013, respectively.
approximately $0.7 million, $0.8 million and $1.6 million
Foreign currency gains or (losses) aggregated ($0.9) million
in 2015, 2014 and 2013, respectively. Excluding this tax,
$0.9 million and ($1.2) million in 2015, 2014 and 2013, re-
our effective tax rate of European operations was 34.5%,
spectively. The volatility in currency exchange rates during the
31.7% and 34.0% in 2015, 2014 and 2013, respective-
first quarter of 2015 had not been seen in many years. The
ly. The increase in 2015 is primarily the result of higher
2015 loss includes approximately $2.4 million in losses from
2015 profits in high tax rate jurisdictions. In 2014, the
intercompany balances of our majority owned subsidiary, In-
exact opposite scenario played out where higher profits
terparfums SA, and its other foreign subsidiaries, which were
in lower tax rate jurisdictions contributed to the decline
not hedged. We typically enter into foreign currency forward
in the effective tax rate of our European operations. In
exchange contracts to manage exposure related to receivables
addition, changes in allocation percentages related to
from unaffiliated third parties denominated in a foreign curren-
state and local taxes of our U.S. operations continues to
cy and occasionally to manage risks related to future sales ex-
reduce our U.S. operations effective tax rate, which was
pected to be denominated in a foreign currency. Almost 40% of
35.1%, 36.5% and 39.8% in 2015, 2014 and 2013,
2015 net sales of our European operations were denominated
respectively.
in U.S. dollars.
The French Tax Authorities have examined the 2012 tax
Interest income aggregated $3.0 million, $3.9 million
return of Interparfums, SA and issued a $6.9 million tax ad-
and $4.4 million in 2015, 2014 and 2013, respectively.
justment. It is our position that the French Tax Authorities are
Cash and cash equivalents and short-term investments
incorrect in their assessments. We believe that we have strong
are primarily invested in certificates of deposit with vary-
arguments to support our tax positions and that more likely
ing maturities.
InCoMe TaXes
than not, our tax positions will be sustained. The Company will
vigorously contest the assessments.
The Company is no longer subject to U.S. federal, state,
Our effective income tax rate was 35.6%, 34.2% and 36.8%
and local or non-U.S. income tax examinations by tax author-
in 2015, 2014 and 2013, respectively. Our effective tax
ities for years before 2012.
rates differ from statutory rates due to the effect of state and
Other than as discussed above, we did not experience any
local taxes and tax rates in foreign jurisdictions. Beginning
significant changes in tax rates, and none were expected in
in 2013, the Company incurred a new tax levied by the
jurisdictions where we operate.
neT InCoMe anD eaRnInGs PeR sHaRe
(In thousands, except share and per share data)
Years Ended December 31,
Net income attributable to European operations
Net income attributable to United States operations
Net income
Less: Net income attributable to the noncontrolling interest
Net income attributable to Inter Parfums, Inc.
Net income attributable to Inter Parfums, Inc. common
shareholders:
Basic
Diluted
Weighted average number of shares outstanding:
Basic
Diluted
2015
$31,328
7,641
$38,969
8,532
$30,437
$0.98
0.98
2014
$29,276
8,069
$37,345
7,909
$29,436
2013
$44,147
6,819
$50,966
11,755
$39,211
$0.95
0.95
$1.27
1.27
30,996,137
31,100,215
30,931,308
30,763,955
31,060,326
30,953,882
INTER PARFUMS, INC. 2015 ANNUAL REPORT
76
Net income was $39.0 million, $37.3 million and $51.0
cash and cash equivalents and short-term investments
million in 2015, 2014 and 2013, respectively. Net in-
held by our European operations. Approximately 90% of
come attributable to European operations was $31.3
the Company’s total assets are held by European opera-
million, $29.3 million and $44.1 million in 2015, 2014
tions. In addition to the cash and cash equivalents and
and 2013, respectively, while net income attributable to
short-term investments referred to above, approximately
United States operations was $7.6 million, $8.1 million
$190 million of trademarks, licenses and other intangible
and $6.8 million in 2015, 2014 and 2013, respectively.
assets are held by European operations.
The reasons for significant fluctuations in net income for
The Company hopes to benefit from its strong finan-
both European operations and United States operations
cial position to potentially acquire one or more brands,
are directly related to the previous discussions relating to
either on a proprietary basis or as a licensee. Opportu-
changes in sales, gross margin and selling, general and
nities for external growth continue to be examined, with
administrative expenses. As previously discussed, our
the priority of maintaining the quality and homogeneous
European operations reported net sales are affected by
nature of our portfolio. However, we cannot assure you
changes in foreign currency exchange rates, as a strong
that any new license or acquisition agreements will be
U.S. dollar has a negative impact on reported net sales.
consummated.
However, earnings are positively affected by a strong U.S.
Cash provided by operating activities aggregated $50.1
dollar, because almost 40% of net sales of our European
million, $36.6 million and $49.2 million in 2015, 2014 and
operations are denominated in U.S. dollars, while almost
2013, respectively. In 2015, working capital items used $0.6
all costs of our European operations are incurred in euro.
million in cash from operating activities, as compared to
For United States operations in 2015, with sales relative-
$10.9 million in 2014 and $18.4 million in 2013. Although
ly flat, the 9% increase in selling, general and adminis-
accounts receivable is up from that of the prior year, day’s
trative expenses was only partially mitigated by the 4%
sales outstanding remains relatively consistent at 75 days in
increase in gross margin.
2015, as compared to 66 days and 73 days in 2014 and
The noncontrolling interest arises from our 73% owned
2013, respectively. Inventory day’s on hand aggregated 213
subsidiary in Paris, Interparfums SA, which is also a public-
in 2015, as compared to 198 in 2014 and 199 in 2013, re-
ly traded company as 27% of Interparfums SA shares trade
spectively. The increase reflects the inventory buildup needed
on the NYSE Euronext. Net income attributable to the non-
to support product development for the newest brands add-
controlling interest is directly related to the profitability of
ed to our fragrance portfolio. Although we saw some initial
our European operations, and aggregated 27.2%, 27.0% and
sales for existing Rochas products in 2015, new fragrances
26.6% of European operations net income in 2015, 2014
for Coach, Abercrombie & Fitch and Hollister will each make
and 2013, respectively. Net income attributable to Inter
their debut in 2016.
Parfums, Inc. aggregated $30.4 million, $29.4 million and
Cash flows used in investing activities reflect the pur-
$39.2 million in 2015, 2014 and 2013, respectively. Net
chase and sales of short-term investments by our European
margins attributable to Inter Parfums, Inc. aggregated 6.5%,
operations. These investments are primarily certificates
5.9% and 7.0% in 2015, 2014 and 2013, respectively.
of deposit with maturities greater than three months. At
December 31, 2015, approximately $82 million of such
lIQUIDITY anD CaPITal ResoURCes
certificates of deposit contain penalties where we would
The Company’s financial position remains strong. At
forfeit a portion of the interest earned in the event of early
December 31, 2015, working capital aggregated $338
withdrawal. Our business is not capital intensive as we do
million and we had a working capital ratio of 3.6 to 1.
not own any manufacturing facilities. However, on a full
Cash and cash equivalents and short-term investments
year basis, we spend approximately $4 million on tools and
aggregated $260 million most of which is held in euro
molds, depending on our new product development calen-
by our European operations and is readily convertible into
dar. Capital expenditures also include amounts for office
U.S. dollars. We have not had any liquidity issues to date,
fixtures, computer equipment and industrial equipment
and do not expect any liquidity issues relating to such
needed at our distribution centers.
management’s discussion and analysis
of financial condition and results of operations
77
In May 2015, the Company, through its majority owned
ber 31, 2015 and 2014, respectively. Proceeds from sale of
Paris-based subsidiary, Interparfums SA, acquired the Ro-
stock of subsidiary reflect the proceeds from shares issued by
chas brand from The Procter & Gamble Company. This trans-
our French subsidiary, Interparfums SA, pursuant to options
action includes all brand names and registered trademarks
exercised.
for Rochas (Femme, Madame, Eau de Rochas, etc.), mainly
In addition to our regular annual dividend, in Novem-
for class 3 (cosmetics) and class 25 (fashion). Substantially
ber 2013, our Board of Directors authorized a special
the entire €106 million purchase price for the assets acquired
cash dividend of $0.48 per share. In January 2014, our
(approximately $118 million) was allocated to trademarks
Board of Directors authorized the continuation of the
with indefinite lives, including approximately $5.4 million in
regular $0.48 per share annual dividend for 2014 and
acquisition related expenses. An additional $4.4 million was
in January 2015, our Board of Directors authorized an
paid for related inventory.
8% increase to $0.52 per share. In January 2016, the
The cost of the acquisition was paid in cash on the clos-
Board of Directors authorized a 15% increase in the
ing date and was financed entirely through a 5-year term
annual dividend to $0.60 per share. The next quarter-
loan payable in equal quarterly installments plus interest.
ly cash dividend of $0.15 per share is payable on April
In order to reduce exposure to rising variable interest rates,
15, 2016 to shareholders of record on March 31, 2016.
the Company entered into a swap transaction effectively
Dividends paid, including dividends paid once per year
exchanging the variable interest rate to a fixed rate of ap-
to noncontrolling stockholders of Interparfums SA, aggre-
proximately 1.2%. The swap is a derivative instrument and
gated $19.6 million, $19.5 million and $36.7 million for
is therefore recorded at fair value and changes in fair value
the years ended December 31, 2015, 2014 and 2013,
are reflected in the accompanying consolidated statements
respectively. The cash dividends to be paid in 2016 are
of income.
not expected to have any significant impact on our finan-
Our short-term financing requirements are expected to be
cial position.
met by available cash on hand at December 31, 2015, cash
We believe that funds provided by or used in opera-
generated by operations and short-term credit lines provided
tions can be supplemented by our present cash position
by domestic and foreign banks. The principal credit facili-
and available credit facilities, so that they will provide us with
ties for 2015 consist of a $20.0 million unsecured revolving
sufficient resources to meet all present and reasonably fore-
line of credit provided by a domestic commercial bank and
seeable future operating needs.
approximately $27.0 million in credit lines provided by a
Inflation rates in the U.S. and foreign countries in which
consortium of international financial institutions. Short-term
we operate did not have a significant impact on operating
borrowings aggregated zero and $0.3 million as of Decem-
results for the year ended December 31, 2015.
ConTRaCTUal oblIGaTIons
The following table summarizes our contractual obligations over the periods indicated, as well as our total contractual obligations.
($ in thousands)
contractual obligations
Long-Term Debt
Operating Leases
(1)
Purchase Obligations
Total
Less than
1-year
Years
2-3
Payments Due by Period
Years
More than
4-5
5-years
$22,163
$43,548
$32,895
–
$5,512
$10,198
$8,235
$8,743
Total
$98,606
$32,688
$905,459
$101,067
$224,131
$227,191
$353,070
$1,036,753
$128,742
$277,877
$268,321
$361,813
(1) Consists of purchase commitments for advertising and promotional items, minimum royalty guarantees, including fixed or minimum obligations, and estimates of such
obligations subject to variable price provisions. Future advertising commitments were estimated based on planned future sales for the license terms that were in effect at
December 31, 2015, without consideration for potential renewal periods and do not reflect the fact that our distributors share our advertising obligations.
INTER PARFUMS, INC. 2015 ANNUAL REPORT
78
reports on internal control over financial reporting
qUantitatiVe and
qUalitatiVe disclosUres
aBoUt market risk.
GeneRal
and JPY ¥50.0 million which all have maturities of less than one
year. We believe that our risk of loss as the result of nonperfor-
mance by any of such financial institutions is remote.
We address certain financial exposures through a controlled
InTeResT RaTe RIsK ManaGeMenT
program of risk management that primarily consists of the use
We mitigate interest rate risk by monitoring interest rates,
of derivative financial instruments. We primarily enter into for-
and then determining whether fixed interest rates should be
eign currency forward exchange contracts in order to reduce
swapped for floating rate debt, or if floating rate debt should
the effects of fluctuating foreign currency exchange rates. We
be swapped for fixed rate debt. We entered into an interest
do not engage in the trading of foreign currency forward ex-
rate swap in June 2015 on €100 million of debt, effectively
change contracts or interest rate swaps.
exchanging the variable interest rate to a fixed rate of approxi-
mately 1.2%. This derivative instrument is recorded at fair val-
foReIGn eXCHanGe RIsK ManaGeMenT
ue and changes in fair value are reflected in the accompanying
We periodically enter into foreign currency forward exchange
consolidated statements of income.
contracts to hedge exposure related to receivables denomi-
nated in a foreign currency and to manage risks related to
future sales expected to be denominated in a currency other
manaGement’s annUal report
than our functional currency. We enter into these exchange
on internal control
contracts for periods consistent with our identified exposures.
oVer financial reportinG
The purpose of the hedging activities is to minimize the effect
of foreign exchange rate movements on the receivables and
The management of Inter Parfums, Inc. is responsible for estab-
cash flows of Interparfums SA, our French subsidiary, whose
lishing and maintaining adequate internal control over financial
functional currency is the euro. All foreign currency contracts
reporting as defined in Rule 13(a)-15(f) under the Securities
are denominated in currencies of major industrial countries
Exchange Act of 1934. With the participation of the Chief
and are with large financial institutions, which are rated as
Executive Officer and the Chief Financial Officer, our manage-
strong investment grade.
ment conducted an evaluation of the effectiveness of our inter-
All derivative instruments are required to be reflected as
nal control over financial reporting based on the framework and
either assets or liabilities in the balance sheet measured at
criteria established in Internal Control – Integrated Framework
fair value. Generally, increases or decreases in fair value of
(2013), issued by the Committee of Sponsoring Organizations of
derivative instruments will be recognized as gains or losses
the Treadway Commission. Based on this evaluation, our man-
in earnings in the period of change. If the derivative is desig-
agement has concluded that our internal control over financial
nated and qualifies as a cash flow hedge, then the changes in
reporting was effective as of December 31, 2015.
fair value of the derivative instrument will be recorded in other
Our independent auditor, WeiserMazars LLP, a registered
comprehensive income.
public accounting firm, has issued its report on its audit
Before entering into a derivative transaction for hedging
of our internal control over financial reporting. This report
purposes, we determine that the change in the value of the
appears below.
derivative will effectively offset the change in the fair value of
the hedged item from a movement in foreign currency rates.
Then, we measure the effectiveness of each hedge throughout
the hedged period. Any hedge ineffectiveness is recognized in
the income statement.
Jean madar
russell Greenberg
At December 31, 2015, we had foreign currency con-
Chief Executive Officer,
Executive Vice President
tracts in the form of forward exchange contracts with notional
Chairman of the
and Chief Financial Officer
amounts of approximately U.S. $12.8 million, GB £1.6 million
Board of Directors
reports on internal control over financial reporting
79
report of independent reGistered
of the assets of the company; (2) provide reasonable as-
pUBlic accoUntinG firm on internal control
surance that transactions are recorded as necessary to
oVer financial reportinG
permit preparation of financial statements in accordance
boaRD of DIReCToRs anD sHaReHolDeRs
with generally accepted accounting principles, and that
InTeR PaRfUMs, InC.
neW YoRK, neW YoRK
receipts and expenditures of the company are being made
only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable
We have audited Inter Parfums, Inc.’s internal control
assurance regarding prevention or timely detection of
over financial reporting as of December 31, 2015, based
unauthorized acquisition, use, or disposition of the com-
on criteria established in Internal Control – Integrated
pany’s assets that could have a material effect on the
Framework (2013) issued by the Committee of Sponsoring
financial statements.
Organizations of the Treadway Commission (the COSO cri-
Because of its inherent limitations, internal control over
teria). Inter Parfums, Inc.’s management is responsible for
financial reporting may not prevent or detect misstate-
maintaining effective internal control over financial report-
ments. Also, projections of any evaluation of effectiveness
ing, and for its assessment of the effectiveness of internal
to future periods are subject to the risk that controls may
control over financial reporting, included in the accom-
become inadequate because of the changes in conditions,
panying Management’s Annual Report on Internal Control
or that the degree of compliance with the policies or proce-
over Financial Reporting. Our responsibility is to express an
dures may deteriorate.
opinion on the company’s internal control over financial re-
In our opinion, Inter Parfums, Inc. maintained, in all mate-
porting based on our audit.
rial respects, effective internal control over financial reporting
We conducted our audit in accordance with the stan-
as of December 31, 2015, based on the COSO criteria.
dards of the Public Company Accounting Oversight Board
We have also audited, in accordance with the standards
(United States). Those standards require that we plan and
of the Public Company Accounting Oversight Board (United
perform the audit to obtain reasonable assurance about
States), the consolidated balance sheet of Inter Parfums, Inc.
whether effective internal control over financial reporting
as of December 31, 2015 and the related consolidated state-
was maintained in all material respects. Our audit of in-
ments of income, comprehensive loss, changes in sharehold-
ternal control over financial reporting included obtaining
ers’ equity, comprehensive income and cash flows for the year
an understanding of internal control over financial report-
ended December 31, 2015 and our report dated March 14,
ing, assessing the risk that a material weakness exists,
2016 expressed an unqualified opinion thereon.
and testing and evaluating the design and operating ef-
fectiveness of internal control based on the assessed risk.
WeisersMazars, LLP
Our audit also included performing such other procedures
as we considered necessary in the circumstances. We be-
lieve that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance
New York, New York
regarding the reliability of financial reporting and the
March 14, 2016
preparation of financial statements for external purposes
in accordance with generally accepted accounting princi-
ples. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
INTER PARFUMS, INC. 2015 ANNUAL REPORT 80
report of independent registered public accounting firm
report of independent reGistered
In our opinion, the consolidated financial statements
pUBlic accoUntinG firm
referred to above present fairly, in all material respects,
boaRD of DIReCToRs anD sHaReHolDeRs
the financial position of Inter Parfums, Inc. and subsid-
InTeR PaRfUMs, InC.
neW YoRK, neW YoRK
iaries as of December 31, 2015 and 2014, and the results
of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2015,
We have audited the accompanying consolidated balance
in conformity with U.S. generally accepted accounting
sheets of Inter Parfums, Inc. and subsidiaries (the “Company”)
principles.
as of December 31, 2015 and 2014, and the related consol-
We also have audited, in accordance with the stan-
idated statements of income, comprehensive income (loss),
dards of the Public Company Accounting Oversight Board
changes in shareholders’ equity and cash flows for each of
(United States), Inter Parfums, Inc.’s internal control
the years in the three-year period ended December 31, 2015.
over financial reporting as of December 31, 2015, based
These consolidated financial statements are the responsibility
on criteria established in Internal Control – Integrated
of the Company’s management. Our responsibility is to express
Framework (2013) issued by the Committee of Sponsoring
an opinion on these consolidated financial statements based
Organizations of the Treadway Commission (COSO), and
on our audits.
our report dated March 14, 2016 expressed an unquali-
We conducted our audits in accordance with the standards
fied opinion thereon.
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the
WeiserMazars LLP
audit to obtain reasonable assurance about whether the con-
solidated financial statements are free of material misstate-
ment. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the ac-
counting principles used and significant estimates made by
management, as well as evaluating the overall financial state-
New York, New York
ment presentation. We believe that our audits provide a rea-
March 14, 2016
sonable basis for our opinion.
financial statements
81
consolidated Balance sheets
(In thousands, except share and per share data)
December 31,
assets
current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Receivables, other
Other current assets
Income taxes receivable
Deferred tax assets
total current assets
equipment and leasehold improvements, net
trademarks, licenses and other intangible assets, net
other assets
total assets
liaBilities and eqUity
2015
2014
$176,967
82,847
95,082
98,346
2,422
5,811
100
7,182
468,757
9,333
201,335
8,234
$687,659
31
62,030
388,434
365,587
110,800
476,387
$687,659
$90,138
190,152
90,124
102,326
1,542
4,504
929
6,848
486,563
9,187
98,531
10,225
$604,506
$298
–
46,646
49,194
3,773
3,717
103,628
–
2,154
–
31
60,200
116,659
498,724
$604,506
Accrued expenses
Accounts payable – trade
Current portion of long-term debt
current liabilities:
Loans payable – banks –
22,163
50,636
46,890
7,359
4,035
131,083
76,443
3,746
long–term debt, less current portion
total current liabilities
Income taxes payable
deferred tax liability
Dividends payable
commitments and contingencies
equity:
Inter Parfums, Inc. shareholders’ equity:
Preferred stock, $0.001 par value. Authorized 1,000,000 shares; none issued
–
Common stock, $0.001 par value. Authorized 100,000,000 shares;
outstanding, 31,037,915 and 30,977,293 shares,
at December 31, 2015 and 2014, respectively
Additional paid-in capital
Retained earnings
374,121
Accumulated other comprehensive loss (48,091) (15,823)
Treasury stock, at cost, 9,880,058 and 9,897,995 common shares
at December 31, 2015 and 2014, respectively (36,817) (36,464)
382,065
total inter parfums, inc. shareholders’ equity
noncontrolling interest
total equity
total liabilities and equity
(See accompanying notes to consolidated financial statements.)
INTER PARFUMS, INC. 2015 ANNUAL REPORT
82
consolidated statements of income
(In thousands, except share and per share data)
Years Ended December 31,
net sales
Cost of sales
Gross margin
Selling, general, and administrative expenses
income from operations
other expenses (income):
Interest expense
2015
$468,540
179,069
289,471
228,268
61,203
2014
2013
$499,261
$563,579
212,224
287,037
233,634
53,403
234,800
328,779
250,025
78,754
(Gain) loss on foreign currency
1,168
Interest and dividend income (2,995) (3,888) (4,440)
707 (3,312) (1,892)
(902)
2,826
876
1,478
1,380
income before income taxes
Income taxes
net income
Less: Net income attributable to the noncontrolling interest
60,496
21,527
38,969
8,532
56,715
19,370
37,345
7,909
80,646
29,680
50,966
11,755
net income attributable to inter parfums, inc.
$30,437
$29,436
$39,211
net income attributable to inter parfums, inc. common shareholders:
Basic
Diluted
$0.98
0.98
$0.95
0.95
$1.27
1.27
weighted average number of shares outstanding:
Basic
Diluted
30,996,137
31,100,215
30,931,308
30,763,955
31,060,326
30,953,882
dividends declared per share
$0.52
$0.48
$0.96
(See accompanying notes to consolidated financial statements )
financial statements
83
consolidated statements of comprehensiVe income (loss)
(In thousands, except share and per share data
Years Ended December 31,
net income
other comprehensive income (loss):
2015
,
2014
$38,969
$37,345
2013
$50,966
Transfer from OCI into earnings
–
(44,346)
Translation adjustments, net of tax
(57,806)
(44,346) (57,806)
(20,461)
comprehensive income (loss)
(5,377)
–
(327)
19,027
18,700
69,666
comprehensive income (loss) attributable to noncontrolling interests:
Net income
11,755
Transfer from OCI into earning – – (87)
Translation adjustments, net of tax (12,078) (16,123)
5,425
(8,214)
17,093
7,909
(3,546)
8,532
comprehensive income (loss) attributable to inter parfums, inc.
$(1,831)
$(12,247)
$52,573
(See accompanying notes to consolidated financial statements.)
INTER PARFUMS, INC. 2015 ANNUAL REPORT
84
consolidated statements of chanGes in shareholders’ eqUity
(In thousands except share and per share data)
Years Ended December 31,
common stock, beginning and end of year
additional paid-in capital, beginning of year
Shares issued upon exercise of stock options
1,981
Sale of subsidiary shares to noncontrolling interests (192) (335)
677
Stock-based compensation
60,200
359,459
additional paid-in capital, end of year
retained earnings, beginning of year
Net income
Dividends
Stock-based compensation
retained earnings, end of year
accumulated other comprehensive income (loss), beginning of year
Foreign currency translation adjustment, net of tax
Transfer from OCI into earnings
accumulated other comprehensive income (loss), end of year
(15,823)
(32,268)
–
(48,091)
2015
$31
60,200
1,234
788
62,030
374,121
30,437
(16,124)
–
388,434
(36,464)
140
(493)
2014
$31
57,877
29,436
(14,855)
81
25,860
(41,683)
–
(15,823)
(36,016)
219
(667)
2013
$31
54,679
2,882
(173)
489
57,877
349,672
39,211
(29,582)
158
12,498
13,602
(240)
25,860
(35,404)
203
374,121
359,459
(815)
(36,817) (36,464) (36,016)
116,659
8,532
(12,078)
–
1,523
(3,836)
–
110,800
128,145
7,909
(16,123)
–
1,365
(4,667)
30
118,505
11,755
5,425
(87)
830
(8,341)
58
116,659
128,145
treasury stock, beginning of year
Shares issued upon exercise of stock options
Shares received as proceeds of option exercises
treasury stock, end of year
noncontrolling interest, beginning of year
Net income
Foreign currency translation adjustment, net of tax
Transfer from OCI into earnings
Sale of subsidiary shares to noncontrolling interest
Dividends
Stock-based compensation
noncontrolling interest, end of year
total equity
$476,387
$498,724
$535,356
(See accompanying notes to consolidated financial statements )
financial statements
85
consolidated statements of cash flows
(In thousands)
Years Ended December 31,
2015 2014 2013
cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Provision for doubtful accounts
Non cash stock compensation
Excess tax benefits from stock-based compensation
arrangements
Deferred tax expense (benefit)
Change in fair value of derivatives
Changes in:
Accounts receivable
$38,969
$37,345
$50,966
10,166
11,110
412
856
(670)
(557)
355
574
838
(700)
4,844
(157)
(19,607)
71,776
9,078
442
787
(260)
829
903
(12,573)
(4,354)
(1,622)
Inventories
Other assets
583
Accounts payable and accrued expenses 12,973 (4,996) (33,156)
Income taxes, net 4,912 8,540 (86,724)
Net cash provided by operating activities
49,194
36,613
29,240
4,344
425
50,084
cash flows from investing activities:
Purchases of short-term investments (62,415) (245,810) (381,843)
Proceeds from sale of short-term investments
207,082
Purchase of equipment and leasehold improvements
Payment for intangible assets acquired
Proceeds from sale of equipment
Proceeds from sale of trademark
3,481
Net cash used in investing activities (34,590) (37,272) (181,263)
151,771
(4,158)
(119,788)
–
–
212,762
(3,302)
(7,769)
(5,015)
(922)
2,801
–
–
cash flows from financing activities:
Proceeds from (repayments of) loans payable – banks
Proceeds from issuance of long-term debt
Repayment of long-term debt
Purchase of treasury stock
Proceeds from exercise of options
Excess tax benefits from stock-based compensation arrangements
Proceeds from sale of stock of subsidiary
Dividends paid
Dividends paid to noncontrolling interests
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
–
110,970
(11,761)
(32)
653
260
1,327
(15,806)
(3,836)
81,775
(10,440)
86,829
90,138
(5,765)
(21,835)
–
–
(90)
953
670
1,030
(14,841)
(4,667)
(22,710)
(12,143)
(35,512)
–
–
(98)
1,668
700
657
(28,331)
(8,341)
(55,580)
5,964
(181,685)
Cash and cash equivalents – beginning of year
307,335
Cash and cash equivalents – end of year $176,967 $90,138 $125,650
Supplemental disclosures of cash flow information:
125,650
Cash paid for:
Interest
Income taxes
(See accompanying notes to consolidated financial statements.)
$2,400
19,668
$1,508
$1,524
10,430
104,992
INTER PARFUMS, INC. 2015 ANNUAL REPORT
86
notes to consolidated financial statements
foReIGn CURRenCY TRanslaTIon
(1) the company and its significant accounting policies
For foreign subsidiaries with operations denominated in a foreign
bUsIness of THe CoMPanY
currency, assets and liabilities are translated to U.S. dollars at
Inter Parfums, Inc. and its subsidiaries (the “Company”) are in
year end exchange rates. Income and expense items are trans-
the fragrance business, and manufacture and distribute a wide
lated at average rates of exchange prevailing during the year.
array of fragrances and fragrance related products.
Gains and losses from translation adjustments are accumulated
Substantially all of our prestige fragrance brands are licensed
in a separate component of shareholders’ equity.
from unaffiliated third parties, and our business is dependent
upon the continuation and renewal of such licenses. Until ear-
CasH anD CasH eQUIValenTs
ly 2013, Burberry was our most significant license as Burberry
anD sHoRT-TeRM InVesTMenTs
products represented 23% of net sales in 2013 (see Note (2)
All highly liquid investments purchased with a maturity of
“Termination of Burberry License”). With respect to the Compa-
three months or less are considered to be cash equivalents.
ny’s largest brands, we own the Lanvin brand name for our class
From time to time, the Company has short-term investments
of trade, and license the Montblanc and Jimmy Choo brand
which consist of certificates of deposit with maturities great-
names. As a percentage of net sales, product sales for the Com-
er than three months. The Company monitors concentrations
pany’s largest brands were as follows:
of credit risk associated with financial institutions with which
2015
Year Ended December 31,
Montblanc 21%
Lanvin 15%
Jimmy Choo 20%
the Company conducts significant business. The Company
2014
2013
believes its credit risk is minimal, as the Company primarily
22%
18%
16%
15%
15%
13%
conducts business with large, well-established financial insti-
tutions. Substantially all cash and cash equivalents are held at
financial institutions outside the United States and are readily
No other brand represented 10% or more of consolidated
net sales.
aCCoUnTs ReCeIVable
convertible into U.S. dollars.
basIs of PRePaRaTIon
Accounts receivable represent payments due to the Company
for previously recognized net sales, reduced by allowances for
The consolidated financial statements include the accounts of
sales returns and doubtful accounts or balances which are
the Company, including 73% owned Interparfums SA (“IPSA”),
estimated to be uncollectible, which aggregated $5.9 million
a subsidiary whose stock is publicly traded in France. In 2015,
and $6.9 million as of December 31, 2015 and 2014, respec-
Interparfums SA formed a new subsidiary in Spain, Parfums
tively. Accounts receivable balances are written-off against
Rochas. The subsidiary is 51% owned by Interparfums SA with
the allowance for doubtful accounts when they become un-
the remaining 49% owned by its Rochas distributor for Spain.
collectible. Recoveries of accounts receivable previously re-
Parfums Rochas is responsible for Rochas brand distribution in
corded against the allowance are recorded in the consolidated
the territory. All material intercompany balances and transac-
statement of income when received. We generally grant credit
tions have been eliminated.
based upon our analysis of the customer’s financial position,
as well as previously established buying patterns.
ManaGeMenT esTIMaTes
Management makes assumptions and estimates to prepare finan-
InVenToRIes
cial statements in conformity with accounting principles general-
Inventories, including promotional merchandise, only include
ly accepted in the United States of America. Those assumptions
inventory considered saleable or usable in future periods, and
and estimates directly affect the amounts reported and disclo-
is stated at the lower of cost or market, with cost being de-
sures included in the consolidated financial statements. Actual
termined on the first-in, first-out method. Cost components
results could differ from those assumptions and estimates.
include raw materials, direct labor and overhead (e.g., indirect
Significant estimates for which changes in the near term are con-
labor, utilities, depreciation, purchasing, receiving, inspection
sidered reasonably possible and that may have a material impact
and warehousing) as well as inbound freight. Promotional mer-
on the financial statements are disclosed in these notes to the
chandise is charged to cost of sales at the time the merchan-
consolidated financial statements.
dise is shipped to the Company’s customers.
notes to consolidated financial statements
(in thousands except share and per share data)
87
DeRIVaTIVes
assumptions, including future sales levels, future cost of goods
All derivative instruments are recorded as either assets or liabil-
and operating expense levels, as well as economic conditions,
ities and measured at fair value. The Company uses derivative
changes to our business model or changes in consumer accep-
instruments to principally manage a variety of market risks. For
tance of our products which are more subjective in nature. If the
derivatives designated as hedges of the exposure to changes
carrying value of an indefinite-lived intangible asset exceeds its
in fair value of the recognized asset or liability or a firm com-
fair value, an impairment charge is recorded.
mitment (referred to as fair value hedges), the gain or loss is
Intangible assets subject to amortization are evaluated for im-
recognized in earnings in the period of change together with the
pairment testing whenever events or changes in circumstances
offsetting loss or gain on the hedged item attributable to the
indicate that the carrying amount of an amortizable intangible as-
risk being hedged. The effect of that accounting is to include
set may not be recoverable. If impairment indicators exist for an
in earnings the extent to which the hedge is not effective in
amortizable intangible asset, the undiscounted future cash flows
achieving offsetting changes in fair value. For cash flow hedges,
associated with the expected service potential of the asset are
the effective portion of the derivative’s gain or loss is initial-
compared to the carrying value of the asset. If our projection of
ly reported in equity (as a component of accumulated other
undiscounted future cash flows is in excess of the carrying value
comprehensive income) and is subsequently reclassified into
of the intangible asset, no impairment charge is recorded. If our
earnings in the same period or periods during which the hedged
projection of undiscounted future cash flows is less than the car-
forecasted transaction affects earnings. The ineffective portion
rying value of the intangible asset, an impairment charge would
of the gain or loss of a cash flow hedge is reported in earnings
be recorded to reduce the intangible asset to its fair value.
immediately. The Company also holds certain instruments for
economic purposes that are not designated for hedge account-
ReVenUe ReCoGnITIon
ing treatment. For these derivative instruments, changes in
The Company sells its products to department stores, perfum-
their fair value are recorded in earnings immediately.
eries, specialty stores, mass-market retailers, supermarkets and
domestic and international wholesalers and distributors. Sales
eQUIPMenT anD leaseHolD IMPRoVeMenTs
of such products by our domestic subsidiaries are denominat-
Equipment and leasehold improvements are stated at cost less
ed in U.S. dollars, and sales of such products by our foreign
accumulated depreciation and amortization. Depreciation and
subsidiaries are primarily denominated in either euro or U.S.
amortization are provided using the straight line method over
dollars. The Company recognizes revenues when merchandise
the estimated useful lives for equipment, which range between
is shipped and the risk of loss passes to the customer. Net sales
three and ten years and the shorter of the lease term or estimat-
are comprised of gross revenues less returns, trade discounts
ed useful asset lives for leasehold improvements. Depreciation
and allowances. The Company does not bill its customers’
provided on equipment used to produce inventory, such as tools
freight and handling charges. All shipping and handling costs,
and molds, is included in cost of sales.
which aggregated $4.7 million, $5.2 million and $6.1 million
lonG-lIVeD asseTs
in 2015, 2014 and 2013, respectively, are included in selling,
general and administrative expenses in the consolidated state-
Indefinite-lived intangible assets principally consist of trademarks
ments of income. The Company grants credit to all qualified
which are not amortized. The Company evaluates indefinite-lived
customers and does not believe it is exposed significantly to any
intangible assets for impairment at least annually during the
undue concentration of credit risk. No one customer represent-
fourth quarter, or more frequently when events occur or circum-
ed 10% or more of net sales in 2015, 2014 or 2013.
stances change, such as an unexpected decline in sales, that
would more likely than not indicate that the carrying value of an
sales ReTURns
indefinite-lived intangible asset may not be recoverable. When
Generally, the Company does not permit customers to return
testing indefinite-lived intangible assets for impairment, the
their unsold products. However, for U.S. based customers, we
evaluation requires a comparison of the estimated fair value of
allow returns if properly requested, authorized and approved. The
the asset to the carrying value of the asset. The fair values used
Company regularly reviews and revises, as deemed necessary, its
in our evaluations are estimated based upon discounted future
estimate of reserves for future sales returns based primarily upon
cash flow projections using a weighted average cost of capital of
historic trends and relevant current data including information
8.02%. The cash flow projections are based upon a number of
provided by retailers regarding their inventory levels. In addition,
INTER PARFUMS, INC. 2015 ANNUAL REPORT 88
as necessary, specific accruals may be established for significant
considers lease renewals in the useful life of its leasehold improve-
future known or anticipated events. The types of known or antici-
ments when such renewals are reasonably assured. In the event the
pated events that we consider include, but are not limited to, the
Company receives capital improvement funding from its landlord,
financial condition of our customers, store closings by retailers,
these amounts are recorded as deferred liabilities and amortized
changes in the retail environment and our decision to continue
over the remaining lease term as a reduction of rent expense.
to support new and existing products. The Company records es-
timated reserves for sales returns as a reduction of sales, cost of
lICense aGReeMenTs
sales and accounts receivable. Returned products are recorded as
The Company’s license agreements generally provide the Company
inventories and are valued based upon estimated realizable value.
with worldwide rights to manufacture, market and sell fragrance
The physical condition and marketability of returned products
and fragrance related products using the licensors’ trademarks.
are the major factors we consider in estimating realizable value.
The licenses typically have an initial term of approximately 5 to
Actual returns, as well as estimated realizable values of returned
15 years, and are potentially renewable subject to the Company’s
products, may differ significantly, either favorably or unfavorably,
compliance with the license agreement provisions. The remaining
from our estimates, if factors such as economic conditions, inven-
terms, including the potential renewal periods, range from ap-
tory levels or competitive conditions differ from our expectations.
proximately 1 to 16 years. Under each license, the Company is
required to pay royalties in the range of 5% to 10% to the licensor,
PaYMenTs To CUsToMeRs
at least annually, based on net sales to third parties.
The Company records revenues generated from purchase with
In certain cases, the Company may pay an entry fee to ac-
purchase and gift with purchase promotions as sales and the
quire, or enter into, a license where the licensor or another
costs of its purchase with purchase and gift with purchase pro-
licensee was operating a pre-existing fragrance business. In
motions as cost of sales. Certain other incentive arrangements
those cases, the entry fee is capitalized as an intangible asset
require the payment of a fee to customers based on their at-
and amortized over its useful life.
tainment of pre-established sales levels. These fees have been
Most license agreements require minimum royalty payments,
recorded as a reduction of net sales.
incremental royalties based on net sales levels and minimum
spending on advertising and promotional activities. Royalty ex-
aDVeRTIsInG anD PRoMoTIon
penses are accrued in the period in which net sales are recog-
Advertising and promotional costs are expensed as incurred and
nized while advertising and promotional expenses are accrued at
recorded as a component of cost of goods sold (in the case of
the time these costs are incurred.
free goods given to customers) or selling, general and adminis-
In addition, the Company is exposed to certain concentration
trative expenses. Advertising and promotional costs included in
risk. Substantially all of our prestige fragrance brands are licensed
selling, general and administrative expenses were $83.8 million,
from unaffiliated third parties, and our business is dependent
$86.7 million and $94.0 million for 2015, 2014 and 2013,
upon the continuation and renewal of such licenses.
respectively. Costs relating to purchase with purchase and gift
with purchase promotions that are reflected in cost of sales
InCoMe TaXes
aggregated $25.4 million, $24.4 million and $25.7 million in
The Company accounts for income taxes using an asset and
2015, 2014 and 2013, respectively. Accrued expenses include
liability approach that requires the recognition of deferred tax
approximately $15.2 million and $16.5 million in advertising lia-
assets and liabilities for the expected future tax consequences
bilities as of December 31, 2015 and 2014, respectively.
of events that have been recognized in its financial statements
or tax returns. The net deferred tax assets assume sufficient
PaCKaGe DeVeloPMenT CosTs
future earnings for their realization, as well as the continued
Package development costs associated with new products and re-
application of currently enacted tax rates. Included in net de-
designs of existing product packaging are expensed as incurred.
ferred tax assets is a valuation allowance for deferred tax as-
oPeRaTInG leases
sets, where management believes it is more-likely-than-not that
the deferred tax assets will not be realized in the relevant ju-
The Company recognizes rent expense from operating leases with
risdiction. If the Company determines that a deferred tax asset
various step rent provisions, rent concessions and escalation clauses
will not be realizable, an adjustment to the deferred tax asset
on a straight-line basis over the applicable lease term. The Company
will result in a reduction of net earnings at that time.
notes to consolidated financial statements
(in thousands except share and per share data)
89
IssUanCe of CoMMon sToCK
bY ConsolIDaTeD sUbsIDIaRY
periods after December 15, 2016, with early adoption permitted.
We are currently evaluating the standard to determine the impact of
The difference between the Company’s share of the proceeds
its adoption on our consolidated financial statements.
received by the subsidiary and the carrying amount of the por-
In May 2014, the FASB issued an ASU which supersedes the
tion of the Company’s investment deemed sold, is reflected as
most current revenue recognition requirements. The new reve-
an equity adjustment in the consolidated balance sheets.
nue recognition standard requires entities to recognize revenue
TReasURY sToCK
in a way that depicts the transfer of goods or services to custom-
ers in an amount that reflects the consideration which the entity
The Board of Directors may authorize share repurchases of the
expects to be entitled to in exchange for those goods or services.
Company’s common stock (Share Repurchase Authorizations).
This guidance is effective for annual and interim reporting pe-
Share repurchases under Share Repurchase Authorizations
riods beginning after December 15, 2017, with early adoption
may be made through open market transactions, negotiated
permitted for annual periods after December 31, 2016. We are
purchase or otherwise, at times and in such amounts within
currently evaluating the standard to determine the impact of its
the parameters authorized by the Board. Shares repurchased
adoption on our consolidated financial statements.
under Share Repurchase Authorizations are held in treasury for
There are no other recent accounting pronouncements issued
general corporate purposes, including issuances under various
but not yet adopted that would have a material effect on our
employee stock option plans. Treasury shares are accounted
consolidated financial statements.
for under the cost method and reported as a reduction of equi-
ty. Share Repurchase Authorizations may be suspended, limit-
(2) termination of Burberry license
ed or terminated at any time without notice.
Burberry exercised its option to buy-out the license rights effec-
ReCenT aCCoUnTInG PRonoUnCeMenTs
Burberry entered into a transition agreement that provided for
In February 2016, the Financial Accounting Standards Board
certain license rights and obligations to continue through March
(“FASB”) issued an Accounting Standards Update (‘ASU”)
31, 2013. The Company continued to operate certain aspects
which requires lessees to recognize lease assets and lease li-
of the business for the brand including product development,
abilities arising from operating leases on the balance sheet.
testing, and distribution during the transition period.
tive December 31, 2012. In October 2012, the Company and
This ASU is effective for annual and interim reporting periods
beginning after December 15, 2018 using a modified retro-
(3) recent agreements
spective approach, with early adoption permitted. We are cur-
MonTblanC
rently evaluating the standard to determine the impact of its
In October 2015, the Company, through its majority owned Paris-
adoption on our consolidated financial statements.
based subsidiary, Interparfums SA, extended its license agreement
In November 2015, the FASB issued an ASU that requires all
with Montblanc by five years. The original agreement, signed in
deferred tax liabilities and assets to be classified as non-current
2010, provided Interparfums SA with the exclusive worldwide
on the balance sheet. This ASU is effective for annual and interim
license rights to create, produce and distribute fragrances and
reporting periods beginning after December 15, 2016, with early
fragrance related products under the Montblanc brand through
adoption permitted. In addition, this guidance can be applied ei-
December 31, 2020. The new 10-year agreement, which went
ther prospectively or retrospectively to all periods presented. We
into effect on January 1, 2016, extends the partnership through
are currently evaluating the standard to determine the impact of
December 31, 2025 without any material changes in operating
its adoption on our consolidated financial statements.
conditions from the prior license. The license agreement is
In July 2015, the FASB issued an ASU modifying the accounting
subject to certain minimum sales, advertising expenditures and
for inventory. Under this ASU, the measurement principle for inven-
royalty payments as are customary in our industry.
tory will change from lower of cost or market value to lower of cost
and net realizable value. The ASU defines net realizable value as
fRenCH ConneCTIon
the estimated selling price in the ordinary course of business, less
In September 2015, the Company entered into a 12-year license
reasonably predictable costs of completion, disposal, and trans-
agreement to create, produce and distribute fragrances and fragrance
portation. The ASU is applicable to inventory that is accounted for
related products under the French Connection brand names. The
under the first-in, first-out method and is effective for reporting
agreement is subject to certain minimum advertising expenditures
INTER PARFUMS, INC. 2015 ANNUAL REPORT 90
and royalty payments as are customary in our industry. The li-
brand. The agreement closed on December 2, 2013 and is sub-
cense agreement was subject to certain conditions precedent,
ject to certain minimum advertising expenditures as is custom-
which have now been satisfied, and the Company took over
ary in our industry. The Company purchased certain inventories
distribution of selected fragrances within the brand’s existing
and paid an up-front entry fee of $5.0 million. Upon closing, the
fragrance portfolio in 2016.
Company took over distribution of fragrances within the brand’s
RoCHas
In May 2015, the Company, through its majority owned Paris-
existing perfume portfolio and launched its first new fragrance
under the Oscar de la Renta brand in 2015.
based subsidiary, Interparfums SA, acquired the Rochas brand
aGenT PRoVoCaTeUR
from The Procter & Gamble Company. This transaction includes
In July 2013, the Company entered into a 10.5-year exclusive
all brand names and registered trademarks for Rochas (Femme,
worldwide license to create, produce and distribute fragrances
Madame, Eau de Rochas, etc.), mainly for class 3 (cosmetics) and
and fragrance related products under London-based luxury lin-
class 25 (fashion). Substantially the entire €106 million purchase
gerie brand, Agent Provocateur. The agreement commenced on
price for the assets acquired (approximately $118 million), includ-
August 1, 2013 and is subject to certain minimum advertising
ing approximately $5.4 million in acquisition related expenses,
expenditures as is customary in our industry. The Company
was allocated to trademarks with indefinite lives including approx-
took over distribution of selected fragrances within the brand’s
imately $21 million of which was allocated to fashion trademarks.
existing perfume portfolio and launched its first fragrances un-
An additional $4.4 million was paid for related inventory.
der the Agent Provocateur brand in 2014.
CoaCH
sHanGHaI TanG
In April 2015, the Company, through its majority owned Paris-based
In July 2013, the Company created a wholly-owned Hong
subsidiary, Interparfums SA, entered into an 11-year exclusive
Kong subsidiary, Inter Parfums USA Hong Kong Limited,
worldwide license with Coach, Inc. to create, produce and distribute
which entered into a 12-year exclusive worldwide license to
new men’s and women’s fragrances and fragrance related products
create, produce and distribute fragrances and fragrance re-
under the Coach brand name. Interparfums SA will distribute these
lated products under China’s leading luxury brand, Shanghai
fragrances globally to department stores, specialty stores and duty
Tang. The agreement commenced on July 1, 2013 and is
free shops, as well as in Coach retail stores beginning in 2016. The
subject to certain minimum sales, advertising expenditures
agreement is subject to certain minimum sales, advertising expen-
and royalty payments as are customary in our industry. In
ditures and royalty payments as are customary in our industry.
2015, the Company launched its initial men’s and women’s
fragrance collection under the Shanghai Tang brand.
abeRCRoMbIe & fITCH anD HollIsTeR
In December 2014, the Company entered into a 7-year exclusive
(4) inventories
worldwide license to create, produce and distribute new fragranc-
December 31,
es and fragrance related products under the Abercrombie & Fitch
and Hollister brand names. The Company will distribute these
fragrances internationally in specialty stores, department stores
Raw materials and
component parts
Finished goods
and duty free shops, and in the U.S., in duty free shops and po-
tentially in Abercrombie & Fitch and Hollister retail stores. The
2015
$30,569
67,777
$98,346
2014
$36,383
65,943
$102,326
agreement is subject to certain minimum sales, advertising ex-
Overhead included in inventory aggregated $3.7 million and
penditures and royalty payments as are customary in our industry.
$3.3 million as of December 31, 2015 and 2014, respec-
New men’s and women’s scents are planned for Hollister in 2016
tively. Included in inventories is an inventory reserve, which
along with a new men’s scent for Abercrombie & Fitch. A women’s
represents the difference between the cost of the inventory
Abercrombie & Fitch scent is in the works for 2017.
and its estimated realizable value, based upon sales forecasts
osCaR De la RenTa
and the physical condition of the inventories. In addition, and
as necessary, specific reserves for future known or anticipat-
In October 2013, the Company entered into a 12-year exclusive
ed events may be established. Inventory reserves aggregated
worldwide license to create, produce and distribute fragrances
$6.6 million and $6.0 million as of December 31, 2015 and
and fragrance related products under the Oscar de la Renta
2014, respectively.
notes to consolidated financial statements
(in thousands except share and per share data)
91
(5) fair Value of financial instruments
The following tables present our financial assets and liabilities that are measured at fair value on a recurring basis and are categorized using
the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.
fair ValUe measUrements at decemBer 31, 2015
Quoted Prices In Active Markets
Significant Other
Significant
for Identical Assets
Observable Inputs Unobservable Inputs
Total
(Level 1)
(Level 2)
(Level 3)
Assets
Short-term investments
$82,847
Foreign currency forward exchange contracts
not accounted for using hedge accounting
123
$82,970
Liabilities
–
–
–
$82,847
123
$82,970
–
–
–
Interest rate swaps 1,026 – 1,026 –
fair ValUe measUrements at decemBer 31, 2014
Quoted Prices In Active Markets
Significant Other
Significant
for Identical Assets
Observable Inputs Unobservable Inputs
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Short-term investments $190,152
Liabilities
Foreign currency forward exchange contracts
not accounted for using hedge accounting 355
–
–
$190,152
355
–
–
The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables,
accounts payable and accrued expenses approximates fair value due to the short terms to maturity of these instruments. The carrying amount of
loans payable approximates fair value as the variable interest rates on the Company’s indebtedness approximate current market rates.
Foreign currency forward exchange contracts are valued based on quotations from financial institutions and the value of interest rate
swaps are the discounted net present value of the swaps using third party quotes from financial institutions.
(6) derivative financial instruments
The Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denom-
inated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a
foreign currency. In connection with the Rochas acquisition, $108 million of the purchase price was paid in cash on the
closing date and was financed entirely through a 5-year term loan. As the payment at closing was due in dollars and we
had planned to finance it with debt in euro, the Company entered into foreign currency forward contracts to secure the
exchange rate for the $108 million purchase price at $1.067 per 1 euro. This derivative was designated and qualified as
a cash flow hedge. The Company did not have any other derivatives under hedge accounting during the three-year period
ended December 31, 2015.
Gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying in-
come statements and were immaterial in each of the years in the three-year period ended December 31, 2015. For the year ended
December 31, 2015, interest expense includes a loss of $1.0 million relating to an interest rate swap.
All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest
rate swaps resulted in a liability which is included in long-term debt on the accompanying balance sheet as of December 31, 2015. The
valuation of foreign currency forward exchange contracts not accounted for using hedge accounting in 2015 resulted in an asset
and is included in other current assets, and at December 31, 2014, such valuation resulted in a liability and is included in accrued
INTER PARFUMS, INC. 2015 ANNUAL REPORT
92
expenses on the accompanying balance sheet. Generally, increas-
Amortization expense was $5.8 million, $6.6 million and $6.2
es or decreases in the fair value of derivative instruments will be
million in 2015, 2014 and 2013, respectively. Amortization ex-
recognized as gains or losses in earnings in the period of change. If
pense is expected to approximate $6.0 million in 2016 and 2017,
the derivative instrument is designated and qualifies as a cash flow
and $4.9 million in 2018, 2019 and 2020. The weighted average
hedge, the changes in fair value of the derivative instrument will be
amortization period for trademarks, licenses and other intangible
recorded as a separate component of shareholders’ equity.
assets with finite lives are 18 years, 14 years and 2 years, respec-
At December 31, 2015, the Company had foreign currency
tively, and 14 years in the aggregate.
contracts in the form of forward exchange contracts with notional
There were no impairment charges for trademarks with indefinite use-
amounts of approximately U.S. $12.8 million, GB £1.6 million and
ful lives in 2015, 2014 and 2013. The fair values used in our evaluations
JPY ¥50.0 million, which all have maturities of less than one year.
are estimated based upon discounted future cash flow projections using
(7) equipment and leasehold improvements
are based upon a number of assumptions, including, future sales levels
a weighted average cost of capital of 8.02%. The cash flow projections
December 31,
Equipment
Leasehold Improvements
Less accumulated
depreciation and amortization
2015 2014
$27,757
$26,006
1,631
29,388
1,581
27,587
and future cost of goods and operating expense levels, as well as eco-
nomic conditions, changes to our business model or changes in consum-
er acceptance of our products which are more subjective in nature. The
Company believes that the assumptions the Company has made in pro-
jecting future cash flows for the evaluations described above are reason-
20,055
$9,333
18,400
$9,187
able and currently no impairment indicators exist for our indefinite-lived
assets. However, if future actual results do not meet our expectations, the
Depreciation and amortization expense was $3.3 million in both
Company may be required to record an impairment charge, the amount
2015 and 2014, $4.9 million in 2013.
of which could be material to our results of operations.
The cost of trademarks, licenses and other intangible assets with
(8) trademarks, licenses and other intangible assets
finite lives is being amortized by the straight line method over the
2015
Trademarks
Gross Accumulated
Net Book
term of the respective license or the intangible assets estimated use-
Amount
Amortization
Value
ful life which range from three to twenty years. If the residual value of
a finite life intangible asset exceeds its carrying value, then the asset
(indefinite lives)
$119,459
$–
$119,459
is not amortized. The Company reviews intangible assets with finite
Trademarks
lives for impairment whenever events or changes in circumstances
(finite lives)
42,046
61
41,985
indicate that the carrying amount may not be recoverable.
Licenses
Trademarks (finite lives) primarily represent Lanvin brand names and
(finite lives)
66,082
28,994
37,088
trademarks and in connection with their purchase, Lanvin was granted
Other intangible assets
(finite lives)
Subtotal
Total
12,366
120,494
$239,953
9,563
38,618
$38,618
2,803
81,876
$201,335
the right to repurchase the brand names and trademarks in 2025 for
the greater of €70 million (approximately $76 million) or one times the
average of the annual sales for the years ending December 31, 2023
and 2024 (residual value). Because the residual value of the intang ble
asset exceeds its carrying value, the asset is not amortized.
2014
Trademarks
Gross Accumulated Net Book
Amount
Amortization
Value
(9) loans payable – Banks
Loans payable – banks consist of the following:
(indefinite lives)
$4,252
$–
$4,252
The Company and its domestic subsidiaries have available a
Trademarks
$20 million unsecured revolving line of credit due on demand,
(finite lives)
46,889
53
46,836
which bears interest at the prime rate minus 0.5% (the prime rate
Licenses
(finite lives)
Other intangible assets
72,171
26,976
45,195
a maturity date of December 18, 2016 is expected to be renewed
was 3.5% as of December 31, 2015). The line of credit which has
on an annual basis. Borrowings outstanding pursuant to lines of
(finite lives)
Subtotal
Total
11,572
130,632
9,324
2,248
credit were zero as of December 31, 2015 and 2014.
36,353
94,279
The Company’s foreign subsidiaries have available credit lines,
$134,884
$36,353
$98,531
including several bank overdraft facilities totaling approximately
notes to consolidated financial statements
(in thousands except share and per share data)
93
$27 million. These credit lines bear interest at EURIBOR plus be-
2032. In connection with certain of these license agreements, the
tween 0.5% and 0.8% (EURIBOR was minus 0.1% at December
Company is subject to minimum annual advertising commitments,
31, 2015). Outstanding amounts were zero as of December 31,
minimum annual royalties and other commitments as follows:
2015, and $0.3 million as of December 31, 2014.
The weighted average interest rate on short-term borrowings was
zero as of December 31, 2015 and 0.8% as of December 31, 2014.
(10) long-term debt
In June 2015, the Company financed its Rochas brand acquisition
2016
2017
2018
2019
2020
with a $111 million, 5-year term loan payable in equal quarterly
Thereafter
installments plus interest. This term loan requires the maintenance
of certain financial covenants, tested semi-annually, including a
$101,067
$114,136
$109,995
$113,091
$114,100
$353,070
$905,459
maximum leverage ratio and a minimum interest coverage ratio. The
Future advertising commitments are estimated based on planned
facility also contains new debt restrictions among other standard
future sales for the license terms that were in effect at December 31,
provisions. The Company is in compliance with all of the covenants
2015, without consideration for potential renewal periods. The above fig-
and other restrictions of the debt agreements. In order to reduce
ures do not reflect the fact that our distributors share our advertising
exposure to rising variable interest rates, the Company entered into
obligations. Royalty expense included in selling, general, and adminis-
a swap transaction effectively exchanging the variable interest rate
trative expenses, aggregated $33.8 million, $35.6 million and $40.5
to a fixed rate of approximately 1.2%. The swap is a derivative in-
million, in 2015, 2014 and 2013, respectively, and represented 7.2%,
strument and is therefore recorded at fair value and changes in fair
7.1% and 7.2% of net sales for the years ended December 31, 2015,
value are reflected in the accompanying consolidated statements of
2014 and 2013.
income. Maturities of long-term debt subsequent to December 31,
2015 are approximately $22 million per year through 2019 and,
(12) equity
$11 million in 2020.
(11) commitments
leases
sHaRe-baseD PaYMenTs:
The Company maintains a stock option program for key employ-
ees, executives and directors. The plans, all of which have been
approved by shareholder vote, provide for the granting of both non-
The Company leases its office and warehouse facilities under oper-
qualified and incentive options. Options granted under the plans
ating leases which are subject to various step rent provisions, rent
typically have a six-year term and vest over a four to five-year peri-
concessions and escalation clauses expiring at various dates through
od. The fair value of shares vested in 2015 and 2014 aggregated
2023. Escalation clauses are not material and have been excluded
$0.8 million and $0.7 million, respectively. Compensation cost, net
from minimum future annual rental payments. Rental expense, which
of estimated forfeitures, is recognized on a straight-line basis over
is calculated on a straight-line basis, amounted to $9.9 million, $10.1
the requisite service period for the entire award. Forfeitures are
million and $10.8 million in 2015, 2014 and 2013, respectively.
estimated based on historic trends. It is generally the Company’s
Minimum future annual rental payments are as follows:
policy to issue new shares upon exercise of stock options.
2016
2017
2018
2019
2020
Thereafter
lICense aGReeMenTs
$5,512
$5,285
$4,913
$4,470
$3,765
$8,743
$32,688
The Company is party to a number of license and other agreements
vested or forfeited
for the use of trademarks and rights in connection with the manu-
Nonvested options –
facture and sale of its products expiring at various dates through
end of year
The following table sets forth information with respect to
nonvested options for 2015:
Weighted Average
Grant Date
Fair Value
Number of Shares
Nonvested options –
beginning of year
Nonvested options
granted
Nonvested options
385,505
158,300
(128,955)
414,850
$7.14
$5.99
6.65
$6.86
INTER PARFUMS, INC. 2015 ANNUAL REPORT
94
The effect of share-based payment expenses decreased
At December 31, 2015, options for 178,045 shares were
income statement line items as follows:
available for future grant under the plans. The aggregate
Year Ended December 31, 2015 2014 2013
Income before –
intrinsic value of options outstanding is $1.7 million as of
December 31, 2015 and unrecognized compensation cost re-
lated to stock options outstanding aggregated $2.7 million,
income taxes $800 $900 $800
which will be recognized over the next five years.
Net Income attributable
The weighted average fair values of options granted by Inter Par-
to Inter Parfums, Inc. 500 500 500
fums, Inc. during 2015, 2014 and 2013 were $5.99, $7.42 and
Diluted earnings per share
attributable to
$9.20 per share, respectively, on the date of grant using the Black-
Scholes option pricing model to calculate the fair value.
Inter Parfums, Inc. 0.01 0.01 0.01
The assumptions used in the Black-Scholes pricing model are
set forth in the following table:
The following tables summarize stock option activity and
Year Ended December 31,
Weighted average expected
stock-price volatility
Weighted average expected
option life
Weighted average risk-free
interest rate
Weighted average
dividend yield
2015
2014
2013
33%
34%
37%
5.0 yrs
5.0 yrs
5.0 yrs
1.7%
1.7%
1.7%
2.1%
1.8%
2.7%
related information for the years ended December 31,2015,
2014 and 2013:
Year Ended December 31,
2015 Options
Shares under option-
Weighted Average
Exercise Price
639,495
158,300
(80,685)
(7,810)
$23.19
23.79
13.82
27.77
beginning of year
Options granted
Options exercised
Options cancelled
Shares under option-
end of year
Year Ended December 31,
2014 Options
Shares under option-
beginning of year 643,595
139,250
Options granted
(136,640)
(6,710)
Options cancelled
Options exercised
Shares under option-
end of year 639,495
709,300
$24.34
Company’s common stock. The expected term of the option is esti-
Expected volatility is estimated based on historic volatility of the
Weighted Average
Exercise Price
mated based on historic data. The risk-free rate is based on the U.S.
Treasury yield curve in effect at the time of the grant of the option
and the dividend yield reflects the assumption that the dividend
payout as authorized by the Board of Directors would maintain its
$19.58
current payout ratio as a percentage of earnings.
27.93
11.19
19.37
$23.19
Proceeds, tax benefits and intrinsic value related to
stock options exercised were as follows:
2015
2014 2013
Year Ended December 31,
Proceeds from stock
options exercised
excluding cashless
Year Ended December 31,
Weighted Average
exercise of $0.5 million,
2013 Options
Exercise Price
$0.6 million and
Shares under option-
beginning of year
Options granted
Options exercised
Options cancelled
Shares under option-
716,235
136,350
(204,240)
(4,750)
$0.7 million in 2015,
$14.41
2014 and 2013,
34.84
11.68
17.47
respectively $653 $953 $1,668
Tax benefits 260 670 700
Intrinsic value of
stock options
exercised
$1,137 $2,733
$4,088
end of year 643,595 $19.58
notes to consolidated financial statements
(in thousands except share and per share data)
95
The following table summarizes additional stock option infor-
maining contractual life of options exercisable is 2.54 years. The
mation as of December 31, 2015:
aggregate intrinsic value of options exercisable at December 31,
Options
Outstanding
Weighted
Average
Remaining
2015 is $1.3 million.
The Chief Executive Officer and the President each exercised
19,000, 32,875 and 28,500 outstanding stock options of the Com-
pany’s common stock in 2015, 2014 and 2013, respectively. The
aggregate exercise prices of $0.5 million in 2015, $0.6 million in
Exercise
Number
Contractual
Options
2014 and $0.7 million in 2013 were paid by them tendering to
Prices Outstanding
92,880
$15.59
2,000
$17.07
189,370
$19.03 - $19.33
3,000
$21.76
$22.20
4,000
144,300
$23.61
14,000
$25.82
130,100
$27.80
2,000
$29.36
3,500
$32.12
124,150
$35.75
709,300
Totals
Life Exercisable
71,380
1,125
142,290
1,000
1,600
–
–
26,020
500
875
49,660
294,450
2.00 years
1.08 years
2.14 years
2.09 years
3.09 years
6.00 years
4.80 years
5.00 years
3.69 years
3.09 years
4.00 years
3.82 years
the Company in 2015, 2014 and 2013, an aggregate of 18,764,
19,656 and 18,880 shares, respectively, of the Company’s common
stock, previously owned by them, valued at fair market value on the
dates of exercise. All shares issued pursuant to these option exercis-
es were issued from treasury stock of the Company. In addition, the
Chief Executive Officer tendered in 2015, 2014 and 2013 an addi-
tional 1,299, 3,112 and 2,573 shares, respectively, for payment of
certain withholding taxes resulting from his option exercises.
DIVIDenDs
The quarterly dividend of $4.0 million ($0.13 per share) declared
in December 2015 was paid in January 2016. Furthermore, in
January 2016, the Board of Directors of the Company authorized
a 15% increase in the annual dividend to $0.60 per share. The
As of December 31, 2015, the weighted average exercise price
next quarterly dividend of $0.15 per share will be paid on April
of options exercisable was $21.93 and the weighted average re-
15, 2016 to shareholders of record on March 31, 2016.
(13) net income attributable to inter parfums, inc. common shareholders
Net income attributable to Inter Parfums, Inc. per common share (“basic EPS”) is computed by dividing net income attributable to
Inter Parfums, Inc. by the weighted average number of shares outstanding. Net income attributable to Inter Parfums, Inc. per share
assuming dilution (“diluted EPS”), is computed using the weighted average number of shares outstanding, plus the incremental
shares outstanding assuming the exercise of dilutive stock options and warrants using the treasury stock method.
The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows:
Year Ended December 31,
Numerator for diluted earnings per share
2015 2014 2013
29,436 39,211
30,437
Denominator:
Weighted average shares
Effect of dilutive securities: stock options
Denominator for diluted earnings per share
Earnings per share:
Net income attributable to Inter Parfums, Inc. common shareholders:
30,996,137
104,078
31,100,215
30,931,308
30,763,955
129,018
31,060,326
189,927
30,953,882
Basic
$1.27
Diluted 0.98 1.27
$0.95
0.95
$0.98
Not included in the above computations is the effect of anti-dilutive potential common shares, which consist of outstanding
options to purchase 272,000, 130,000, and 32,000 shares of common stock for 2015, 2014, and 2013, respectively.
INTER PARFUMS, INC. 2015 ANNUAL REPORT
96
(14) segments and Geographical areas
The Company manufactures and distributes one product line, fragrances and fragrance related products. The Company manages its
business in two segments, European based operations and United States based operations. The European assets are located, and
operations are primarily conducted, in France. Both European and United States operations primarily represent the sale of prestige
brand name fragrances. Information on the Company’s operations by segments is as follows:
Year Ended December 31,
net sales:
2015
2014 2013
(141)
$468,540 $499,261 $563,579
United States
Europe
Eliminations of intercompany sales
net income attributable to inter parfums, inc.:
United States
Europe
$105,851
362,911
(222)
$105,270
394,164
(173)
$99,158
464,562
$7,640
$22,797
–
$8,069
$21,367
$6,806
32,392
Eliminations
– 13
$30,437 $29,436 $39,211
depreciation and amortization expense:
United States $1,583 $1,554 $1,216
Europe 7,495 8,612 9,894
$9,078 $10,166 $11,110
interest and dividend income:
United States
Europe
interest expense:
United States
Europe
income tax expense:
United States
Europe
Eliminations
total assets:
United States
additions to long-lived assets:
United States
total long-lived assets:
United States
deferred tax assets:
United States
Europe
$18
2,977
$2,995
$2
2,824
$2,826
$3,923
17,604
–
$21,527
$3
3,885
$3,888
$73
1,405
$1,478
$4,643
14,727
–
$19,370
$80,761
616,199
$78,740
535,049
$16
4,424
$4,440
$13
1,367
$1,380
$4,512
25,159
9
$29,680
$76,980
$1,283
122,663
$13,133
197,535
$365
6,817
–
$1,165
$7,629
$13,433
$13,823
$396
6,452
$341
6,916
Europe
596,153
Eliminations of investment in subsidiary (9,301) (9,283) (9,075)
$687,659 $604,506 $664,058
Europe
5,155
$123,946 $4,224 $12,784
3,059
Europe
112,864
$210,668 $107,718 $126,687
94,285
Eliminations
–
$7,182 $6,848 $7,257
–
notes to consolidated financial statements
(in thousands except share and per share data)
97
segments and Geographical areas continued
United States export sales were approximately $66.3 million, $61.0 million and $58.8 million in 2015, 2014 and 2013,
respectively. Consolidated net sales to customers by region are as follows:
Year Ended December 31,
North America
Europe
Central and South America
Middle East
Asia
Other
2015 2014 2013
$125,700
$125,900
$145,900
170,600
177,900
41,100
57,700
41,900
78,200
11,000
$468,500
$499,300
$563,600
215,700
11,900
85,600
40,300
50,600
98,700
43,300
9,400
Consolidated net sales to customers in major countries are as follows:
Year Ended December 31, 2015 2014 2013
$122,000 $119,000 $142,000
United States
$32,000
United Kingdom
$37,000 $46,000
$34,000
France
$50,000 $47,000
(15) income taxes
The Company or its subsidiaries file income tax returns in the U.S. federal, and various states and foreign jurisdictions.
The Company assessed its uncertain tax positions and determined that it has no uncertain tax position at December 31, 2015.
The components of income before income taxes consist of the following:
Year Ended December 31,
U.S. operations
Foreign operations
2015 2014 2013
$12,712 $11,340
$11,564
44,003 69,306
48,932
$56,715 $80,646
$60,496
The provision for current and deferred income tax expense (benefit) consists of the following:
Year Ended December 31,
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Total income tax expense
2015 2014 2013
$3,660
220
16,806
20,686
30
1
810
841
$21,527
$4,374 $3,638
323 454
15,229 20,744
19,926 24,836
(84)
370
30 59
4,415
(502)
(556)
4,844
$19,370 $29,680
INTER PARFUMS, INC. 2015 ANNUAL REPORT
98
The tax effects of temporary differences that give rise to
Differences between the United States Federal statutory income
significant portions of the deferred tax assets and deferred
tax rate and the effective income tax rate were as follows:
2015
2014
2015
2013
Year Ended December 31,
Statutory rates 34.0% 34.0% 34.0%
State and local taxes,
2014
tax liabilities are as follows:
December 31,
net deferred tax assets:
Foreign net operating loss
carry-forwards
Inventory and accounts receivable
Profit sharing
Stock option compensation
Effect of inventory profit
elimination
Other
Total gross deferred tax assets, net
Valuation allowance
Net deferred tax assets
296
2,321
2,442
717
2,170
(468)
7,478
(296)
7,182
deferred tax liabilities (long-term):
Trademarks and licenses (3,746)
–
Other
(3,746)
$3,436
Total deferred tax liabilities
Net deferred tax assets
net of Federal benefit
Effect of foreign taxes
greater than
0.2
0.1
0.4
1.6
U.S. statutory rates
(0.2)
Other
Effective rates 35.6%
0.4 2.0
(0.3) 0.4
34.2%
36.8%
419
2,655
2,570
545
1,757
(16) accumulated other comprehensive income (loss)
(679)
The components of accumulated other comprehensive income
7,267
(loss) consists of the following:
(419)
6,848
(2,154)
–
(2,154)
$4,694
2013
2014
Year Ended December 31, 2015
Net derivative instruments,
beginning of year $– $– $240
Transfer from OCI into
earnings – – (240)
Net derivative instruments,
end of year – – –
Cumulative translation
Valuation allowances are provided for foreign net op -
erating loss carr y-for wards, as future profitable oper-
adjustments,
ations from certain foreign subsidiaries might not be
sufficient to realize the full amount of net operating loss
carr y-forwards.
(15,823)
beginning of year
12,258
Translation adjustments (32,268) (41,683) 13,602
Cumulative translation
25,860
No other valuation allowances have been provided as
management believes that it is more likely than not that
the asset will be realized in the reduction of future taxable
adjustments,
end of year (48,091) (15,823)
Accumulated other
25,860
income.
comprehensive income
The French Tax Authorities have examined the 2012 tax return
(loss)
($48,091)
$(15,823)
$25,860
of Interparfums, SA and issued a $6.9 million tax adjustment.
It is the Company’s position that the French Tax Authorities are
(17) net income attributable to inter parfums, inc.
incorrect in their assessments. The Company believes that it
and transfers from the noncontrolling interest
has strong arguments to support its tax positions and that more
likely than not, its tax positions will be sustained. The Company
will vigorously contest the assessments.
Year Ended December 31, 2015 2014 2013
Net income attributable
The Company is no longer subject to U.S. federal, state, and
to Inter Parfums, Inc. $30,437
$29,436
$39,211
local or non-U.S. income tax examinations by tax authorities
Decrease in
for years before 2012.
The Company has not provided for U.S. deferred income
taxes on $352 million of undistributed earnings of its
non-U.S. subsidiaries as of December 31, 2015 since the
Inter Parfums, Inc.’s
additional paid-in capital
for subsidiary share
transactions (192)
Company intends to reinvest most of these earnings in its
Change from net income
foreign operations indefinitely and the Company believes
attributable to
it has sufficient foreign tax credits available to offset any
Inter Parfums, Inc.
(335)
(173)
potential tax on amounts that have been and are planned
to be repatriated.
and transfers from
noncontrolling interest $30,245 $29,101 $39,038
directors and executive officers
99
directors and execUtiVe officers
DIReCToRs
Jean madar
Jean madar
Chief Executive Officer,
Chief Executive Officer,
eXeCUTIVe offICeRs
CoRPoRaTe InfoRMaTIon
inter parfums, inc.
551 Fifth Avenue
and Chairman of the Board of Directors
and Chairman of the Board of Directors
New York, NY 10176
Inter Parfums, Inc.
Inter Parfums, Inc.
Tel. (212) 983-2640
Fax: (212) 983-4197
philippe Benacin
philippe Benacin
www.interparfumsinc.com
President, and Vice Chairman of the
President, and Vice Chairman of the
Board of Directors, Inter Parfums, Inc.
Board of Directors, Inter Parfums, Inc.
interparfums sa
Chief Executive Officer,
Chief Executive Officer,
4 Rond Point des Champs Elysées
Interparfums SA
Interparfums SA
russell Greenberg
russell Greenberg
Executive Vice President,
Executive Vice President,
75008 Paris, France
Tel. (1) 53-77-00-00
Fax: (1) 40-76-08-65
and Chief Financial Officer
and Chief Financial Officer
auditors
Inter Parfums, Inc.
Inter Parfums, Inc.
philippe santi
Executive Vice President
Director General Delegue
Interparfums SA
henry B. clarke
President,
Inter Parfums USA, LLC
transfer agent
WeiserMazars, LLP
135 West 50th Street
New York, NY 10020
American Stock Transfer
and Trust Company
6201 15th Avenue
Brooklyn, NY 11219
francois heilbronn
Executive Vice President
Managing Partner M.M. Friedrich,
Director General Delegue
Heilbronn & Fiszer
Interparfums SA
philippe santi
Jean levy
frédéric Garcia-pelayo
Business Consultant - Former President
Director of Export Sales
and Chief Executive Officer, Cosmair
Interparfums SA
Former President and Chief Executive
Officer, Sanofi Beauté (France)
robert Bensoussan-torres
Co-founder of Sirius Equity, a retail
and branded luxury goods
investment company
patrick choël
Business Consultant and Former
President and Chief Executive Officer
Parfums Christian Dior
and the LVMH Perfume and
Cosmetics Division
michel dyens
Chairman, and Chief Executive Officer,
Michel Dyens & Co.
INTER PARFUMS, INC. 2015 ANNUAL REPORT 100
corporate and market information
THe MaRKeT foR oUR CoMMon sToCK
Our Company’s common stock, $.001 par value per share, is traded
basis and in January 2015, our Board of Directors authorized an
on The Nasdaq Global Select Market under the symbol “IPAR”. The
8% increase in the annual dividend to $0.52 per share.
following table sets forth in dollars, the range of high and low closing
In January 2016, our Board of Directors authorized a 15% in-
prices for the past two fiscal years for our common stock.
crease in the cash dividend to $0.60 per share on an annual basis.
High Closing Low Closing
April 15, 2016 to shareholders of record on March 31, 2016.
The next quarterly cash dividend of $0.15 per share is payable on
fiscal 2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Price Price
22.33
33.45
29.97
35.22
23.40
34.83
22.73
29.37
foRM 10K
a copy of the company’s 2015 annual report on form 10-k, as
filed with the securities and exchange commission, is available
without charge to shareholders upon request (except for exhibits)
to: inter parfums, inc. 551 fifth avenue new york, ny 10176
Fiscal 2014 Price Price
High Closing Low Closing
attention: corporate secretary.
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
29.98
31.39
36.78
37.74
24.81
25.62
27.59
30.38
CoRPoRaTe PeRfoRManCe GRaPH
The following graph compares the performance for the periods in-
dicated in the graph of our common stock with the performance of
the Nasdaq Market Index and the average performance of a group
of the Company’s peer corporations consisting of: Avon Products
As of February 23, 2016, the number of record holders,
Inc., CCA Industries, Inc., Colgate-Palmolive Co., Elizabeth Arden,
which include brokers and broker’s nominees, etc., of our
Inc., Estee Lauder Companies, Inc., Inter Parfums, Inc., Kimberly
common stock was 45. We believe there are approximately
Clark Corp., Natural Health Trends Corp., Revlon, Inc., Spectrum
8,200 beneficial owners of our common stock.
Brands, Inc., Stephan Company, Summer Infant, Inc., The Procter
DIVIDenDs
& Gamble Company and United Guardian, Inc. The graph assumes
that the value of the investment in our common stock and each
In January 2014, our Board of Directors determined to maintain
index was $100 at the beginning of the period indicated in the
the quarterly dividend of $0.12 per share, or $0.48 on an annual
graph, and that all dividends were reinvested.
comparison 0f 5 year cUmUlatiVe total retUrn*
among inter parfums, inc., the nasdaq composite index, and a peer Group
*$100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Below is the list of the data points for each year that corresponds to the lines on the above graph
Inter Parfums, Inc.
NASDAQ Composite
Peer Group
12/10
100.00
100.00
100.00
12/11
84.09
100.53
109.19
12/12
107.11
116.92
118.26
12/13
203.00
166.19
148.15
12/14
158.14
188.78
167.04
12/15
139.80
199.95
158.65