annual report
two thousand sixteen
2016
Table of ConTenTs
Financial Highlights 02
Letter to our Shareholders 04
The Company 08
The Products 14
The Organization 60
INTER PARFUMS, INC. 2016 ANNUAL REPORT 2
financial
Highlights
$654.1
$131.1
$407.2
$381.5
$382.1
$370.4
$365.6
$563.6
$521.1
$499.3
$468.5
$39.2
$33.3
$29.4
$30.4
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
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
258,787
66,678
67,074
Net Income Attributable to the
9,917
Noncontrolling Interest
Net Income Attributable to Inter Parfums, Inc. 33,331
Net Income Attributable to Inter Parfums, Inc.
Common Shareholders’ per Share:
Basic
Diluted
Weighted 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
1.07
1.07
31,072
31,176
15,341
161,828
94,202
337,977
682,409
–0–
74,562
370,391
0.62
2016
2015
2014
2013
2012
$521,072
194,601
$468,540
179,069
$499,261
$563,579
$654,117
212,224
234,800
246,931
228,268
61,203
60,496
8,532
30,437
0.98
0.98
30,996
31,100
9,078
176,967
82,847
337,674
687,659
–0–
98,606
365,587
0.52
233,634
250,025
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
–0–
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
–0–
325,799
278,414
274,765
45,754
131,136
4.29
4.26
30,575
30,716
15,554
307,335
– 0–
366,680
759,920
27,776
–0–
382,065
407,211
381,476
0.48
0.96
0.32
INTER PARFUMS, INC. 2016 ANNUAL REPORT
4
2016
letter to our
Shareholders
dear fellow shareholders,
2016 was another year of growth and accomplishment and
• S, G & A expense as a percentage of sales was 49.7% com-
one in which we continued to build a strong foundation to
pared to 48.7%.
support future growth. Among the highlights of the past
• Net income attributable to Inter Parfums, Inc. was $33.3
year are:
million or $1.07 per diluted share compared to $30.4 million
• Strong top line growth across all but one geographic market;
or $0.98 per diluted share in 2015.
• Market share gain;
• Improved profitability; and,
• Our business generated cash flows from operating activ-
ities of approximately $54.6 million, up from $50.1 million
• Better than expected initial results from new portfolio brand
in 2015.
launches including Coach, Abercrombie & Fitch and Hollister.
• We closed the year with working capital of $338 million in-
financial oVerView
cluding approximately $256 million in cash, cash equivalents
and short-term investments, resulting in a working capital ra-
• Net sales rose 11.2% to $521.1 million from $468.5 million
tio of nearly 3.4 to 1.
in 2015, at comparable foreign currency exchange rates, net
• At year-end, long-term debt including current maturities ag-
sales rose 12.1% year-over-year.
gregated $74.6 million, which related to the remainder of the
• Sales by European based operations were $404.0 million,
debt incurred in connection with the May 2015 acquisition of
up 11% from $362.7 million in 2015, in comparable foreign
the Rochas brand.
currency exchange rates, net sales for European based opera-
tions were up 12.5%.
With expectations for continued growth and consistent
• U.S. based operations generated net sales of $117.1 mil-
cash flows, coupled with an exceptionally strong balance
lion, up 11% from $105.8 million in 2015.
sheet, in October 2016, our Board of Directors deemed it
• Gross margin was 62.7% compared to 61.8% in 2015.
appropriate to increase our regular quarterly cash dividend,
letter to shareholders
5
and Spain continues in 2017 as well as in important markets
for the brand such as China and Japan. In the fall, we are
unveiling a new men’s scent. Our timing couldn’t be better as
the Coach brand has successfully undergone a major trans-
formation, revitalization and repositioning, and as is now em-
blematic of one of the most important industry trends known
as “democratic luxury,” which translates into expensive, but
not jet-setting over-the-top extravagant. Every indicator points
to Coach becoming one of our largest brands and therefore an
important addition to our brand portfolio.
Another new brand, Rochas, achieved 2016 sales of $32.3
million selling only legacy scents. Mademoiselle Rochas, our first
new fragrance under the Rochas brand, launches in 2017 where
we plan to unlock the untapped potential of this sleeping beauty
of a brand. Our ad campaign features Swiss born actress Noémie
Schmidt, currently one of leading ladies on the BBC series, Ver-
sailles. Distribution will be in two phases – 12 countries in the
first half, including the brand’s largest markets of France and
Spain, followed by round two starting in the second half. As the
owner of the Rochas brand, our goal is to restore the brand’s de-
sirability, reestablish Rochas as a Parisian luxury house, modern-
ize the outdated classic image of the current lines and broaden
the target customer.
Philippe Benacin and Jean Madar
Our largest brand, Montblanc, had an exceptional year with
sales climbing 25% to approximately $122 million, resulting
in a five-year compound annual growth rate for the brand of
this time by 13% to $0.17 per share, or $0.68 per share
23.2%. To our own surprise, Legend Spirit, a new flanker in
annually. This marks the fifth increase in our quarterly cash
our consistently popular Montblanc Legend fragrance family,
dividend since 2010.
was a major contributor to the increase in brand sales. The
Our two largest markets achieved exceptional growth
brand’s Lady Emblem has begun to get traction as well, es-
in 2016. In Western Europe, sales grew by 23.5%, and in
pecially in the Middle East and South America. Capitalizing
North America, sales increased 19% year-over-year. In Asia,
upon the Legend loyalty, we will welcome still another exten-
our third largest market, sales were 4% ahead of 2015, with
sion, Legend Night, which is planned for the end of 2017 and
Korea and Japan making up some of the shortfall in China,
early 2018.
where the market remains depressed. Aggregate sales in Cen-
Sales of Jimmy Choo fragrances have achieved a five-year
tral and South America and the Middle East ran ahead of
compound annual growth rate of 17%, making it our second
2015, and the only market in which our sales declined was
largest brand. With 2016 brand sales approximating $90 mil-
Eastern Europe, owing to Russia’s economic problems result-
lion, Jimmy Choo fragrances were off a modest 2% from 2015
ing from lower oil prices and a devalued currency.
when year-over-year sales rose 18%, catalyzed by the launch
looKinG BacK and ahead
eUroPean Based oPerations
of two women’s scents and the rollout of our first men’s fra-
grance for the brand. In 2016, Jimmy Choo Illicit Flower de-
buted as a flanker for Illicit, one of the 2015 new product
One of 2016’s most promising and well-timed events for our
launches. The Jimmy Choo franchise will welcome two new
European operations was the introduction of our first Coach
members in 2017, Jimmy Choo L’Eau in the first half and Jim-
scent for women. Launched mid-year, the brand generated
my Choo Man Ice in the second half.
$23 million in sales in the second half, well ahead of expecta-
Lanvin, our third largest brand, had a down year with sales
tions. The Coach signature scent rollout in France, Germany,
off 13% primarily due to the economic slowdowns in its two
INTER PARFUMS, INC. 2016 ANNUAL REPORT 6
flagship markets of Russia and China. At the end of 2016,
indUstrY insiGhts and conclUsion
we introduced Modern Princess in limited distribution, which
We’d like to share some of our thoughts about our industry
is being followed with broader rollout in 2017 in the hopes
and our place within it. It is estimated that from 2011
of offsetting the negative geographic conditions where the
to 2016, the global fragrance market contracted at a com-
brand is most popular. Similarly, a new interpretation of the
pound annual rate of 1.3%; during that timeframe, our com-
best performing Lanvin fragrance, Éclat d’Arpège, will debut
pound annual growth rate was 11%. That says something
later in 2017.
about our ability to buck trends, gain market share and grow
As we do every year, in 2016, there were several limit-
our Company.
ed edition, brand extensions and holiday programs that we
If you Google, “fragrance launches of 2016,” a whopping
brought to market. In the brand extension category, we added
1,685 new entries appear. When it comes to fragrance, in
a new fragrance for the Van Cleef & Arpels Collection Extraor-
our opinion, new is good but longevity is better. The best
dinaire and introduced In New York, a new men’s scent for the
of breed fragrances remain on the market for years and
brand. In addition to the 2017 programs mentioned above,
some even decades fortified by extensions and flankers,
we will grow the Collection Extraordinaire by still another new
and/or with new packaging and promotion. But at the end
fragrance and for Boucheron, we have Galerie Olfactive, a six-
of the day, these fragrance gems achieve stellar returns
scent luxury collection in exclusive distribution.
on investment for their owners and our stable has many of
these thoroughbreds.
U.s. Based oPerations
We have every reason for confidence in the future of In-
The big news for U.S. operations was the launch of our two new-
ter Parfums. With our rich and diverse portfolio of brands,
est brands, Abercrombie & Fitch and Hollister, in international
we are not dependent on one or two for our growth or suc-
markets. While these well-known American brands are part of
cess. We also recognize that all brands are not created
our U.S. based operations, in the international markets, these
equal. We have an effective distribution network reaching
names are viewed as full-fledged prestige brands and are sold
100 countries, and in several of the most important mar-
in department stores, specialty stores, and travel retail. These
kets, we own or control the distribution organizations. We
brands have played a key role in the transition of our U.S. based
also have a very strong balance sheet, which, among other
operations into a far larger, more geographically diverse and in-
things, makes us an attractive partner to prospective brand
creasingly profitable prestige fragrance business. In 2016, we
owners. And of course, we have a great talent and resource
launched Wave, a Hollister fragrance duo targeted for the young-
reservoir. In fact, with 357 full-time employees worldwide,
er set. That success was the impetus behind the 2017 launch
Inter Parfums generated $521 million in sales in 2016
of another fragrance duo, Wave 2. For Abercrombie & Fitch, we
equating to almost $1.5 million in sales per employee,
introduced First Instinct for men in 2016 followed by a women’s
which we feel is quite an achievement.
version in 2017. For both brands, we couldn’t be happier with
the results thus far.
Sincerely yours,
Dunhill, our largest fragrance franchise under the U.S.
operations umbrella, with products solely for men, launched
Icon Elite in 2016, building upon the highly successful Icon
pillar. In 2017, we have Desire Extreme as well as Icon Rac-
ing, another Icon flanker debuting for the brand. We are re-
invigorating our Oscar de la Renta fragrance collection with a
new women’s scent called Bella Blanca with a launch date set
Jean madar
Philippe Benacin
for 2018, and for Anna Sui we have several brand extensions
Chairman of the Board
Vice Chairman of the Board
and an entirely new pillar called Fantasia coming to market.
Chief Executive Officer
& President
letter to shareholders
7
Jimmy Choo Illicit Flower
INTER PARFUMS, INC. 2016 ANNUAL REPORT 8
the
Company
Rochas Mademoiselle Rochas
We are InTer Parfums, InC. We oPeraTe In The fragranCe busIness, and manufaCTure, markeT and
dIsTrIbuTe a WIde array of fragranCe 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)
owner of three (3) distribution subsidiaries: Inter Parfums srl
wholly-owned United States subsidiaries, Jean Philippe
for Italy, Inter España Parfums et Cosmetiques, SL, for Spain
Fragrances, LLC and Inter Parfums USA, LLC, both New
and Interparfums Luxury Brands, Inc., a Delaware corporation
York limited liability companies, and IP Beauty, Inc. (former-
for distribution of prestige brands in the United States. In-
ly Nickel USA, Inc.), a Delaware corporation, are located at
terparfums SA is also the majority owner of Parfums Rochas
551 Fifth Avenue, New York, New York 10176, and our tele-
Spain, SL, a Spanish limited liability company, which special-
phone number is 212.983.2640. We also own 100% of Inter
izes in the distribution of Rochas fragrances, as well as the
Parfums USA Hong Kong Limited indirectly through our 100%
majority owner of Inter Parfums Gmbh, a distribution subsidi-
owned subsidiary, Inter Parfums USA, LLC.
ary for Germany. In addition, Interparfums SA is also the sole
Our consolidated wholly-owned subsidiary, Inter Parfums
owner of Interparfums (Suisse) SARL, a company formed to
Holdings, S.A., and its majority-owned subsidiary, Interpar-
hold and manage certain brand names, and Interparfums Sin-
fums SA, maintain executive offices at 4 Rond Point des
gapore Pte., Ltd., an Asian sales and marketing office.
Champs Elysees, 75008 Paris, France. Our telephone num-
Our common stock is listed on The Nasdaq Global Select
ber in Paris is 331.5377.0000. Interparfums SA is the sole
Market under the trading symbol “IPAR”. The common shares
the company
9
Abercrombie & Fitch First Instinct
of our subsidiary, Interparfums SA, are traded on the NYSE
owned subsidiary in Paris, Interparfums SA, which is also
Euronext Exchange.
a publicly traded company, as 27% of Interparfums SA
We maintain our internet website at www.interparfum-
shares trade on the NYSE Euronext.
sinc.com, which is linked to the Securities and Exchange
Our business is not capital intensive, and it is important to
Commission Edgar database. You can obtain through our
note that we do not own manufacturing facilities. We act as
website, free of charge, our annual reports on Form 10-
a general contractor and source our needed components from
K, quarterly reports on Form 10-Q, interactive data files,
our suppliers. These components are received at one of our
current reports on Form 8-K, beneficial ownership reports
distribution centers and then, based upon production needs,
(Forms 3, 4 and 5) and amendments to those reports filed
the components are sent to one of several third party fillers
or furnished pursuant to Section 13(a) of the Securities
which manufacture the finished product for us and deliver
Exchange Act of 1934 as soon as reasonably practicable
them to one of our distribution centers.
after they have been electronically filed with or furnished
Our prestige products focus on niche brands, each with
to the SEC.
a devoted following. By concentrating in markets where
We operate in the fragrance business and manufacture,
the brands are best known, we have had many successful
market and distribute a wide array of fragrance and fra-
launches. We typically launch new fragrance families for our
grance related products. We manage our business in two
brands every year or two, and more frequently seasonal and
segments, European based operations and United States
limited edition fragrances are introduced as well.
based operations. Prestige fragrance products are pro-
The creation and marketing of each product family is in-
duced and marketed by both our United States operations,
timately linked with the brand’s name, its past and present
and our European operations, the latter, through our 73%
positioning, customer base and, more generally, the prevailing
INTER PARFUMS, INC. 2016 ANNUAL REPORT 10
market atmosphere. Accordingly, we generally study the mar-
BUsiness strateGY
ket for each proposed family of fragrance products for almost
foCus on PresTIge beauTy brands
a full year before we introduce any new product into the mar-
Prestige beauty brands are expected to contribute significantly
ket. This study is intended to define the general position of
to our growth. We focus on developing and launching quality fra-
the fragrance family and more particularly its scent, bottle,
grances utilizing internationally renowned brand names. By iden-
packaging and appeal to the buyer. In our opinion, the unity
tifying and concentrating in the most receptive market segments
of these four elements of the marketing mix makes for a suc-
and territories where our brands are known, and executing highly
cessful product.
targeted launches that capture the essence of the brand, we have
As with any business, many aspects of our operations
had a history of successful launches. Certain fashion designers
are subject to influences outside our control. We discuss
and other licensors choose us as a partner, because our Company’s
in greater detail risk factors relating to our business in
size enables us to work more closely with them in the product
Item 1A of our Annual Report on Form 10-K for the fiscal
development process as well as our successful track record.
year ended December 31, 2016, and the reports that we
file from time to time with the Securities and Exchange
groW PorTfolIo brands Through
Commission.
euroPean oPeraTIons
neW ProduCT develoPmenT and markeTIng
We grow through the creation of fragrance family extensions
within the existing brands in our portfolio. Every year or two,
We produce and distribute our fragrance products primarily
we create a new family of fragrances for each brand in our
under license agreements with brand owners, and fragrance
portfolio. We frequently introduce seasonal and limited edition
product sales through our European operations represented
fragrances as well. With new introductions, we leverage our
approximately 78% of net sales for 2016. We have built
ability and experience to gauge trends in the market and fur-
a portfolio of prestige brands, which include Boucheron,
ther leverage the brand name into different product families in
Coach, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc,
order to maximize sales and profit potential. We have had suc-
Paul Smith, S.T. Dupont, Repetto, Rochas and Van Cleef &
cess in introducing new fragrance families (sub-brands, flanker
Arpels, whose products are distributed in over 100 countries
brands or flankers) within our brand franchises. Furthermore,
around the world.
we promote the smooth and consistent performance of our
With respect to the Company’s largest brands, we own the
prestige fragrance operations through knowledge of the mar-
Lanvin brand name for its class of trade, and license the
ket, detailed analysis of the image and potential of each brand
Montblanc and Jimmy Choo brand names. As a percentage of
name, a “good dose” of creativity and a highly professional
net sales, product sales for the Company’s largest brands were
approach to international distribution channels.
as follows:
Year ended December 31, 2016
23%
Montblanc
17%
12%
Jimmy Choo
Lanvin
ConTInue To add neW brands
2015
2014
To our PorTfolIo Through neW lICenses
21%
20%
15%
22%
16%
18%
or aCQuIsITIons
Prestige brands are the core of our business and we intend
to add new prestige beauty brands to our portfolio. Over the
past twenty years, we have built our portfolio of well-known
unITed sTaTes oPeraTIons
prestige brands through acquisitions and new license agree-
Prestige brand fragrance products are also marketed through
ments. We intend to further build on our success in prestige
our United States operations, and represented 22% of sales
fragrances and pursue new licenses and acquire new brands
for the year ended December 31, 2016. These fragrance
to strengthen our position in the prestige beauty market.
products are sold under trademarks owned by us or pursu-
To that end, during 2014, we signed fragrance licenses
ant to license or other agreements with the owners of brands,
for Abercrombie & Fitch and Hollister brands; in 2015, we
which include Abercrombie & Fitch, Agent Provocateur, Anna
signed fragrance licenses for Coach and French Connection,
Sui, bebe, Dunhill, Hollister, French Connection, Oscar de la
extended our Montblanc fragrance license and purchased the
Renta, and Shanghai Tang brands.
Rochas brand, and in 2016, we extended the terms of our
the company
11
Coach Coach
INTER PARFUMS, INC. 2016 ANNUAL REPORT
INTER PARFUMS, INC. 2016 ANNUAL REPORT 12
S.T. Dupont and bebe licenses. As of December 31, 2016,
payment aggregating €5.4 million (approximately $5.7 mil-
we had cash, cash equivalents and short-term investments of
lion). As a result of the buyout, we recognized a gain of $4.7
approximately $256 million, which we believe should assist
million and received the buyout payment in May 2017. As of
us in entering new brand licenses or outright acquisitions.
March 31, 2017, the three month inventory sell-off period
However, we cannot assure you that we will be able to enter
concluded and Balmain purchased all remaining inventory ag-
into any future agreements, or acquire brands or assets on
gregating $1.4 million.
terms favorable to us, or if we do, that any such transaction
will be successful. We identify prestige brands that can be
ImPaIrmenT loss
developed and marketed into a full and varied product fam-
We review intangible assets with finite lives for impair-
ilies and, with our technical knowledge and practical expe-
ment whenever events or changes in circumstances in-
rience gained over time, take licensed brand names through
dicate that the carrying amount may not be recoverable.
all phases of concept, development, manufacturing, market-
Product sales of our Karl Lagerfeld brand have not met
ing and distribution.
exPand exIsTIng PorTfolIo
InTo neW CaTegorIes
with our original expectations. As a result of our review in
2016, we recorded an impairment loss of $5.7 million as
of December 31, 2016.
We intend to selectively broaden our product offering beyond
s.T. duPonT
the fragrance category and offer other fragrance related prod-
In September 2016, we renewed our license agreement
ucts and personal care products under some of our existing
with S.T. Dupont for the creation, development and distri-
brands. We believe such product offerings meet customer
bution of fragrance products through December 31, 2019,
needs and further strengthen customer loyalty.
without any material changes in terms and conditions. Our
ConTInue To buIld
initial 11-year license agreement with S.T. Dupont was
signed in June 1997, and had previously been extended
global dIsTrIbuTIon fooTPrInT
through December 31, 2016.
Our business is a global business and we intend to con-
tinue to build our global distribution footprint. In order to
seTTlemenT WITh frenCh Tax auThorITIes
adapt to changes in the environment and our business, we
The French Tax Authorities examined the 2012 tax return
have formed and are operating distribution subsidiaries in
of Interparfums SA, and in August 2015 issued a $6.9
the major markets of the United States, Italy, Spain and
million tax adjustment. It is our position that the French
Germany for distribution of prestige fragrances. We may
Tax Authorities are incorrect in their assessments and we
look into future joint arrangements or acquire distribution
believe that we have strong arguments to support our tax
companies within other key markets to distribute certain
positions. The main issues challenged by the French Tax
of our prestige brands. While building a global distribution
Authorities related to the commission rate and royalty rate
footprint is part of our long-term strategy, we may need to
paid to Interparfums Singapore Pte. and Interparfums
make certain decisions based on the short-term needs of the
(Suisse) SARL, respectively. Interparfums Singapore Pte.
business. We believe that in certain markets, vertical inte-
and Interparfums (Suisse) SARL are wholly-owned sub-
gration of our distribution network may be one of the keys
sidiaries of Interparfums SA. Due to the subjective nature
to future growth of our Company, and ownership of such
of the issues involved, in April 2016, Interparfums SA
distribution should enable us to better serve our customers’
reached an agreement in principle to settle the entire mat-
needs in local markets and adapt more quickly as situations
ter with the French Tax Authorities. The settlement requires
may determine.
recent deVeloPments
buyouT of lICense
Interparfums SA to pay a tax assessment of $1.9 million
covering the issues for not only the 2012 tax year, but also
covering the issues for the tax years ended 2013 through
2015. The settlement also includes an agreement as to
In December 2016, we reached an agreement with the Bal-
future acceptable commission and royalty rates, which is
main brand calling for Balmain to buyout the Balmain license
not expected to have a significant impact on cash flow. The
agreement, effective December 31, 2016, in exchange for a
settlement, which was recently finalized with the French
the company
13
Tax Authorities, was accrued for in March 2016. In July
from many different suppliers located around the world.
2016, Interparfums SA paid $1.1 million to the French Tax
For United States operations, components for our pres-
Authorities upon receipt of formal notification regarding tax
tige fragrances are primarily sourced, produced and filled
years 2013 and 2014.
ProdUction and sUPPlY
The sTages of The develoPmenT
and ProduCTIon ProCess
in the United States, and our mass market products are
primarily manufactured, produced or filled in the United
States or China.
marKetinG and distriBUtion
for all fragranCes are as folloWs:
Our products are distributed in over 100 countries around
• Simultaneous discussions with perfume designers and
the world through a selective distribution network. For
creators (includes analysis of aesthetic and olfactory trends,
our
international distribution, we either contract with
target clientele and market communication approach)
independent distribution companies specializing in luxury
• Concept choice
goods or distribute prestige products through our distribution
• Produce mock-ups for final acceptance of bottles
subsidiaries. In each country, we designate anywhere from
and packaging
one to three distributors on an exclusive basis for one or more
• Receive bids from component suppliers (glass makers,
of our name brands. We also distribute our products through
plastic processors, printers, etc.)
a 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 distribution subsidiaries in the major markets
incoming components; and
of the United States, Italy, Spain and Germany. Our third
• Follow packaging and inventory control procedures.
party distributors vary in size depending on the number of
competing brands they represent. This extensive and diverse
suPPlIers Who assIsT us WITh ProduCT
network together with our own distribution subsidiaries pro-
develoPmenT InClude:
vides us with a significant presence in over 100 countries
• Independent perfumery design companies
around the world.
(Aesthete, Carré Basset, PI Design, Cent Degres)
Approximately 40% of our European based prestige fra-
• Perfumers (IFF, Givaudan, Firmenich, Robertet,
grance net sales are denominated in U.S. dollars. We address
Takasago, Mane) which create a fragrance consistent
certain financial exposures through a controlled program of
with our expectations and, that of the fragrance designers
risk management that includes the use of derivative financial
and creators
instruments. We primarily enter into foreign currency forward
• Bottle manufacturers (Pochet du Courval, Verescence,
exchange contracts to reduce the effects of fluctuating foreign
Verreries Brosse, Bormioli Luigi, Stoelzle Masnières),
currency exchange rates.
caps (Qualipac, ALBEA , RPC, Codiplas, LF Beauty,
The business of our European operations has become in-
Texen Group) or boxes (Autajon, MMPP, Nortier, Draeger)
creasingly seasonal due to the timing of shipments by our
• Production specialists who carry out packaging (CCI,
majority-owned distribution subsidiaries to their customers,
Edipar, Jacomo, SDPP, MF Productions, Biopack) or
which are weighted to the second half of the year.
logistics (Balloré Logistics for storage, order preparation
For our United States operations, we distribute product to
and shipment).
approved retailers and distributors in the United States as well
as internationally, including duty free and other travel-related
Suppliers’ accounts for our European operations are
retailers. We utilize our in house sales team to reach our third
primarily settled in euro and for our United States oper-
party distributors and customers outside the United States.
ations, suppliers’ accounts are primarily settled in U.S.
In addition, the business of our United States operations has
dollars. For our European operations, prestige fragrances,
become increasingly seasonal as shipments are weighted to-
components and contract filling needs are purchased
ward the second half of the year.
INTER PARFUMS, INC. 2016 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 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
bebe Stores
Boucheron
Coach
Dunhill
Hollister
Jimmy Choo
Karl Lagerfeld
Montblanc
December 31, 2021, plus two five-year optional terms if certain conditions are met
June 30, 2020
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, 2019
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 $74 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. 2016 ANNUAL REPORT 16
aberCrombIe & fITCh
In December 2014, we entered into a 7-year exclusive world-
Abercrombie & Fitch. A women’s version of First instinct is in
wide license to create, produce and distribute new fragrances
the works for 2017.
and fragrance related products under the Abercrombie &
Abercrombie & Fitch stands for effortless American Style.
Fitch brand name. The Company distributes these fragranc-
Since 1892, the brand has been known for its attention to
es internationally in specialty stores, high-end department
detail with designs that embody simplicity and casual luxu-
stores and duty free shops, and in the U.S., in duty free
ry. Rooted in a heritage of quality craftsmanship, Abercrom-
shops and in select Abercrombie & Fitch retail stores. In
bie and Fitch continues to bring its customers iconic, modern
2016 we launched a new men’s scent, First Instinct, for
classics with an aspirational look, feel, and attitude.
the products
17
Abercrombie & Fitch First Instinct
INTER PARFUMS, INC. 2016 ANNUAL REPORT 18
Agent Provocateur Aphrodisiaque
the products
19
agenT ProvoCaTeur
In July 2013, we entered into a 10.5-year exclusive worldwide
Agent Provocateur fragrance sales are concentrated in the
license to create, produce and distribute fragrances and fra-
United Kingdom and the Middle East.
grance related products under London-based luxury lingerie
Founded in 1994, Agent Provocateur is an iconic, global-
brand, Agent Provocateur. In 2013, we commenced distribution
ly-recognized brand, breaking new ground with every collection
of selected fragrances within the brand’s legacy fragrance port-
and rightfully earning its place as a benchmark brand in the
folio, and in 2014, we launched our first new Agent Provocateur
world of lingerie. It is a brand that is confident, sensual and ir-
scents, Fatale and Fatale Pink. In 2016, we introduced Agent
reverent. Agent Provocateur celebrates and empowers women
Provocateur Aphrodisiaque, our second fragrance family for the
with a unique brand image renowned for being provocative and
brand. Several new scents are scheduled to launch in 2017.
yet always leaving something to the imagination.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 20
anna suI
In June 2011, we entered into a 10-year exclusive worldwide
capture the brand’s very sweet feminine girly aspect, com-
fragrance license agreement to produce and distribute fragranc-
bined with touch of nostalgia, hipness and rock-and-roll.
es and fragrance related products under the Anna Sui brand.
Anna Sui’s devoted customer base, which spans the world, is
Our rights under the agreement commenced on January 1, 2012
concentrated in Asia.
when we took over production and distribution of the existing
Anna Sui product sales have declined in the past three
Anna Sui fragrance collections.
years primarily owing to the slowdown in the Chinese economy
We are working in partnership with American designer,
where the brand is especially popular. We are currently distrib-
Anna Sui, and her creative team to build upon the brand’s
uting several lines of product, including top sellers, La Vie de
growing customer appeal, and develop new fragrances that
Bohème, Romantica and Secret Wish.
the products
21
Anna Sui Fantasia
INTER PARFUMS, INC. 2016 ANNUAL REPORT 22
bebe Glam
the products
23
bebe sTores
In July 2008, we entered into an exclusive 6-year worldwide
agreement with bebe Stores, Inc., that has been renewed
through June 30, 2020, under which we design, manufacture
and supply fragrances for company-owned bebe stores in the
United States and Canada, as well as select specialty and de-
partment stores worldwide. We have incorporated bebe’s sig-
nature look into fragrances for the brand’s strong, hip, sexy,
and sophisticated clientele. Scents currently available for do-
mestic and international markets include: bebe, bebe Sheer,
bebe Gold, bebe Glam and bebe Glam 24 Karat.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 24
bouCheron
In December 2010, we entered into an exclusive 15-year
worldwide as well as an e-commerce site.
worldwide license agreement for the creation, development
Our first new fragrance under the Boucheron brand, Jaïpur
and distribution of fragrances under the Boucheron brand.
Bracelet, debuted in 2012, and Boucheron Place Vendôme,
Boucheron is the French jeweler “par excellence”. Founded
which has a beautiful glasswork bottle with a cabochon,
by Frederic Boucheron in 1858, the House has produced
the emblematic stone of House Boucheron, was released in
some of the world’s most beautiful and precious creations.
2013. In 2015, we launched a new fragrance duo for the
Today Boucheron creates jewelry and timepieces and, under
Boucheron brand around its iconic Quatre ring, Boucheron
license from global brand leaders, fragrances and sunglass-
Quatre. A six scent collection is launching under the Bouche-
es. Currently Boucheron operates through over 40 boutiques
ron brand in 2017.
the products
25
Boucheron Quatre pour Homme
INTER PARFUMS, INC. 2016 ANNUAL REPORT 26
Coach Coach
the products
27
CoaCh
In April 2015, we entered into an exclusive 11-year worldwide
innovative design. Coach is sold worldwide through Coach stores,
license with Coach, Inc. to create, produce and distribute new
select department stores and specialty stores, and through Coach’s
men’s and women’s fragrances and fragrance related products
website at www.coach.com. Coach’s common stock is traded on
under the Coach brand name. We distribute these fragrances
the New York Stock Exchange under the symbol COH and Coach’s
globally to department stores, specialty stores and duty free
Hong Kong Depositary Receipts are traded on The Stock Exchange
shops, as well as in Coach retail stores.
of Hong Kong Limited under the symbol 6388.
Coach, established in New York City in 1941, is a leading design
In 2016, we launched our first Coach fragrance, a women’s
house of modern luxury accessories and lifestyle collections with
scent, which has quickly become a top selling new prestige
a rich heritage of pairing exceptional leathers and materials with
fragrance. A men’s scent is planned for 2017.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 28
dunhIll
In December 2012, we entered into an exclusive 10-
of British men’s style, the brand continues to blend innovation
year worldwide fragrance license to create, produce and
and creativity with traditional craftsmanship.
distribute fragrances and fragrance related products under
We took over production and distribution of Dunhill legacy
the Dunhill brand.
fragrances beginning in 2013, and we introduced a legacy
The house of Dunhill was established in 1893 and since
scent flanker, Desire Black, in 2014. In 2015, we rolled out
that time has been dedicated to providing high quality
our new Dunhill scent, Icon, the success of which has made the
men’s luxury products, with core collections offered in mens-
Dunhill brand our largest and fastest growing brand within our
wear, leather goods and accessories. The brand has global
United States based operations. For 2016, we launched several
reach through a premium mix of self-managed retail outlets,
product extensions including Icon Luxury Spray Set and Icon
high-level department stores and specialty stores. Known for
Elite. In 2017, the brand’s Desire family is adding a new scent,
its commitment to elegance and innovation and being a leader
Desire Extreme, and Icon Racing will also launch in 2017.
the products
29
Dunhill Icon Collection
INTER PARFUMS, INC. 2016 ANNUAL REPORT 30
Hollister Wave for Her
the products
31
hollIsTer
In December 2014, we entered into a 7-year exclusive world-
women’s scent, Wave, for Hollister. Wave 2, a brand extension
wide license to create, produce and distribute new fragrances
for Hollister is in the works for 2017.
and fragrance related products under the Hollister brand
Hollister is the fantasy of Southern California. Inspired by
name. The Company distributes these fragrances internation-
beautiful beaches, open blue skies, and sunshine, Hollister lives
ally in specialty stores, high-end department stores and duty
the dream of an endless summer. Hollister’s laidback lifestyle
free shops, and in the U.S., in duty free shops and in select
makes every design effortlessly cool and totally accessible. Hol-
Hollister retail stores. In 2016 we launched a new men’s and
lister brings Southern California to the world.
INTER PARFUMS, INC. 2016 ANNUAL REPORT
32
JImmy Choo
In October 2009, we entered into an exclusive 12-
Our first fragrance under the Jimmy Choo brand, a signature
year worldwide
license agreement for the creation,
scent, rolled out globally in 2011. Jimmy Choo product sales ex-
development and distribution of fragrances under the
ceeded our expectations and sales topped $40 million in that first
Jimmy Choo brand.
year. In 2013, we launched our second Jimmy Choo line, Flash,
With a heritage in luxury footwear, Jimmy Choo today en-
and in 2014, we debuted Jimmy Choo Man our first men’s scent
compasses a complete luxury lifestyle accessory brand with
which ranked in 2015 as the 9th best-selling men’s fragrance in
men’s and women’s shoes, handbags, small leather goods,
the United States. In 2015, the launch of Jimmy Choo Illicit, our
sunglasses and eyewear. Its products are available in the
third women’s fragrance under that label, was the principal driver
growing network of Jimmy Choo freestanding stores as well as
for brand growth. For 2016, we debuted a new women’s flanker,
in the most prestigious department, specialty and duty free
Jimmy Choo Illicit Flower. In 2017, we have both a women’s and
stores worldwide.
men’s fragrance initiative planned for the brand.
the products
33
Jimmy Choo Man Intense
INTER PARFUMS, INC. 2016 ANNUAL REPORT 34
Karl Lagerfeld Private Klub
the products
35
karl lagerfeld
In October 2012, we entered into a 20-year worldwide license
reflects the designer’s own style and soul. Our first line, a
agreement with Karl Lagerfeld B.V., the internationally re-
premium namesake duo scent for both men and women, was
nowned haute couture fashion house, to create, produce and
launched in 2014. However, in 2015, with sales concentrated
distribute fragrances under the Karl Lagerfeld brand.
in Russia and northern Europe, re-orders were disappointing
Under the creative direction of Karl Lagerfeld, one of the
and sales of this brand declined despite the launch of Pri-
world’s most influential and iconic designers, the Lagerfeld
vate Klub, a line extension. We will attempt to reinvigorate this
Portfolio represents a modern approach to distribution, an in-
brand by changing its strategic positioning and instituting new
novative digital strategy and a global 360 degree vision that
pricing in 2017.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 36
lanvIn
In July 2007, we acquired the worldwide rights to the Lanvin
Éclat d’Arpège line accounts for approximately 50% of this
brand names and international trademarks listed in Class 3,
brand’s sales. We have extended our Lanvin fragrance fam-
our class of trade. A synonym of luxury and elegance, the
ilies, and in order to capitalize on the success of our Éclat
Lanvin fashion house, founded in 1889 by Jeanne Lanvin, ex-
d’Arpège line, in 2015, we launched Éclat d’Arpège Pour
panded into fragrances in the 1920s.
Homme as well as Éclat de Fleurs. For 2016, we released a
Lanvin is currently our third largest brand by sales vol-
new women’s line, Lanvin Modern Princess in limited distri-
ume. Lanvin fragrances occupy an important position in the
bution to be followed by broader international distribution in
selective distribution market in France, Europe and Asia.
2017. In addition, another interpretation of Éclat d’Arpège
Current lines in distribution include: Arpège, Lanvin L’Hom-
is also in the works for 2017. Lanvin brand product sales
me, Éclat d’Arpège, Rumeur 2 Rose, Jeanne Lanvin, Marry
continue to be affected by the economic slowdown in its two
Me!, Jeanne Lanvin Couture, Lanvin Me and Me L’Eau. Our
flagship markets, Russia and China.
the products
37
Lanvin Modern Princess
INTER PARFUMS, INC. 2016 ANNUAL REPORT 38
Montblanc Legend Night
the products
39
monTblanC
In October 2015, we extended our license agreement with
goods, promising growth outlook in women’s jewelry, active
Montblanc by five years. The original agreement, signed in
presence in more than 70 countries, network of more than
2010, provided us with the exclusive worldwide license rights
350 boutiques worldwide and high standards of product de-
to create, produce and distribute fragrances and fragrance re-
sign and quality, Montblanc has quickly grown to be our largest
lated products under the Montblanc brand through December
and fastest growing fragrance brand.
31, 2020. The new 10-year agreement, which went into ef-
In 2011, we launched our first new Montblanc fragrance,
fect on January 1, 2016, extends the partnership through
Legend, which quickly became our best-selling men’s line. In
December 31, 2025 without any material changes in operating
2012, we launched our first women’s fragrance under the Mont-
conditions from the prior license.
blanc brand, and our second men’s line, Emblem, was launched
Montblanc has achieved a world-renowned position in the
in 2014. Montblanc has quickly become our largest selling
luxury segment and has become a purveyor of exclusive prod-
brand. The Emblem line was expanded in 2015 to include Mont-
ucts, which reflect today’s exacting demands for timeless
blanc Emblem Intense and a new women’s scent, Lady Emblem.
design, tradition and master craftsmanship. Through its lead-
In 2016, we further extended our successful Montblanc Legend
ership positions in writing instruments, watches and leather
line with a new men’s scent, Montblanc Legend Spirit.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 40
osCar de la renTa
In October 2013, we entered into a 12-year exclusive worldwide
Oscar de la Renta is one of the world’s leading luxury goods
license to create, produce and distribute fragrances and fragrance
firms. The New York-based company was established in 1965,
related products under the Oscar de la Renta brand. In 2014,
and encompasses a full line of women’s accessories, bridal,
we took over distribution of fragrances within the brand’s legacy
childrenswear, fragrance, beauty and home goods, in addition
fragrance portfolio, and our first new women’s fragrance under
to its internationally renowned signature women’s ready to
the Oscar de la Renta brand, Extraordinary, was launched in
wear collection. Oscar de la Renta products are sold globally
2015. For 2016, in addition to several flankers that we launched
in fine department and specialty stores, www.oscardelarenta.
throughout the year in select markets, we debuted a new men’s
com and through wholesale channels. The Oscar de la Renta
fragrance family, Oscar de la Renta Gentleman. Bella Blanca, a
brand has a loyal following in the United States, Canada and
new Oscar de la Renta scent, will be introduced in 2018.
Latin America.
the products
41
Oscar de la Renta Bella Blanca
INTER PARFUMS, INC. 2016 ANNUAL REPORT 42
Paul Smith Essential
the products
43
Paul smITh
We signed an exclusive worldwide license agreement with Paul
Smith in December 1998 for the creation, development and
distribution of Paul Smith fragrances. In 2008, we extended
this license for an additional seven years through December 31,
2017, and although we cannot assure we will be successful,
we are currently in discussions to extend this license through
December 31, 2019.
Paul Smith is an internationally renowned British designer
who creates fashion with a clear identity. Paul Smith has a mod-
ern 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 Extrême,
Paul Smith Rose and Paul Smith Essential.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 44
rePeTTo
In December 2011, we entered into a 13-year exclusive world-
With Repetto boutiques in several countries throughout
wide license agreement to create, produce and distribute fra-
the world, the brand has branched out into Asia, notably
grances under the Repetto brand.
China, Hong Kong, Singapore, Thailand, South Korea and
Created in 1947 by Rose Repetto at the request of her son,
Japan with a mix of cross-generational appeal and French
dancer and choreographer Roland Petit, Repetto is today a legend-
chic. Our first Repetto fragrance line was launched in 2013
ary name in the world of dance. For a number of years it has de-
and a floral scent was added in 2015. Despite this brand’s
veloped timeless and must-have collections with a fully modernized
success with footwear, handbags and high end accessories,
signature style ranging from dance shoes, ballet slippers, flat shoes,
fragrance sales have been disappointing due to the lack of
and sandals to more recently handbags and high-end accessories.
brand recognition.
the products
45
Repetto Le Ballet Blanc
INTER PARFUMS, INC. 2016 ANNUAL REPORT 46
Rochas Mademoiselle Rochas
the products
47
roChas
In May 2015, we acquired the Rochas brand from The Procter
This acquisition opened up a new page in the Company’s
& Gamble Company. Founded by Marcel Rochas in 1925, the
history by integrating for the first time both fragrances and
brand began as a fashion house and expanded into perfumery
fashion. This is allowing us to apply a global approach to man-
in the 1950s under Hélène Rochas’ direction. This transac-
aging a fragrance brand with complete freedom in terms of
tion included all brand names and registered trademarks for
creativity and aesthetic choices, as well as a very high degree
Rochas (Femme, Madame, Eau de Rochas, etc.), mainly for
of visibility to establish a position of even greater preeminence
class 3 (cosmetics) and class 25 (fashion). Substantially the
for Rochas in the luxury goods universe. Rochas brand sales
entire €106 million purchase price for the assets acquired
currently include approximately $2 million of royalties gener-
(approximately $118 million) was allocated to trademarks with
ated by the fashion and accessory business via its portfolio of
indefinite lives, including approximately $5.4 million in acqui-
license agreements. Our first new fragrance for Rochas, Made-
sition related expenses.
moiselle Rochas, launched in the first quarter of 2017.
INTER PARFUMS, INC. 2016 ANNUAL REPORT
48
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
into a 12-year exclusive worldwide license to create, produce
through its contemporary lifestyle offer of apparel and ac-
and distribute fragrances under China’s leading luxury brand,
cessories for men, women and children, as well as home col-
Shanghai Tang. Our first Shanghai Tang fragrance collection
lections. Shanghai Tang supports an international network of
for men and women debuted in 2015.
48 boutiques, including The Shanghai Tang Mansion in Hong
Founded in 1994, Shanghai Tang is the leading Chinese
Kong, and its largest flagship Boutique, The Cathay Mansion
luxury brand with international recognition and distribution.
in Shanghai, China and on-line.
the products
49
Shanghai Tang Gold Lily
INTER PARFUMS, INC. 2016 ANNUAL REPORT 50
S.T. Dupont Collection
the products
51
s.T. duPonT
In June 1997, we signed an exclusive worldwide license agree-
a French luxury goods house founded in 1872, which is known
ment with S.T. Dupont for the creation, manufacture and dis-
for its fine writing instruments, lighters and leather goods.
tribution of S.T. Dupont fragrances. In 2011, the agreement
S.T. Dupont fragrances include: S.T. Dupont, S.T. Dupont
was renewed through December 31, 2016, and in September
Essence Pure, S.T. Dupont Passenger, S.T. Dupont Passen-
2016 was renewed again through December 31, 2019, without
ger Cruise, 58 avenue Montaigne, So Dupont and S.T. Du-
any material changes in terms and conditions. S.T. Dupont is
pont Collection.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 52
van Cleef & arPels
In September 2006, we entered into an exclusive 12-year
worldwide license agreement for the creation, development
and distribution 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, Féerie,
Collection Extraordinaire, and Rêve. In 2016, we launched a
new men’s line, In New York, and a new women’s line, So First.
Sales of the Collection Extraordinaire line have experienced
continued growth since its debut.
the products
53
Van Cleef & Arpels In New York
INTER PARFUMS, INC. 2016 ANNUAL REPORT 54
the products
55
INTER PARFUMS, INC. 2016 ANNUAL REPORT 56
Rochas Mademoiselle Rochas
quarterly financial data
57
qUarterlY data: (UnaUdited)
for the Year ended decemBer 31, 2016
(In Thousands, Except Per Share Data)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Full Year
Net Sales $111,522 $117,157
74,428
Gross Margin
7,729
71,317
9,448
Net Income
$157,622
94,832
21,479
$134,771
85,894
4,592
$521,072
326,471
43,248
Net Income Attributable to
Inter Parfums, Inc.
Net Income Attributable to
Inter Parfums, Inc. per Share:
Basic
Diluted
Average Common Shares Outstanding:
Basic
Diluted
7,334
5,831
16,239
3,927
33,331
$0.24
$0.24
31,039
31,115
$0.19
$0.19
31,055
31,160
$0.52
$0.52
31,080
31,197
$0.13
$0.13
31,072
31,231
$1.07
$1.07
31,072
31,176
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
$109,249
$102,021
$138,944
$118,326
$468,540
67,610
13,305
60,325
5,520
85,826
75,710
18,634
1,510
289,471
38,969
Net Sales
Gross Margin
Net Income
Net Income Attributable to
Inter Parfums, Inc.
10,007
4,351
14,220
1,859
30,437
Net Income Attributable to
Inter Parfums, Inc. per Share:
Basic
Diluted
Average Common Shares Outstanding:
Basic
Diluted
$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
INTER PARFUMS, INC. 2016 ANNUAL REPORT
norTh amerICa
29%
United States export sales were approximately $77.5 mil-
lion, $66.3 million and $61.0 million in 2016, 2015 and
2014, respectively. Consolidated net sales to customers by
region are as follows:
Year Ended December 31,
consolidated net sales to cUstomers BY reGion
(in thousands)
2016
$149,600
192,800
North America
2014
$125,900
$125,700
170,600
177,900
2015
Europe
CenTral & souTh
amerICa
8%
Central and
South America
Middle East
Asia
Other
41,100
57,700
41,900
40,300
78,200
85,600
43,900
42,200
81,600
11,000
11,000
$521,100 $468,500
consolidated net sales to cUstomers
in maJor coUntries are as follows:
(in thousands)
Year Ended December 31,
2016
United States
United Kingdom
France
2015
$144,000 $122,000
32,000
31,000
43,000
34,000
11,900
$499,300
2014
$119,000
37,000
50,000
euroPe
37%
asIa
16%
mIddle easT
8%
INTER PARFUMS, INC. 2016 ANNUAL REPORT 60
the
Organization
all CorPoraTe funCTIons,
oPeraTIons:
Including product analysis and development, production and
Daniel Kline and Alex Canavan in the United States, and Axel
sales, and finance are coordinated at the Company’s corpo-
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
61
simPlified chart of the orGaniZation
philippe benacin
jean madar
inter parfums, inc.
(nasdaq - “ipar”)
public
shareholders
interparfums
holdings, sa
jean philippe
fragrances, llc
inter parfums
usa, llc
inter parfums
usa hong kong ltd
interparfums sa
(euronext – paris)
interparfums
luxury
brands, inc.
interparfums
(suisse) sarl
interparfums
singapore
pte, ltd
interparfums
deutschland
gmbh
(germany)
parfums rochas
spain, sl
pãna
inter es
pa
rfums
et cosmetiques, sl
(spain)
interparfums
srl
(italy)
INTER PARFUMS, INC. 2016 ANNUAL REPORT 62
ConTenTs
Management’s Discussion and Analysis of
Financial Condition and Results of Operations 63
Report on Internal Control Over Financial Reporting 75
Reports of Independent Registered Public Accounting Firm 76
Notes to Consolidated Financial Statements 83
Financial Statements 78
Directors and Executive Officers 98
Corporate and Market Information 99
management’s discussion and analysis
of financial condition and results of operations
63
management’s discussion
and analysis of
financial condition and
Results of Operations
manaGement’s discUssion and analYsis of
financial condition and resUlts of oPerations
regulaTIon s-k ITem 10(e)
Regulation S-K, Item 10(e), “Use of Non-GAAP Financial
We produce and distribute our European based fragrance
Measures in commission filings,” prescribes the conditions
products primarily under license agreements with brand own-
for use of non-GAAP financial information in filings with the
ers, and European based fragrance product sales represented
Securities and Exchange Commission.
approximately 79%, 77% and 82% of net sales for 2016, 2015
Our reported results include a provision of $1.9 million
and 2014, respectively. We have built a portfolio of prestige
($1.4 million net of noncontrolling interests) for income taxes
brands, which include Balmain, Boucheron, Coach, Jimmy
resulting from a pending nonrecurring tax settlement. Due to
Choo, Karl Lagerfeld, Lanvin, Montblanc, Paul Smith, S.T. Du-
the significance of this transaction, as well as its nonrecurring
pont, Repetto, Rochas and Van Cleef & Arpels, whose products
nature, exclusion of such amount in the non-GAAP financial
are distributed in over 100 countries around the world.
measures provides a more complete disclosure and facilitates
With
respect
to
the Company’s
largest brands,
a more accurate comparison of current results to historic re-
we own the Lanvin brand name for its class of trade, and
sults. Based upon the foregoing, we believe that our presen-
license the Montblanc and Jimmy Choo brand names.
tation of the non-GAAP financial information is an important
As a percentage of net sales, product sales for the Compa-
supplemental measure of operating performance to investors.
ny’s largest brands were as follows:
overvIeW
We operate in the fragrance business, and manufacture, mar-
ket and distribute a wide array of fragrances and fragrance
related products. We manage our business in two segments,
European based operations and United States based opera-
Year ended December 31, 2016
23%
Montblanc
17%
12%
Jimmy Choo
Lanvin
2015
2014
21%
20%
15%
22%
16%
18%
tions. Certain prestige fragrance products are produced and
Through our United States operations we also market fra-
marketed by our European operations through our 73% owned
grance and fragrance related products. United States opera-
subsidiary in Paris, Interparfums SA, which is also a publicly
tions represented 22%, 23% and 21% of net sales in 2016,
traded company as 27% of Interparfums SA shares trade on
2015 and 2014, respectively. These fragrance products are
the NYSE Euronext.
sold primarily pursuant to license or other agreements with
INTER PARFUMS, INC. 2016 ANNUAL REPORT
64
the owners of the Abercrombie & Fitch, Agent Provocateur,
Our reported net sales are impacted by changes in foreign
Anna Sui, Banana Republic, bebe, Dunhill, French Connection,
currency exchange rates. A strong U.S. dollar has a negative im-
Hollister, Oscar de la Renta, and Shanghai Tang brands.
pact on our net sales. However, earnings are positively affected
Quarterly sales fluctuations are influenced by the timing of
by a strong dollar, because approximately 40% of net sales
new product launches as well as the third and fourth quarter
of our European operations are denominated in U.S. dollars,
holiday season. In certain markets where we sell directly to re-
while almost all costs of our European operations are incurred
tailers, seasonality is more evident. We sell directly to retailers
in euro. Our Company addresses certain financial exposures
in France as well as through our own distribution subsidiaries
through a controlled program of risk management that includes
in Italy, Germany, Spain and the United States.
the use of derivative financial instruments. We primarily enter
We grow our business in two distinct ways. First, we grow by
into foreign currency forward exchange contracts to reduce the
adding new brands to our portfolio, either through new licenses
effects of fluctuating foreign currency exchange rates. We are
or other arrangements or out-right acquisitions of brands. Sec-
also carefully monitoring currency trends in the United King-
ond, we grow through the introduction of new products and
dom as a result of the volatility created from the United King-
by supporting new and established products through adver-
dom’s decision to exit the European Union. We have evaluated
tising, merchandising and sampling as well as by phasing out
our current pricing models and currently we do not expect any
existing products that no longer meet the needs of our con-
significant pricing changes. However, if the devaluation of the
sumers. The economics of developing, producing, launching
British Pound worsens, it may affect future gross profit margins
and supporting products influence our sales and operating
from sales in the territory. We do not expect any material losses
performance each year. Our introduction of new products may
on accounts receivables to be collected in British Pounds as we
have some cannibalizing effect on sales of existing products,
routinely hedge those amounts.
which we take into account in our business planning.
Our business is not capital intensive, and it is important to
recent imPortant eVents
note that we do not own manufacturing facilities. We act as a
buyouT of lICense
general contractor and source our needed components from our
In December 2016, the Company reached an agreement
suppliers. These components are received at one of our dis-
with the Balmain brand calling for Balmain to buyout the
tribution centers and then, based upon production needs, the
Balmain license agreement, effective December 31, 2016,
components are sent to one of several third party fillers, which
in exchange for a payment aggregating €5.4 million (approxi-
manufacture the finished product for us and then deliver them
mately $5.7 million). As a result of the buyout, the Company
to one of our distribution centers.
recognized a gain of $4.7 million and expects to receive the
As with any global business, many aspects of our opera-
buyout payment by April 30, 2017. The Company has a three
tions are subject to influences outside our control. We believe
month inventory sell-off period ending March 31, 2017 and
we have a strong brand portfolio with global reach and poten-
Balmain has also agreed to purchase all remaining inventory
tial. As part of our strategy, we plan to continue to make in-
and tangible assets.
vestments behind fast-growing markets and channels to grow
market share.
ImPaIrmenT loss
During 2016, the economic and political uncertainty and
The Company reviews intangible assets with finite lives for impair-
financial market volatility taking place in Eastern Europe, the
ment whenever events or changes in circumstances indicate that
Middle East and China had a small negative impact on our
the carrying amount may not be recoverable. Product sales of our
business, and at this time we do not believe it will signifi-
Karl Lagerfeld brand have not met with our original expectations.
cantly affect our overall business for the foreseeable future.
As a result of our review in 2016, the Company recorded an im-
However, if the degree of uncertainty or volatility worsens or
pairment loss of $5.7 million as of December 31, 2016.
is prolonged, then there will likely be a negative effect on on-
going consumer confidence, demand and spending and as a
s.T. duPonT
result, our business. Currently, we believe general economic
In September 2016, we renewed our license agreement with
and other uncertainties still exist in select markets in which
S.T. Dupont for the creation, development and distribution
we do business, and we continue to monitor global economic
of fragrance products through December 31, 2019, without
uncertainties and other risks that may affect our business.
any material changes in terms and conditions. Our initial
management’s discussion and analysis
of financial condition and results of operations
65
11-year license agreement with S.T. Dupont was signed
revenue reCognITIon
in June 1997, and had previously been extended through
We sell our products to department stores, perfumeries, spe-
December 31, 2016.
cialty stores, and domestic and international wholesalers and
distributors. Sales of such products by our domestic subsidiar-
seTTlemenT WITh frenCh Tax auThorITIes
ies are denominated in U.S. dollars and sales of such products
As previously reported, the French Tax Authorities examined
by our foreign subsidiaries are primarily denominated in either
the 2012 tax return of Interparfums SA, and in August 2015
euro or U.S. dollars. We recognize revenues when merchandise
issued a $6.9 million tax adjustment. It is the Company’s
is shipped and the risk of loss passes to the customer. Net
position that the French Tax Authorities are incorrect in their
sales are comprised of gross revenues less returns, trade dis-
assessments and the Company believes that it has strong
counts and allowances.
arguments to support its tax positions. The main issues chal-
lenged by the French Tax Authorities related to the commis-
aCCounTs reCeIvable
sion rate and royalty rate paid to Interparfums Singapore Pte.
Accounts receivable represent payments due to the Company for
and Interparfums (Suisse) SARL, respectively. Interparfums
previously recognized net sales, reduced by allowances for sales
Singapore Pte. and Interparfums (Suisse) SARL are whol-
returns and doubtful accounts. Accounts receivable balances
ly-owned subsidiaries of Interparfums SA. Due to the subjec-
are written-off against the allowance for doubtful accounts when
tive nature of the issues involved, in April 2016, Interparfums
they become uncollectible. Recoveries of accounts receivable
SA reached an agreement in principle to settle the entire
previously recorded against the allowance are recorded in the
matter with the French Tax Authorities. The settlement re-
consolidated statement of income when received. We generally
quires Interparfums SA to pay a tax assessment of $1.9
grant credit based upon our analysis of the customer’s financial
million covering the issues for not only the 2012 tax year,
position as well as previously established buying patterns.
but also covering the issues for the tax years ended 2013
through 2015. The settlement also includes an agreement as
sales reTurns
to future acceptable commission and royalty rates, which is
Generally, we do not permit customers to return their unsold
not expected to have a significant impact on cash flow. The
products. However, for U.S. distribution of our prestige prod-
settlement, which is subject to formal documentation with
ucts, we allow returns if properly requested, authorized and
the French Tax Authorities, was accrued for in March 2016.
approved. We regularly review and revise, as deemed necessary,
In July 2016, Interparfums SA paid $1.1 million to the French
our estimate of reserves for future sales returns based primarily
Tax Authorities upon receipt of formal notification regarding
upon historic trends and relevant current data, including infor-
tax years 2013 and 2014.
mation provided by retailers regarding their inventory levels. In
addition, as necessary, specific accruals may be established
discUssion of critical accoUntinG Policies
for significant future known or anticipated events. The types
We make estimates and assumptions in the preparation of
of known or anticipated events that we have considered, and
our financial statements in conformity with accounting prin-
will continue to consider, include, but are not limited to, the
ciples generally accepted in the United States of America.
financial condition of our customers, store closings by retailers,
Actual results could differ significantly from those estimates
changes in the retail environment and our decision to contin-
under different assumptions and conditions. We believe the
ue to support new and existing products. We record estimated
following discussion addresses our most critical accounting
reserves for sales returns as a reduction of sales, cost of sales
policies, which are those that are most important to the por-
and accounts receivable. Returned products are recorded as in-
trayal of our financial condition and results of operations.
ventories and are valued based upon estimated realizable value.
These accounting policies generally require our manage-
The physical condition and marketability of returned products
ment’s most difficult and subjective judgments, often as
are the major factors we consider in estimating realizable value.
a result of the need to make estimates about the effect of
Actual returns, as well as estimated realizable values of returned
matters that are inherently uncertain. Management of the
products, may differ significantly, either favorably or unfavor-
Company has discussed the selection of significant ac-
ably, from our estimates, if factors such as economic condi-
counting policies and the effect of estimates with the Audit
tions, inventory levels or competitive conditions differ from
Committee of the Board of Directors.
our expectations.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 66
InvenTorIes
results do not meet our expectations, we may be required to
Inventories are stated at the lower of cost and net realizable
record an impairment charge, the amount of which could be
value. Cost is principally determined by the first-in, first-out
material to our results of operations.
method. We record adjustments to the cost of inventories
At December 31, 2016 indefinite-lived intangible assets
based upon our sales forecast and the physical condition of
aggregated $115.8 million. The following table presents the
the inventories. These adjustments are estimates, which could
impact a change in the following significant assumptions
vary significantly, either favorably or unfavorably, from actual
would have had on the calculated fair value in 2016 assuming
results if future economic conditions or competitive condi-
all other assumptions remained constant:
tions differ from our expectations.
eQuIPmenT and oTher long-lIved asseTs
$ in millions
Equipment, which includes tools and molds, is recorded at
Weighted average cost of capital
cost and is depreciated on a straight-line basis over the esti-
Weighted average cost of capital
mated useful lives of such assets. Changes in circumstances
Future sales levels
such as technological advances, changes to our business
Future sales levels
model or changes in our capital spending strategy can re-
increase
(decrease)
change to fair value
+10%
-10%
+10%
-10%
$(16.2)
$ 20.0
$ 17.0
$(17.0)
sult in the actual useful lives differing from our estimates.
Intangible assets subject to amortization are evaluated
In those cases where we determine that the useful life of
for impairment testing whenever events or changes in cir-
equipment should be shortened, we would depreciate the net
cumstances indicate that the carrying amount of an amortiz-
book value in excess of the salvage value, over its revised re-
able intangible asset may not be recoverable. If impairment
maining useful life, thereby increasing depreciation expense.
indicators exist for an amortizable intangible asset, the un-
Factors such as changes in the planned use of equipment,
discounted future cash flows associated with the expected
or market acceptance of products, could result in shortened
service potential of the asset are compared to the carrying
useful lives.
value of the asset. If our projection of undiscounted future
We evaluate indefinite-lived intangible assets for impair-
cash flows is in excess of the carrying value of the intangible
ment at least annually during the fourth quarter, or more fre-
asset, no impairment charge is recorded. If our projection
quently when events occur or circumstances change, such as
of undiscounted future cash flows is less than the carrying
an unexpected decline in sales, that would more likely than
value of the intangible asset, an impairment charge would
not indicate that the carrying value of an indefinite-lived in-
be recorded to reduce the intangible asset to its fair value.
tangible asset may not be recoverable. When testing indef-
The cash flow projections are based upon a number of as-
inite-lived intangible assets for impairment, the evaluation
sumptions, including future sales levels and future cost of
requires a comparison of the estimated fair value of the asset
goods and operating expense levels, as well as economic
to the carrying value of the asset. The fair values used in our
conditions, changes to our business model or changes in
evaluations are estimated based upon discounted future cash
consumer acceptance of our products which are more sub-
flow projections using a weighted average cost of capital of
jective in nature. In those cases where we determine that
6.2%. The cash flow projections are based upon a number
the useful life of long-lived assets should be shortened, we
of assumptions, including, future sales levels and future cost
would amortize the net book value in excess of the salvage
of goods and operating expense levels, as well as economic
value (after testing for impairment as described above), over
conditions, changes to our business model or changes in con-
the revised remaining useful life of such asset thereby in-
sumer acceptance of our products which are more subjective
creasing amortization expense. We believe that the assump-
in nature. If the carrying value of an indefinite-lived intangible
tions we have made in projecting future cash flows for the
asset exceeds its fair value, an impairment charge is recorded.
evaluations described above are reasonable. Product sales
We believe that the assumptions we have made in project-
of our Karl Lagerfeld brand have not met with our original
ing future cash flows for the evaluations described above are
expectations. During the fourth quarter of 2016, the Com-
reasonable and currently no impairment indicators exist for
pany decided that it will most likely exercise its rights for
our indefinite-lived intangible assets. However, if future actual
an early termination of the Karl Lagerfeld license in 2024,
management’s discussion and analysis
of financial condition and results of operations
67
rather than continue the license through its original expira-
monitor the instruments. Variables that are external to us such
tion in 2032. As a result of the shortened expected life of
as social, political and economic risks may have an impact on
the license, the Company recorded an impairment loss of
our hedging program and the results thereof.
$5.7 million as of December 31, 2016.
In determining the useful life of our Lanvin brand names
InCome Taxes
and trademarks, we applied the provisions of ASC topic
The Company accounts for income taxes using an asset and
350-30-35-3. The only factor that prevented us from de-
liability approach that requires the recognition of deferred tax
termining that the Lanvin brand names and trademarks were
assets and liabilities for the expected future tax consequences
indefinite life intangible assets was Item c. “Any legal, reg-
of events that have been recognized in its financial statements
ulatory, or contractual provisions that may limit the useful
or tax returns. The net deferred tax assets assume sufficient
life.” The existence of a repurchase option in 2025 may limit
future earnings for their realization, as well as the continued
the useful life of the Lanvin brand names and trademarks to
application of currently anticipated tax rates. Included in net
the Company. However, this limitation would only take ef-
deferred tax assets is a valuation allowance for deferred tax
fect if the repurchase option were to be exercised and the
assets, where management believes it is more-likely-than-not
repurchase price was paid. If the repurchase option is not
that the deferred tax assets will not be realized in the relevant
exercised, then the Lanvin brand names and trademarks are
jurisdiction. If the Company determines that a deferred tax
expected to continue to contribute directly to the future cash
asset will not be realizable, an adjustment to the deferred tax
flows of our Company and their useful life would be consid-
asset will result in a reduction of net income at that time. In
ered to be indefinite.
addition, the Company follows the provisions of uncertain tax
With respect to the application of ASC topic 350-30-35-8,
positions as addressed in ASC topic 740.
the Lanvin brand names and trademarks would only have a
finite life to our Company if the repurchase option were exer-
QuanTITaTIv e analysIs
cised, and in applying ASC topic 350-30-35-8, we assumed
During the three-year period ended December 31, 2016, we
that the repurchase option is exercised. When exercised, Lan-
have not made any material changes in our assumptions un-
vin has an obligation to pay the exercise price and the Compa-
derlying these critical accounting policies or to the related
ny would be required to convey the Lanvin brand names and
significant estimates. The results of our business underlying
trademarks back to Lanvin. The exercise price to be received
these assumptions have not differed significantly from our
(Residual Value) is well in excess of the carrying value of the
expectations.
Lanvin brand names and trademarks, therefore no amortiza-
While we believe the estimates we have made are prop-
tion is required.
derIvaTIves
er and the related results of operations for the period are
presented fairly in all material respects, other assumptions
could reasonably be justified that would change the amount
We account for derivative financial instruments in accor-
of reported net sales, cost of sales, and selling, general and
dance with ASC topic 815, which establishes accounting
administrative expenses as they relate to the provisions for
and reporting standards for derivative instruments, includ-
anticipated sales returns, allowance for doubtful accounts
ing certain derivative instruments embedded in other con-
and inventory obsolescence reserves. For 2016, had these
tracts, and for hedging activities. This topic also requires
estimates been changed simultaneously by 5% in either di-
the recognition of all derivative instruments as either assets
rection, our reported gross profit would have increased or
or liabilities on the balance sheet and that they are mea-
decreased by approximately $0.5 million and selling, general
sured at fair value.
and administrative expenses would have changed by approx-
We currently use derivative financial instruments to hedge
imately $0.02 million. The collective impact of these chang-
certain anticipated transactions and interest rates, as well
es on 2016 operating income, net income attributable to
as receivables denominated in foreign currencies. We do not
Inter Parfums, Inc., and net income attributable to Inter Par-
utilize derivatives for trading or speculative purposes. Hedge
fums, Inc. per diluted common share would be an increase
effectiveness is documented, assessed and monitored by
or decrease of approximately $0.5 million, $0.2 million and
employees who are qualified to make such assessments and
$0.01, respectively.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 68
resUlts of oPerations
neT sales
(in millions)
Years Ended December 31,
European-based ongoing brand
product sales
United States-based product sales
Total net sales
2016
$404.0
117.1
$521.1
% Change
2015
% Change
2014
11%
11%
11%
$362.7
105.8
$468.5
(8)%
1%
(6)%
$394.0
105.3
$499.3
Net sales increased 11% in 2016 to $521.1 million, as com-
It was anticipated that 2015 was going to be very challeng-
pared to $468.5 million in 2015. At comparable foreign
ing from a currency perspective for our European based oper-
currency exchange rates, net sales increased 12%. Net sales
ations. The significant strength of the U.S. dollar began early
decreased 6% in 2015 to $468.5 million, as compared to
on in 2015, and continued throughout the year. As mentioned
$499.3 million in 2014. At comparable foreign currency ex-
above, the average U.S. dollar/euro exchange rate for all of 2015
change rates, net sales increased 1.5%. The average U.S.
was 1.11, as compared to 1.33 for 2014. The currency impact
dollar/euro exchange rates were 1.11 in 2016 and 2015 and
was most apparent with our three largest brands, led by Jimmy
1.33 in 2014.
Choo, where brand sales for 2015 increased 41% in local cur-
European based prestige product sales increased 11% in
rency, but only 18% in dollars, as compared to 2014. The excel-
2016 to $404.0 million, as compared to $362.7 million in
lent performance in Jimmy Choo fragrance sales reflects robust
2015. At comparable foreign currency exchange rates, Euro-
gains from the Jimmy Choo Man line, and the launch of Jimmy
pean based prestige product sales increased 12.5%. Euro-
Choo Illicit, the brand’s third women’s fragrance initiative. With
pean based prestige product sales decreased 8% in 2015 to
only a new line extension launched for the Lanvin brand in 2015,
$362.7 million, as compared to $394.0 million in 2014. At
sales were off only 6% in local currency, but 21% in dollars, in
comparable foreign currency exchange rates, European based
2015 as compared to 2014. Montblanc brand sales increased
prestige product sales increased 1.8% in 2015.
6% in local currency but declined 12% in dollars in 2015, as
In 2016, Montblanc, our largest brand, continued to lead
compared to 2014. The brand benefited from both established
the way in sales growth reaching $121.7 million in brand sales,
scents, such as Legend and Emblem along with initial sales for
a 25% increase from the prior year. The successful launch of
the Lady Emblem line. The most disappointing performance was
Montblanc Legend Spirit and the continued popularity of the
that of the Karl Lagerfeld brand, which saw brand sales decline
original Legend line were important contributors to Montblanc
43% in local currency or 53% in dollars, as its initial 2014
brand sales. Our newer brands were also contributors to the
launch did not gain the traction originally anticipated.
increase in net sales. Coach brand sales, which commenced in
Irrespective of the strong U.S. dollar environment, we main-
the second half of 2016, were well ahead of expectations gen-
tain confidence in our future as we continue to strengthen ad-
erating $23.1 million in incremental sales. Strong demand for
vertising and promotional investments supporting all portfolio
the Eau de Rochas and Rochas Man lines in Spain and France
brands, accelerate brand development and build upon the
contributed to the successful integration of Rochas, and brand
strength of our worldwide distribution network. For 2017, our
sales aggregated $32.3 million in 2016. We began consolidat-
first new product for Rochas, a women’s fragrance, will be in-
ing brand sales when we acquired Rochas in June 2015. In the
troduced early in the year, initially in about 12 countries. Also
absence of a major new product launch, Jimmy Choo fragrance
this winter, Lanvin Modern Princess, which recently debuted in
sales declined 2% in 2016 as the bar was set unusually high
France, will roll out in wider international distribution. A multi-
in 2015 when brand sales were up 18% compared to the pre-
scent collection for Boucheron is now in selective distribution,
ceding year. Lanvin brand sales declined 13% in 2016 as that
and come this spring, we have important new initiatives unveil-
brand’s product sales continue to be affected by the economic
ing for the Jimmy Choo signature scent for women and Jimmy
slowdowns in its two flagship markets of Russia and China.
Choo Man, with a brand extension for each. A fragrance duo is
We hope to reverse that trend with the recent launch of a new
in the pipeline for the Karl Lagerfeld brand next summer, and
scent by Lanvin, Modern Princess.
our first men’s scent for Coach will launch in the fall.
management’s discussion and analysis
of financial condition and results of operations
69
United States based product sales increased 11% in 2016
In 2016, we continued to feel the effect of negative market
to $117.1 million, as compared to $105.8 million in 2015.
conditions in Eastern Europe, the Middle East and China, while
International distribution of our first new Abercrombie & Fitch
Western Europe and North America continued to perform well.
men’s scent, First Instinct, and the Hollister duo, Wave, were
For 2015 compared to 2014, the results demonstrate the ef-
major contributors to our top line growth in 2016 as they were
fect of negative market conditions in China and South America.
rolled out into several international markets throughout the
The 2015 decline in Western Europe includes the effect of the
year. Dunhill, which launched its Icon fragrance line in ear-
17% devaluation of the euro against the dollar and the difficult
ly 2015, continues to be a consistent top performing brand.
comparison for Karl Lagerfeld brand sales in 2015 compared to
Sales increased 4% in 2016 despite a difficult comparison
the initial launch of that brand in the 2014 period.
to 2015, where Dunhill brand sales were up 37% compared
to the prior year. The success of the 2015 launch of Dunhill
Icon has enabled Dunhill to quickly become the largest brand
within our United States operations.
Although Oscar de la Renta brand sales had increased
18% in 2015, benefitting from the 2015 launch of Extraor-
dinary by Oscar de la Renta, sales of this brand decreased
28% in 2016 due to large part to the absence of any major
gross margIns
(In millions)
Years ended December 31, 2016
$521.1
Net sales
194.6
Cost of sales
$326.5
Gross margin
Gross margin as a
2015
$468.5
179.0
$289.5
2014
$499.3
212.3
$287.0
product launch. For the Spring of 2017, we have a new Os-
percent of net sales
62.7%
61.8%
57.5%
car de la Renta woman’s scent ready to launch. In addition,
sales of Anna Sui fragrances continued to be depressed due
As a percentage of net sales, gross profit margins were 62.7%,
to negative market conditions in China throughout the 2014
61.8%, and 57.5% in 2016, 2015 and 2014, respectively. For
to 2016 periods. We hope to reverse this trend and anticipate
European operations, gross profit margin was 66%, 65% and
either stable sales or modest growth for Anna Sui fragrances
60% in 2016, 2015 and 2014, respectively. The margin fluctu-
for 2017.
ation as a percentage of sales for European operations in 2016,
For 2017, we expect our newest brands Abercrombie & Fitch
as compared to 2015, is primarily the result of increased product
and Hollister, to lead our growth story. Overall, growth within
sales, much of which was through our distribution subsidiaries
our United States based operations is expected to come from
that sell product directly to retailers. In addition to increased sales
our prestige fragrance licenses, by launching new products
of Montblanc and Coach product sold through our United States
and pursuing expanded distribution.
distribution subsidiary, the Rochas brand was a major contributor
Lastly, we hope to benefit our worldwide operations from
as its sales are concentrated in France and Spain, both of which
our strong financial position to potentially acquire one or more
are countries where we distribute directly to retailers.
brands, either on a proprietary basis or as a licensee. Howev-
We carefully monitor movements in foreign currency ex-
er, we cannot assure you that any new license or acquisition
change rates as almost 40% of our European based opera-
agreements will be consummated.
tions net sales is denominated in U.S. dollars, while most of
2015
$125.7
123.6
neT sales To CusTomers by regIon
(In millions)
Years ended December 31, 2016
$149.6
North America
152.6
Western Europe
40.3
Eastern Europe
43.9
Central & South America
42.2
81.5
11.0
$521.1
Middle East
Other
Asia
our costs are incurred in euro. From a margin standpoint, a
strong U.S. dollar has a positive effect on our gross margin
while a weak U.S. dollar has a negative effect. The average
2014
dollar/euro exchange rate was 1.11 in 2016 and 2015 and
$125.9
1.33 in 2014. Although currency fluctuation had only a minor
130.9
effect on gross margin as a percentage of sales in our Europe-
47.0
41.1
41.9
78.2
47.0
57.7
40.3
85.6
an operations for 2016, in 2015 it was the primary cause of
the gross margin fluctuation.
For United States operations, gross profit margin was
50% for both 2016 and 2015 and 48% in 2014. Sales
11.0
11.9
growth in recent years for our United States operations has
$468.5
$499.3
primarily come from higher margin prestige product licenses
INTER PARFUMS, INC. 2016 ANNUAL REPORT
70
while sales of other lower margin fragrance products have
spending to support new product launches and continued world-
been in a decline.
wide building of brand awareness for our brand portfolio.
Costs relating to purchase with purchase and gift with pur-
Royalty expense included in selling, general and adminis-
chase promotions are reflected in cost of sales and aggregat-
trative expenses aggregated $37.8 million, $33.8 million and
ed $30.0 million, $25.4 million and $24.4 million in 2016,
$35.6 million in 2016, 2015 and 2014, respectively. Royalty
2015 and 2014, respectively, and represented 5.8%, 5.4%
expense as a percentage of sales represented 7.3%, 7.2%
and 4.9% of net sales, respectively.
and 7.1% of net sales in 2016, 2015 and 2014, respectively.
Generally, we do not bill customers for shipping and han-
The small increases are the result of increased licensing ac-
dling costs and such costs, which aggregated $5.1 million,
tivities within our U.S. operations.
$4.7 million and $5.2 million in 2016, 2015 and 2014, re-
Service fees, which are fees paid to third parties relating
spectively, are included in selling, general and administrative
to the activities of our distribution subsidiaries, aggregated
expenses in the consolidated statements of income. As such,
$9.9 million, $12.3 million and $11.1 million in 2016, 2015
our Company’s gross margins may not be comparable to other
and 2014, respectively. Service fees decreased in 2016 as a
companies, which may include these expenses as a compo-
result of our U.S. distribution subsidiary, Interparfums Luxury
nent of cost of goods sold.
Brands, Inc.’s 2016 conversion to an in-house sales team
model. However, much of this savings was mitigated by an
sellIng, general & admInIsTraTIve exPenses
increase in compensation costs of the in-house sales team.
(In millions)
Years ended December 31, 2016
Selling, general &
administrative expenses $258.8 $228.3 $233.6
Selling, general &
2015 2014
administrative expenses
Approximately two-thirds of the 2015 increase in service fees
was the result of higher fees paid in the U.S. resulting from
increased sales. The balance of the increase is from the ad-
dition of our newly formed distribution subsidiary in Spain,
Parfums Rochas.
as a percent of net sales
50%
49% 47%
buyouT of lICense
In December 2016, the Company reached an agreement with
Selling, general and administrative expenses increased 13%
the Balmain brand calling for Balmain to buyout the Balmain
in 2016 as compared to 2015 and decreased 2% in 2015 as
license agreement, effective December 31, 2016, in exchange
compared to 2014. As a percentage of sales, selling, gener-
for a payment aggregating €5.4 million (approximately $5.7 mil-
al and administrative expenses were 50%, 49% and 47% in
lion). As a result of the buyout, the Company recognized a gain
2016, 2015 and 2014, respectively. For European operations,
of $4.7 million and expects to receive the buyout payment by
selling, general and administrative expenses increased 14%
April 30, 2017. The Company has a three month inventory sell-
in 2016, as compared to 2015 and represented 53% of sales
off period ending March 31, 2017 and Balmain has also agreed
in 2016 as compared to 52% in 2015. As discussed in more
to purchase all remaining inventory and tangible assets.
detail below, the 2016 increase is primarily from increased
promotion and advertising expenditures.
ImPaIrmenT loss
For United States operations, selling, general and adminis-
The Company reviews intangible assets with finite lives for
trative expenses increased 9% in 2016 and represented 38%
impairment whenever events or changes in circumstances
of sales, as compared to 39% in 2015. This increase is in line
indicate that the carrying amount may not be recoverable.
with sales growth from our newest prestige product licens-
Product sales of our Karl Lagerfeld brand have not met with
es, such as Abercrombie & Fitch, Hollister and Dunhill, all of
our original expectations. As a result of our review in 2016,
which bear royalty and advertising expenses.
the Company recorded an impairment loss of $5.7 million as
Promotion and advertising included in selling, general and
of December 31, 2016.
administrative expenses aggregated $99.0 million, $83.8 mil-
lion and $86.7 million in 2016, 2015 and 2014, respectively.
InCome from oPeraTIons
Promotion and advertising as a percentage of sales represent-
As a result of the above analysis regarding net sales, gross
ed 19.0%, 17.9% and 17.4% of net sales in 2016, 2015 and
profit margins, selling, general and administrative expenses,
2014, respectively. As planned, we invest heavily in promotional
buyout of license and impairment loss, income from opera-
management’s discussion and analysis
of financial condition and results of operations
71
tions increased 9% to $66.7 million in 2016 as compared
InCome Taxes
to 2015, after increasing 15% to $61.2 million in 2015 from
Our effective income tax rate was 35.5%, 35.6% and 34.2% in
$53.4 million in 2014. Operating margins aggregated 12.8%,
2016, 2015 and 2014, respectively, and differs from statutory
13.1% and 10.7% for the years ended December 31, 2016,
rates due to the effect of state and local taxes and tax rates in
2015 and 2014, respectively. Excluding the gain on buyout of
foreign jurisdictions. The effective tax rate for our European op-
license and impairment loss, income from operations in 2016
erations was 35.9%, 36% and 33.5% in 2016, 2015 and 2014,
would have aggregated $67.7 million, an increase of 10.6%,
respectively. The French Tax Authorities examined the 2012 tax
compared to 2015 and represented an operating margin of
return of Interparfums SA, and in August 2015 issued a $6.9
13.0%. In summary, for the past two years, the increase in
million tax adjustment. The main issues challenged by the
gross margin was mitigated by an increase in selling, general
French Tax Authorities related to the commission rate and roy-
and administrative expenses, primarily promotion and adver-
alty rate paid to Interparfums Singapore Pte. and Interparfums
tising expenditures, explaining the effect on operating margin.
(Suisse) SARL, respectively. Interparfums Singapore Pte. and
The Company plans to continue to increase sales without a
Interparfums (Suisse) SARL are wholly-owned subsidiaries of
substantial increase in fixed costs. Our goal is to reach an op-
Interparfums SA. Due to the subjective nature of the issues in-
erating margin of at least 14% in the coming years.
volved, in April 2016, Interparfums SA reached an agreement
in principle to settle the entire matter with the French Tax
oTher InCome and exPenses
Authorities. The settlement requires Interparfums SA to pay a
Interest expense aggregated $2.3 million, $2.8 million and
tax assessment of $1.9 million covering the issues for not only
$1.5 million in 2016, 2015 and 2014, respectively. The
the 2012 tax year, but also covering the issues for the tax years
significant increase in 2015 is related to the financing of
ended 2013 through 2015. The settlement also includes an
the Rochas brand acquisition and includes an approximate
agreement as to future acceptable commission and royalty rates,
$1.0 million loss in 2015 relating to the interest rate swap.
which is not expected to have a significant impact on cash flow.
There was a small gain on the swap in 2016. We use the
The settlement, which is subject to formal documentation with
credit lines available to us, as needed, to finance our work-
the French Tax Authorities, was accrued as of March 31, 2016.
ing capital needs as well as our financing needs for acquisi-
In addition, the 2016 effective tax rate for European operations
tions. Loans payable – banks and long-term debt including
was favorably impacted by approximately 1.5%, due to lower tax
current maturities aggregated $74.6 million, $98.6 million
rates in France, Spain, and the United States. The increase in
and $0.3 million as of December 31, 2016, 2015 and 2014,
2015 is primarily the result of higher 2015 profits in high tax
respectively.
rate jurisdictions as compared to 2014.
Foreign currency gains or (losses) aggregated ($0.6) mil-
The effective tax rate for our U.S. operations was 34.0%,
lion ($0.9) million and $0.9 million in 2016, 2015 and 2014,
35.1% and 36.5% in 2016, 2015 and 2014, respectively. The
respectively. Currency exchange rates were extremely volatile
early adoption in 2016 of Accounting Standards Update 2016-
during the first quarter of 2015. The 2015 loss includes ap-
09 (“ASU 2016-09”) resulted in the recognition of excess tax
proximately $2.4 million in losses from intercompany balanc-
benefits of $0.4 million in our provision for income taxes rath-
es of our majority owned subsidiary, Interparfums SA, and its
er than in additional paid-in capital. Under previous guidance,
other foreign subsidiaries, which were not hedged. We typical-
excess tax benefits and certain tax deficiencies from share-
ly enter into foreign currency forward exchange contracts to
based compensation arrangements were recorded in additional
manage exposure related to receivables from unaffiliated third
paid-in capital when the awards vested or were settled. ASU
parties denominated in a foreign currency and occasionally to
2016-09 requires that all excess tax benefits and all tax de-
manage risks related to future sales expected to be denominat-
ficiencies be recognized as income tax expense or benefit in
ed in a foreign currency. Almost 40% of 2016 net sales of our
the income statement and adoption is on a prospective basis.
European operations were denominated in U.S. dollars.
In 2015, changes in allocation percentages related to state
Interest and dividend income aggregated $3.3 million,
and local taxes of our U.S. operations resulted in a reduced
$3.0 million and $3.9 million in 2016, 2015 and 2014, re-
effective tax rate.
spectively. Cash and cash equivalents and short-term invest-
Other than as discussed above, we did not experience any
ments are primarily invested in certificates of deposit with
significant changes in tax rates, and none were expected in
varying maturities.
jurisdictions where we operate.
INTER PARFUMS, INC. 2016 ANNUAL REPORT 72
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
2016
$35,037
8,211
$43,248
9,917
$33,331
2015
$31,328
7,641
$38,969
8,532
$30,437
2014
$29,276
8,069
$37,345
7,909
$29,436
$1.07
1.07
$0.98
0.98
$0.95
0.95
31,072,328
31,175,598
30,996,137
31,100,215
30,931,308
31,060,326
Net income has continued to increase over the past three
trade on the NYSE Euronext. Net income attributable to the
years and aggregated $43.2 million, $39.0 million and
noncontrolling interest is related to the profitability of our
$37.3 million in 2016, 2015 and 2014, respectively. Net
European operations, and aggregated 28.3%, 27.2% and
income attributable to European operations was $35.0 mil-
27.0% of European operations net income in 2016, 2015 and
lion, $31.3 million and $29.3 million in 2016, 2015 and
2014, respectively. Net income attributable to Inter Parfums,
2014, respectively, while net income attributable to United
Inc. aggregated $33.3 million, $30.4 million and $29.4 mil-
States operations was $8.2 million, $7.6 million and $8.1
lion in 2016, 2015 and 2014, respectively. Net margins at-
million in 2016, 2015 and 2014, respectively. The signif-
tributable to Inter Parfums, Inc. aggregated 6.4%, 6.5% and
icant fluctuations in net income for European operations
5.9% in 2016, 2015 and 2014, respectively.
in are directly related to the previous discussions relating
to changes in sales, gross profit margins, selling, general
adJusTed neT InCome aTTrIbuTable
and administrative expenses, buyout of license, impair-
To InTer Parfums, InC.
ment loss, and the pending settlement with the French Tax
See information regarding Regulation S-K Item 10(e), “Use
Authorities. In summary, improved gross profit margins in
of Non-GAAP Financial Measures in commission filings,” on
2016 were offset by increased advertising and promotional
page 63 of this Annual Report.
expenditures. In addition, for our European operations, net
Adjusted Net Income Attributable to Inter Parfums,
income includes the effects of the $4.7 million gain on buy-
Inc., is deemed a “non-GAAP financial measure” under
out of license, $5.7 million impairment loss and the $1.9
the rules of the Securities and Exchange Commission. This
million pending income tax settlement with the French Tax
non-GAAP measure is calculated using GAAP amounts de-
Authorities.
rived from our consolidated financial statements. Adjusted
For United States operations, in summary, in 2016 sales
net income attributable to Inter Parfums, Inc. has limita-
increased 11% while gross margins as a percentage of sales
tions and should not be considered in isolation or as a sub-
were unchanged and selling, general and administrative ex-
stitute for net income, operating income, cash flow from
penses increased 9%, as compared to the corresponding pe-
operations or other consolidated income or cash flow data
riod of the prior year.
prepared in accordance with GAAP. Because not all com-
The noncontrolling interest arises primarily from our 73%
panies use identical calculations, this presentation of ad-
owned subsidiary in Paris, Interparfums SA, which is also a
justed income may not be comparable to a similarly titled
publicly traded company as 27% of Interparfums SA shares
measure of other companies.
management’s discussion and analysis
of financial condition and results of operations
73
adJusTed neT InCome aTTrIbuTable To InTer Parfums, InC. reConCIlIaTIon
Adjusted net income attributable to Inter Parfums, Inc. is defined as net income attributable to Inter Parfums, Inc., plus the
previously discussed pending nonrecurring tax settlement, net of the portion of the settlement attributable to the noncontrolling
interest. We believe that certain investors would consider adjusted net income attributable to Inter Parfums, Inc. a useful means
of evaluating our financial performance. The following table provides a reconciliation of net income attributable to Inter Parfums,
Inc. to adjusted net income attributable to Inter Parfums, Inc. for the periods indicated.
(In thousands, except share and per share data)
Years Ended December 31,
Net income attributable to Inter Parfums, Inc.
Pending nonrecurring tax settlement (net of portion
attributable to the noncontrolling interest of $500)
Net income attributable to Inter Parfums, Inc.
Adjusted net income attributable to
Inter Parfums, Inc. common shareholders:
Basic
Diluted
Weighted average number of shares outstanding:
Basic
Diluted
2016
$33,331
1,400
$34,731
1.12
1.11
2015
$30,437
2014
$29,436
—
—
$30,437
$29,436
0.98
0.98
0.95
0.95
31,072,328
31,175,598
30,996,137
31,100,215
30,931,308
31,060,326
lIQuIdITy and CaPITal resourCes
Cash provided by operating activities aggregated $54.6
The Company’s financial position remains strong. At
million, $50.1 million and $36.6 million in 2016, 2015 and
December 31, 2016, working capital aggregated $338 mil-
2014, respectively. In 2016, working capital items used $0.2
lion and we had a working capital ratio of almost 3.4 to
million in cash from operating activities, as compared to
1. Cash and cash equivalents and short-term investments
$0.6 million in 2015 and $10.9 million in 2014. Although
aggregated $256 million most of which is held in euro by
accounts receivable is up from that of the prior year, days
our European operations and is readily convertible into U.S.
sales outstanding remained relatively consistent at 71 days
dollars. We have not had any liquidity issues to date, and
in 2016, as compared to 75 days and 66 days in 2015 and
do not expect any liquidity issues relating to such cash and
2014, respectively. Inventory days on hand aggregated 185
cash equivalents and short-term investments held by our
days in 2016, as compared to 213 days in 2015 and 198
European operations. Approximately 88% of the Company’s
days in 2014, respectively. Fluctuations are primarily a func-
total assets are held by European operations. In addition to
tion of new product launch dates. The high level of days
the cash and cash equivalents and short-term investments
on hand in 2015 reflects the inventory buildup needed to
referred to above, approximately $174 million of trademarks,
support product development for the newest brands, as new
licenses and other intangible assets are held by European
scents for Coach, Abercrombie & Fitch and Hollister each
operations.
made their debut in 2016.
The Company hopes to benefit from its strong financial
Cash flows used in investing activities reflect the purchase
position to potentially acquire one or more brands, either
and sales of short-term investments by our European opera-
on a proprietary basis or as a licensee. Opportunities for
tions. These investments are primarily certificates of deposit
external growth continue to be examined, with the priority
with maturities greater than three months. At December 31,
of maintaining the quality and homogeneous nature of our
2016, approximately $76 million of such certificates of de-
portfolio. However, we cannot assure you that any new
posit contain penalties where we would forfeit a portion of the
license or acquisition agreements will be consummated.
interest earned in the event of early withdrawal.
INTER PARFUMS, INC. 2016 ANNUAL REPORT
74
Our business is not capital intensive as we do not own any
Proceeds from sale of stock of subsidiary reflect the
manufacturing facilities. However, on a full year basis, we spend
proceeds from shares issued by our French subsidiary, In-
approximately $4.0 million on tools and molds, depending on our
terparfums SA, pursuant to options exercised. Purchase of
new product development calendar. Capital expenditures also
subsidiary shares from noncontrolling interest represents the
include amounts for office fixtures, computer equipment and in-
purchase of treasury shares of Interparfums SA, which are
dustrial equipment needed at our distribution centers.
expected to be issued to Interparfums SA employees in 2019
In connection with the 2015 acquisition of the Rochas brand,
pursuant to its Free Share Plan.
we entered into a 5-year term loan payable in equal quarterly
In January 2014, our Board of Directors authorized the con-
installments of €5.0 million (approximately $5.3 million) plus
tinuation of the regular $0.48 per share annual dividend for
interest. This term loan requires the maintenance of certain fi-
2014, and in January 2015, our Board of Directors authorized
nancial covenants, tested semi-annually, including a maximum
an 8% increase to $0.52 per share. In January 2016, the Board
leverage ratio and a minimum interest coverage ratio. The fa-
of Directors authorized a 15% increase in the annual dividend to
cility also contains new debt restrictions among other standard
$0.60 per share, and in October 2016, our Board of Directors
provisions. The Company is in compliance with all of the cove-
authorized an additional 13% increase in the annual dividend to
nants and other restrictions of the debt agreements. In order to
$0.68 per share. The next quarterly cash dividend of $0.17 per
reduce exposure to rising variable interest rates, the Company
share is payable on April 14, 2017 to shareholders of record on
entered into a swap transaction effectively exchanging the vari-
March 31, 2017. Dividends paid, including dividends paid once
able interest rate to a fixed rate of approximately 1.2%. The
per year to noncontrolling stockholders of Interparfums SA, ag-
swap is a derivative instrument and is therefore recorded at fair
gregated $22.9 million, $19.6 million and $19.5 million for the
value and changes in fair value are reflected in the accompany-
years ended December 31, 2016, 2015 and 2014, respectively.
ing consolidated statements of income.
The cash dividends to be paid in 2017 are not expected to have
Our short-term financing requirements are expected to be met
any significant impact on our financial position.
by available cash on hand at December 31, 2016, cash generated
We believe that funds provided by or used in operations can
by operations and short-term credit lines provided by domestic
be supplemented by our present cash position and available
and foreign banks. The principal credit facilities for 2017 consist
credit facilities, so that they will provide us with sufficient re-
of a $20.0 million unsecured revolving line of credit provided by
sources to meet all present and reasonably foreseeable future
a domestic commercial bank and approximately $26.0 million in
operating needs.
credit lines provided by a consortium of international financial
Inflation rates in the U.S. and foreign countries in which we
institutions. There were no balances due from short-term borrow-
operate did not have a significant impact on operating results
ings as of December 31, 2016 and 2015.
for the year ended December 31, 2016.
ConTraCTual oblIgaTIons
The following table summarizes our contractual obligations over the periods indicated, as well as our total contractual obligations
($ in thousands):
contractual obligations
Long-Term Debt
Operating Leases
Purchase Obligations
(1)
Total
Less than
1-year
Years
2-3
Payments Due by Period
Years
More than
4-5
5-years
$21,494
$42,523
$10,541
-0-
$5,390
$9,596
$6,697
$5,952
Total
$74,558
$27,635
$907,206
$113,633
$226,386
$234,357
$332,830
$1,009,399
$140,517
$278,505
$251,595
$338,782
(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, 2016, without consideration for potential renewal periods and do not reflect the fact that our distributors share our advertising obligations.
report on internal control over financial reporting
75
qUantitatiVe and
qUalitatiVe disclosUres
aBoUt marKet risK.
¥50.0 million which all have maturities of less than one year.
We believe that our risk of loss as the result of nonperformance
by any of such financial institutions is remote.
general
InTeresT raTe rIsk managemenT
We address certain financial exposures through a controlled
We mitigate interest rate risk by monitoring interest rates,
program of risk management that primarily consists of the use
and then determining whether fixed interest rates should be
of derivative financial instruments. We primarily enter into for-
swapped for floating rate debt, or if floating rate debt should
eign currency forward exchange contracts in order to reduce
be swapped for fixed rate debt. We entered into an interest
the effects of fluctuating foreign currency exchange rates. We
rate swap in June 2015 on €100 million of debt, effectively
do not engage in the trading of foreign currency forward ex-
exchanging the variable interest rate to a fixed rate of approx-
change contracts or interest rate swaps.
imately 1.2%. This derivative instrument is recorded at fair
value and changes in fair value are reflected in the accompa-
foreIgn exChange rIsk managemenT
nying consolidated statements of income.
We periodically enter into foreign currency forward exchange
contracts to hedge exposure related to receivables denomi-
manaGement’s annUal rePort
nated in a foreign currency and to manage risks related to
on internal control
future sales expected to be denominated in a currency other
oVer financial rePortinG
than our functional currency. We enter into these exchange
The management of Inter Parfums, Inc. is responsible for
contracts for periods consistent with our identified exposures.
establishing and maintaining adequate internal control over
The purpose of the hedging activities is to minimize the effect
financial reporting as defined in Rule 13(a)-15(f) under the
of foreign exchange rate movements on the receivables and
Securities Exchange Act of 1934. With the participation of
cash flows of Interparfums SA, our French subsidiary, whose
the Chief Executive Officer and the Chief Financial Officer,
functional currency is the euro. All foreign currency contracts
our management conducted an evaluation of the effective-
are denominated in currencies of major industrial countries
ness of our internal control over financial reporting based on
and are with large financial institutions, which are rated as
the framework and criteria established in Internal Control –
strong investment grade.
Integrated Framework (2013), issued by the Committee of
All derivative instruments are required to be reflected as
Sponsoring Organizations of the Treadway Commission. Based
either assets or liabilities in the balance sheet measured at
on this evaluation, our management has concluded that our
fair value. Generally, increases or decreases in fair value of
internal control over financial reporting was effective as of
derivative instruments will be recognized as gains or losses
December 31, 2016.
in earnings in the period of change. If the derivative is desig-
Our independent auditor, Mazars USA LLP, a registered
nated and qualifies as a cash flow hedge, then the changes in
public accounting firm, has issued its report on its audit of our
fair value of the derivative instrument will be recorded in other
internal control over financial reporting. This report appears
comprehensive income.
on the following page.
Before entering into a derivative transaction for hedging
purposes, we determine that the change in the value of the
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, 2016, we had foreign currency contracts in
Chief Executive Officer,
Executive Vice President
the form of forward exchange contracts with notional amounts
Chairman of the
and Chief Financial Officer
of approximately U.S. $69.8 million, GB £1.8 million and JPY
Board of Directors
INTER PARFUMS, INC. 2016 ANNUAL REPORT
76
reports of independent registered public accounting firm
rePort of indePendent reGistered
that (1) pertain to the maintenance of records that, in reason-
PUBlic accoUntinG firm on internal control
able detail, accurately and fairly reflect the transactions and dis-
oVer financial rePortinG
positions of the assets of the company; (2) provide reasonable
board of dIreCTors and shareholders
assurance that transactions are recorded as necessary to permit
InTer Parfums, InC.
neW york, neW york
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expendi-
tures of the company are being made only in accordance with
We have audited Inter Parfums, Inc.’s internal control over fi-
authorizations of management and directors of the company;
nancial reporting as of December 31, 2016, based on criteria
and (3) provide reasonable assurance regarding prevention or
established in Internal Control – Integrated Framework (2013)
timely detection of unauthorized acquisition, use, or disposition
issued by the Committee of Sponsoring Organizations of the
of the company’s assets that could have a material effect on the
Treadway Commission (the COSO criteria). Inter Parfums, Inc.’s
financial statements.
management is responsible for maintaining effective internal
Because of its inherent limitations, internal control over
control over financial reporting, and for its assessment of the ef-
financial reporting may not prevent or detect misstatements.
fectiveness of internal control over financial reporting, included
Also, projections of any evaluation of effectiveness to future
in the accompanying Management’s Annual Report on Internal
periods are subject to the risk that controls may become in-
Control over Financial Reporting. Our responsibility is to express
adequate because of the changes in conditions, or that the
an opinion on the company’s internal control over financial re-
degree of compliance with the policies or procedures may
porting based on our audit.
deteriorate.
We conducted our audit in accordance with the standards
In our opinion, Inter Parfums, Inc. maintained, in all material
of the Public Company Accounting Oversight Board (United
respects, effective internal control over financial reporting as of
States). Those standards require that we plan and perform the
December 31, 2016, based on the COSO criteria.
audit to obtain reasonable assurance about whether effective
We have also audited, in accordance with the standards
internal control over financial reporting was maintained in all
of the Public Company Accounting Oversight Board (United
material respects. Our audit of internal control over financial re-
States), the consolidated balance sheet of Inter Parfums,
porting included obtaining an understanding of internal control
Inc. as of December 31, 2016 and the related consolidated
over financial reporting, assessing the risk that a material weak-
statements of income, comprehensive income (loss), chang-
ness exists, and testing and evaluating the design and operat-
es in shareholders’ equity and cash flows for the year ended
ing effectiveness of internal control based on the assessed risk.
December 31, 2016 and our report dated March 13, 2017
Our audit also included performing such other procedures as we
expressed an unqualified opinion thereon.
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Mazars USA LLP
A company’s internal control over financial reporting is a pro-
cess designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control
New York, New York
over financial reporting includes those policies and procedures
March 13, 2017
reports of independent registered public accounting firm
77
rePort of indePendent reGistered PUBlic
nancial statement presentation. We believe that our audits
accoUntinG firm
provide a reasonable basis for our opinion.
board of dIreCTors and shareholders
In our opinion, the consolidated financial statements re-
InTer Parfums, InC.
neW york, neW york
ferred to above present fairly, in all material respects, the
financial position of Inter Parfums, Inc. and subsidiaries as
of December 31, 2016 and 2015, and the results of their
We have audited the accompanying consolidated balance sheets
operations and their cash flows for each of the years in the
of Inter Parfums, Inc. and subsidiaries (the “Company”) as of
three-year period ended December 31, 2016, in conformity
December 31, 2016 and 2015, and the related consolidated
with U.S. generally accepted accounting principles.
statements of income, comprehensive income (loss), changes in
We also have audited, in accordance with the standards
shareholders’ equity and cash flows for each of the years in the
of the Public Company Accounting Oversight Board (United
three-year period ended December 31, 2016. These consolidat-
States), Inter Parfums, Inc.’s internal control over financial
ed financial statements are the responsibility of the Company’s
reporting as of December 31, 2016, based on criteria es-
management. Our responsibility is to express an opinion on these
tablished in Internal Control – Integrated Framework (2013)
consolidated financial statements based on our audits.
issued by the Committee of Sponsoring Organizations of the
We conducted our audits in accordance with the standards
Treadway Commission (COSO), and our report dated March
of the Public Company Accounting Oversight Board (United
13, 2017 expressed an unqualified opinion thereon.
States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
Mazars USA LLP
consolidated financial statements are free of material mis-
statement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the con-
solidated financial statements. An audit also includes assess-
ing the accounting principles used and significant estimates
New York, New York
made by management, as well as evaluating the overall fi-
March 13, 2017
INTER PARFUMS, INC. 2016 ANNUAL REPORT
78
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
current liabilities:
Current portion of long-term debt
Accounts payable – trade
Accrued expenses
Income taxes payable
Dividends payable
total current liabilities
long–term debt, less current portion
deferred tax liability
commitments and contingencies
equity:
Inter Parfums, Inc. shareholders’ equity:
2016
2015
$161,828
94,202
104,819
96,977
7,433
6,240
626
8,090
480,215
10,076
183,868
8,250
$682,409
21,498
49,507
62,609
3,331
5,293
142,238
53,064
3,449
31
63,103
402,714
370,391
113,267
483,658
$682,409
$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
22,163
50,636
46,890
7,359
4,035
131,083
76,443
3,746
–
31
62,030
110,800
476,387
$687,659
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, 31,138,318 and 31,037,915 shares,
at December 31, 2016 and 2015, respectively
Additional paid-in capital
Retained earnings
388,434
Accumulated other comprehensive loss (57,982) (48,091)
Treasury stock, at cost, 9,864,805 and 9,880,058 common shares
at December 31, 2016 and 2015, respectively (37,475) (36,817)
365,587
total inter Parfums, inc. shareholders’ equity
noncontrolling interest
total equity
total liabilities and equity
(See accompanying notes to consolidated financial statements )
financial statements
79
Gross margin
2014
$499,261
2015
$468,540
2016
$521,072
194,601
179,069
326,471 289,471 287, 037
258,787
233,634
228,268
(4,652)
5,658
66,678
61,203
—
—
—
—
53,403
212,224
consolidated statements of income
(In thousands, except share and per share data)
Years Ended December 31,
net sales
Cost of sales
Selling, general, and administrative expenses
Gain on buyout of license
Impairment loss
income from operations
other expenses (income):
Interest expense
(Gain) loss on foreign currency
(902)
Interest and dividend income (3,331) (2,995) (3,888)
(396) 707 (3,312 )
876
2,340
595
2,826
1,478
income before income taxes
Income taxes
net income
Less: Net income attributable to the noncontrolling interest
67,074
23,826
43,248
9,917
60,496
21,527
38,969
8,532
56,715
19,370
37,345
7,909
net income attributable to inter Parfums, inc.
$33,331
$30,437
$29,436
net income attributable to inter Parfums, inc. common shareholders:
Basic
Diluted
$1.07
1.07
$0.98
0.98
$0.95
0.95
weighted average number of shares outstanding:
Basic
Diluted
31,072,328
31,175,598
30,996,137
30,931,308
31,100,215
31,060,326
dividends declared per share
$0.62
$0.52
$0.48
(See accompanying notes to consolidated financial statements.)
INTER PARFUMS, INC. 2016 ANNUAL REPORT
80
consolidated statements of comPrehensiVe income (loss)
(In thousands, except share and per share data)
Years Ended December 31, 2016 2015 2014
net income $43,248
$37,345
other comprehensive income (loss):
Net derivative instrument loss, net of tax (22) – –
Translation adjustments, net of tax (13,153) (44,346) (57,806)
(13,175) (44,346) (57,806)
comprehensive income (loss) 30,073 (5,377) (20,461)
$38,969
,
comprehensive income (loss) attributable to noncontrolling interests:
Net income
7,909
Net derivative instrument loss, net of tax (5) – –
Translation adjustments, net of tax (3,279) (12,078) (16,123)
6,633 (3,546) (8,214)
8,532
9,917
comprehensive income (loss) attributable to inter Parfums, inc. $23,440 $(1,831)
$(12,247)
(See accompanying notes to consolidated financial statements.)
financial statements
81
2016
$31
62,030
2,160
(173
(1,753
839
63,103
388,434
33,331
(19,273
(222
402,714
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
2015
$31
60,200
1,234
2014
$31
57,877
1,981
677
60,200
359,459
29,436
(14,855)
81
25,860
(41,683)
–
(15,823)
(36,016)
219
Shares issued upon exercise of stock options
Sale of subsidiary shares to noncontrolling interests
Purchase of subsidiary shares from noncontrolling interests
Stock-based compensation
)
(192) (335)
)
–
–
788
additional paid-in capital, end of year
retained earnings, beginning of year
Net income
Dividends
Stock-based compensation
retained earnings, end of year
62,030
374,121
30,437
(16,124)
–
)
)
388,434
374,121
accumulated other comprehensive income (loss), beginning of year
Foreign currency translation adjustment, net of tax
Net derivative instrument gain, net of tax
accumulated other comprehensive loss, end of year
(48,091
(9,874
(17
(57,982
)
)
)
)
(15,823)
(32,268)
–
(48,091)
treasury stock, beginning of year
Shares issued upon exercise of stock options
Shares received as proceeds of option exercises
treasury stock, end of year
(36,817
142
(800
(37,475
)
(36,464)
140
(493)
)
)
(36,817) (36,464)
(667)
noncontrolling interest, beginning of year
Net income
Foreign currency translation adjustment, net of tax
Net derivative instrument gain, net of tax
Sale of subsidiary shares to noncontrolling interest
Purchase of subsidiary shares from noncontrolling interest
Dividends
Stock-based compensation
noncontrolling interest, end of year
110,800
9,917
(3,279
(5
1,738
(1,188
(4,863
147
113,267
)
)
)
)
116,659
8,532
(12,078)
–
1,523
–
(3,836)
–
128,145
7,909
(16,123)
–
1,365
–
(4,667)
30
110,800
116,659
total equity
$483,658
$476,387
$498,724
(See accompanying notes to consolidated financial statements.)
INTER PARFUMS, INC. 2016 ANNUAL REPORT
82
consolidated statements of cash flows
(In thousands)
Years Ended December 31,
cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization including impairment loss
Provision for doubtful accounts
Non cash stock compensation
Gain on sale of license
Excess tax benefits from stock-based compensation
arrangements
Deferred tax expense (benefit)
Change in fair value of derivatives
Changes in:
Accounts receivable
2016
$43,248
2015
2014
$38,969
$37,345
15,341
349
1,198
(4,652
–
(1,374
682
(13,156
(909
(297
18,690
(4,556
54,564
)
)
)
)
)
)
–
–
(21,884
(77
1,579
–
1,565
(18,015
(4,863
(2,941
(44,636
(4,640
(15,139
176,967
$161,828
)
)
)
)
)
)
)
)
9,078
10,166
442
787
–
(260
)
829
903
412
856
–
(670
)
(557
)
355
(12,573
)
(19,607
)
(4,354
)
(1,622
)
12,973
4,912
50,084
4,344
425
)
(4,996
8,540
36,613
(62,415
)
(245,810
)
151,771
212,762
(4,158
)
(119,788
)
(34,590
)
(3,302
)
(922
)
(37,272
)
–
(5,765
)
110,970
(11,761
)
(32
)
653
260
1,327
(15,806
)
(3,836
)
–
81,775
(10,440
)
86,829
90,138
$176,967
–
–
(90
)
953
670
1,030
(14,841
)
(4,667
)
–
(22,710
(12,143
)
(35,512
)
125,650
$90,138
$2,239
28,124
$2,400
19,668
$1,508
104,430
Inventories
Other assets
Accounts payable and accrued expenses
Income taxes, net
Net cash provided by operating activities
cash flows from investing activities:
Purchases of short-term investments
Proceeds from sale of short-term investments
Purchase of equipment and leasehold improvements
Payment for intangible assets acquired
Net cash used in investing activities
(57,289
42,604
(4,777
(965
(20,427
)
)
)
)
cash flows from financing activities:
Repayment 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
Purchase of subsidiary shares from 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
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
Supplemental disclosures of cash flow information:
Cash paid for:
Interest
Income taxes
(See accompanying notes to consolidated financial statements.)
notes to consolidated financial statements
(in thousands except share and per share data)
83
notes to consolidated financial statements
year. Gains and losses from translation adjustments are accumu-
(1) the company and its significant accounting Policies
lated in a separate component of shareholders’ equity.
busIness of The ComPany
Inter Parfums, Inc. and its subsidiaries (the “Company”) are in
Cash and Cash eQuIvalenTs
the fragrance business and manufacture and distribute a wide
and shorT-Term InvesTmenTs
array of fragrances and fragrance related products.
All highly liquid investments purchased with a maturity of three
Substantially all of our prestige fragrance brands are licensed
months or less are considered to be cash equivalents. From time
from unaffiliated third parties, and our business is dependent
to time, the Company has short-term investments which con-
upon the continuation and renewal of such licenses. With re-
sist of certificates of deposit with maturities greater than three
spect to the Company’s largest brands, we own the Lanvin brand
months. The Company monitors concentrations of credit risk as-
name for our class of trade, and license the Montblanc and Jim-
sociated with financial institutions with which the Company con-
my Choo brand names. As a percentage of net sales, product
ducts significant business. The Company believes its credit risk is
sales for the Company’s largest brands were as follows:
minimal, as the Company primarily conducts business with large,
Year Ended December 31, 2016 2015 2014
Montblanc 23%
22%
Jimmy Choo 17%
Lanvin 12%
20%
21%
15%
18%
16%
well-established financial institutions. Substantially all cash and
cash equivalents are held at financial institutions outside the
United States and are readily convertible into U.S. dollars.
aCCounTs reCeIvable
Accounts receivable represent payments due to the Company for
No other brand represented 10% or more of consolidated net sales.
previously recognized net sales, reduced by allowances for sales
basIs of PreParaTIon
returns and doubtful accounts or balances which are estimated to
be uncollectible, which aggregated $5.3 million and $5.9 million
The consolidated financial statements include the accounts of the
as of December 31, 2016 and 2015, respectively. Accounts re-
Company, including 73% owned Interparfums SA, a subsidiary
ceivable balances are written-off against the allowance for doubtful
whose stock is publicly traded in France. In 2015, Interparfums
accounts when they become uncollectible. Recoveries of accounts
SA formed a subsidiary in Spain, Parfums Rochas. The subsidiary
receivable previously recorded against the allowance are recorded
is 51% owned by Interparfums SA with the remaining 49% owned
in the consolidated statement of income when received. We gener-
by its Rochas distributor for Spain. Parfums Rochas is responsible
ally grant credit based upon our analysis of the customer’s financial
for Rochas brand distribution in the territory. All material inter-
position, as well as previously established buying patterns.
company balances and transactions have been eliminated.
InvenTorIes
managemenT esTImaTes
Inventories, including promotional merchandise, only include
Management makes assumptions and estimates to prepare
inventory considered saleable or usable in future periods, and
financial statements in conformity with accounting principles
is stated at the lower of cost and net realizable value, with
generally accepted in the United States of America. Those as-
cost being determined on the first-in, first-out method. Cost
sumptions and estimates directly affect the amounts reported
components include raw materials, direct labor and overhead
and disclosures included in the consolidated financial state-
(e.g., indirect labor, utilities, depreciation, purchasing, receiv-
ments. Actual results could differ from those assumptions and
ing, inspection and warehousing) as well as inbound freight.
estimates. Significant estimates for which changes in the near
Promotional merchandise is charged to cost of sales at the time
term are considered reasonably possible and that may have a
the merchandise is shipped to the Company’s customers.
material impact on the financial statements are disclosed in
these notes to the consolidated financial statements.
derIvaTIves
foreIgn CurrenCy TranslaTIon
and measured at fair value. The Company uses derivative instru-
For foreign subsidiaries with operations denominated in a
ments to principally manage a variety of market risks. For deriva-
foreign currency, assets and liabilities are translated to U.S.
tives designated as hedges of the exposure to changes in fair value
dollars at year end exchange rates. Income and expense items
of the recognized asset or liability or a firm commitment (referred
are trans lated at average rates of exchange prevailing during the
to as fair value hedges), the gain or loss is recognized in earnings
All derivative instruments are recorded as either assets or liabilities
INTER PARFUMS, INC. 2016 ANNUAL REPORT
84
in the period of change together with the offsetting loss or gain on
set may not be recoverable. If impairment indicators exist for an
the hedged item attributable to the risk being hedged. The effect
amortizable intangible asset, the undiscounted future cash flows
of that accounting is to include in earnings the extent to which the
associated with the expected service potential of the asset are
hedge is not effective in achieving offsetting changes in fair value.
compared to the carrying value of the asset. If our projection of
For cash flow hedges, the effective portion of the derivative’s gain
undiscounted future cash flows is in excess of the carrying value
or loss is initially reported in equity (as a component of accumu-
of the intangible asset, no impairment charge is recorded. If our
lated other comprehensive income) and is subsequently reclassi-
projection of undiscounted future cash flows is less than the car-
fied into earnings in the same period or periods during which the
rying value of the intangible asset, an impairment charge would
hedged forecasted transaction affects earnings. The ineffective
be recorded to reduce the intangible asset to its fair value.
portion of the gain or loss of a cash flow hedge is reported in earn-
ings immediately. The Company also holds certain instruments for
revenue reCognITIon
economic purposes that are not designated for hedge accounting
The Company sells its products to department stores, perfum-
treatment. For these derivative instruments, changes in their fair
eries, specialty stores and domestic and international whole-
value are recorded in earnings immediately.
salers and distributors. Sales of such products by our domestic
subsidiaries are denominated in U.S. dollars, and sales of such
eQuIPmenT and leasehold ImProvemenTs
products by our foreign subsidiaries are primarily denominated
Equipment and leasehold improvements are stated at cost less accu-
in either euro or U.S. dollars. The Company recognizes revenues
mulated depreciation and amortization. Depreciation and amortization
when merchandise is shipped and the risk of loss passes to the
are provided using the straight line method over the estimated useful
customer. Net sales are comprised of gross revenues less re-
lives for equipment, which range between three and ten years and the
turns, trade discounts and allowances. The Company does not
shorter of the lease term or estimated useful asset lives for leasehold
bill its customers’ freight and handling charges. All shipping and
improvements. Depreciation provided on equipment used to produce
handling costs, which aggregated $5.1 million, $4.7 million and
inventory, such as tools and molds, is included in cost of sales.
$5.2 million in 2016, 2015 and 2014, respectively, are included
long-lIved asseTs
in selling, general and administrative expenses in the consolidat-
ed statements of income. The Company grants credit to all quali-
Indefinite-lived intangible assets principally consist of trademarks
fied customers and does not believe it is exposed significantly to
which are not amortized. The Company evaluates indefinite-lived
any undue concentration of credit risk. No one customer repre-
intangible assets for impairment at least annually during the
sented 10% or more of net sales in 2016, 2015 or 2014.
fourth quarter, or more frequently when events occur or circum-
stances change, such as an unexpected decline in sales, that
sales reTurns
would more likely than not indicate that the carrying value of an
Generally, the Company does not permit customers to return their
indefinite-lived intangible asset may not be recoverable. When
unsold products. However, for U.S. based customers, we allow re-
testing indefinite-lived intangible assets for impairment, the eval-
turns if properly requested, authorized and approved. The Company
uation requires a comparison of the estimated fair value of the
regularly reviews and revises, as deemed necessary, its estimate
asset to the carrying value of the asset. The fair values used
of reserves for future sales returns based primarily upon historic
in our evaluations are estimated based upon discounted future
trends and relevant current data including information provided by
cash flow projections using a weighted average cost of capital
retailers regarding their inventory levels. In addition, as necessary,
of 6.2%. The cash flow projections are based upon a number of
specific accruals may be established for significant future known
assumptions, including future sales levels, future cost of goods
or anticipated events. The types of known or anticipated events
and operating expense levels, as well as economic conditions,
that we consider include, but are not limited to, the financial con-
changes to our business model or changes in consumer accep-
dition of our customers, store closings by retailers, changes in the
tance of our products which are more subjective in nature. If the
retail environment and our decision to continue to support new
carrying value of an indefinite-lived intangible asset exceeds its
and existing products. The Company records estimated reserves
fair value, an impairment charge is recorded.
for sales returns as a reduction of sales, cost of sales and accounts
Intangible assets subject to amortization are evaluated for im-
receivable. Returned products are recorded as inventories and are
pairment testing whenever events or changes in circumstances
valued based upon estimated realizable value. The physical condi-
indicate that the carrying amount of an amortizable intangible as-
tion and marketability of returned products are the major factors
notes to consolidated financial statements
(in thousands except share and per share data)
85
we consider in estimating realizable value. Actual returns, as well
The licenses typically have an initial term of approximately 5 to
as estimated realizable values of returned products, may differ
15 years, and are potentially renewable subject to the Company’s
significantly, either favorably or unfavorably, from our estimates, if
compliance with the license agreement provisions. The remaining
factors such as economic conditions, inventory levels or competi-
terms, including the potential renewal periods, range from ap-
tive conditions differ from our expectations.
proximately 1 to 15 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 pur-
In certain cases, the Company may pay an entry fee to ac-
chase and gift with purchase promotions as sales and the costs of its
quire, or enter into, a license where the licensor or another
purchase with purchase and gift with purchase promotions as cost of
licensee was operating a pre-existing fragrance business. In
sales. Certain other incentive arrangements require the payment of a
those cases, the entry fee is capitalized as an intangible asset
fee to customers based on their attainment of pre-established sales
and amortized over its useful life.
levels. These fees have been recorded as a reduction of net sales.
Most license agreements require minimum royalty pay-
ments, incremental royalties based on net sales levels and
adverTIsIng and PromoTIon
minimum spending on advertising and promotional activities.
Advertising and promotional costs are expensed as incurred and
Royalty expenses are accrued in the period in which net sales
recorded as a component of cost of goods sold (in the case of free
are recognized while advertising and promotional expenses
goods given to customers) or selling, general and administrative
are accrued at the time these costs are incurred.
expenses. Advertising and promotional costs included in selling,
In addition, the Company is exposed to certain concentra-
general and administrative expenses were $99.0 million, $83.8
tion risk. Substantially all of our prestige fragrance brands are
million and $86.7 million for 2016, 2015 and 2014, respective-
licensed from unaffiliated third parties, and our business is de-
ly. Costs relating to purchase with purchase and gift with pur-
pendent upon the continuation and renewal of such licenses.
chase promotions that are reflected in cost of sales aggregated
$30.0 million, $25.4 million and $24.4 million in 2016, 2015
InCome Taxes
and 2014, respectively. Accrued expenses include approximate-
The Company accounts for income taxes using an asset and lia-
ly $27.2 million and $15.2 million in advertising liabilities as of
bility approach that requires the recognition of deferred tax assets
December 31, 2016 and 2015, respectively.
and liabilities for the expected future tax consequences of events
that have been recognized in its financial statements or tax returns.
PaCk age develoPmenT CosTs
The net deferred tax assets assume sufficient future earnings for
Package development costs associated with new products and
their realization, as well as the continued application of currently
redesigns of existing product packaging are expensed as incurred.
enacted tax rates. Included in net deferred tax assets is a valuation
oPeraTIng leases
allowance for deferred tax assets, where management believes it is
more-likely-than-not that the deferred tax assets will not be realized
The Company recognizes rent expense from operating leases
in the relevant jurisdiction. If the Company determines that a de-
with various step rent provisions, rent concessions and escala-
ferred tax asset will not be realizable, an adjustment to the deferred
tion clauses on a straight-line basis over the applicable lease
tax asset will result in a reduction of net earnings at that time.
term. The Company considers lease renewals in the useful life
of its leasehold improvements when such renewals are rea-
IssuanCe of Common sToCk
sonably assured. In the event the Company receives capital
by ConsolIdaTed subsIdIary
improvement funding from its landlord, these amounts are re-
The difference between the Company’s share of the proceeds
corded as deferred liabilities and amortized over the remaining
received by the subsidiary and the carrying amount of the por-
lease term as a reduction of rent expense.
tion of the Company’s investment deemed sold, is reflected as
an equity adjustment in the consolidated balance sheets.
lICense agreemenTs
The Company’s license agreements generally provide the Company
Treasury sToCk
with worldwide rights to manufacture, market and sell fragrance
The Board of Directors may authorize share repurchases of the
and fragrance related products using the licensors’ trademarks.
Company’s common stock (Share Repurchase Authorizations).
INTER PARFUMS, INC. 2016 ANNUAL REPORT
86
Share repurchases under Share Repurchase Authorizations
the Company’s diluted weighted average number of common
may be made through open market transactions, negotiated
shares outstanding increased from 31,161,083 to 31,175,598.
purchase or otherwise, at times and in such amounts within
The adoption resulted in an increase in basic and diluted earn-
the parameters authorized by the Board. Shares repurchased
ings per share attributable to Inter Parfums Inc. (“EPS”) as follows:
under Share Repurchase Authorizations are held in treasury for
general corporate purposes, including issuances under various
employee stock option plans. Treasury shares are accounted
for under the cost method and reported as a reduction of equi-
ty. Share Repurchase Authorizations may be suspended, limit-
ed or terminated at any time without notice.
2016
Year Ended December 31,
$1.06
Basic EPS prior to adoption of ASU 2016-09
$1.07
Basic EPS upon adoption of ASU 2016-09
Diluted EPS prior to adoption of ASU 2016-09 $1.06
$1.07
Diluted EPS upon adoption of ASU 2016-09
reCenT aCCounTIng PronounCemenTs
In addition, under ASU 2016-09, excess tax benefits from
In August 2016, the Financial Accounting Standards Board
stock-based compensation arrangements are classified in cash
(“FASB”) issued an Accounting Standards Update (“ASU”) to
flows from operations, rather than inflow within financing activ-
eliminate the diversity in practice related to the classification of
ities and outflow within operating activities. The Company has
certain cash receipts and payments in the statement of cash flows,
applied the cash flow classification guidance prospectively.
by adding or clarifying guidance on eight specific cash flow issues.
In February 2016, the FASB issued an ASU which requires
This ASU is effective for annual and interim periods beginning after
lessees to recognize lease assets and lease liabilities arising from
December 15, 2017 and early adoption is permitted. We have eval-
operating leases on the balance sheet. This ASU is effective for
uated the standard and determined that there will be no material
annual and interim reporting periods beginning after December 15,
impact on our consolidated financial statements.
2018 using a modified retrospective approach, with early adoption
In March 2016, the FASB issued ASU 2016-09 which
permitted. We are currently evaluating the standard to determine
simplifies several aspects of the accounting for share-based
the impact of its adoption on our consolidated financial statements.
payments, including the income tax consequences and classifi-
In November 2015, the FASB issued an ASU that requires all
cation on the statement of cash flows. This ASU is effective for
deferred tax liabilities and assets to be classified as noncurrent
annual and interim periods beginning after December 15, 2016
on the balance sheet. This ASU is effective for annual and interim
and early adoption is permitted. The Company elected to early
reporting periods beginning after December 15, 2016, with early
adopt ASU 2016-09 in the fourth quarter of 2016 which re-
adoption permitted. In addition, this guidance can be applied ei-
quired us to reflect any adjustments as of January 1, 2016, the
ther prospectively or retrospectively to all periods presented. We
beginning of the annual period that includes the interim period
are currently evaluating the standard to determine the impact of
of adoption. Prior periods were not adjusted.
its adoption on our consolidated financial statements.
Under previous guidance, excess tax benefits and certain
In July 2015, the FASB issued an ASU modifying the ac-
tax deficiencies from share-based compensation arrangements
counting for inventory. Under this ASU, the measurement princi-
were recorded in additional paid-in capital when the awards
ple for inventory will change from lower of cost or market value
vested or were settled. ASU 2016-09 requires that all excess
to lower of cost and net realizable value. The ASU defines net
tax benefits and all tax deficiencies be recognized as income tax
realizable value as the estimated selling price in the ordinary
expense or benefit in the income statement and adoption is on
course of business, less reasonably predictable costs of comple-
a prospective basis. The adoption resulted in the recognition of
tion, disposal, and transportation. The ASU is applicable to in-
excess tax benefits of $0.4 million in our provision for income
ventory that is accounted for under the first-in, first-out method
taxes rather than in additional paid-in capital for the year ending
and is effective for reporting periods beginning after December
December 31, 2016. As permitted by ASU 2016-09, the Com-
15, 2016, with early adoption permitted. We have evaluated the
pany has elected to continue to estimate the number of stock-
standard and determined that there is no material impact on our
based awards expected to vest, rather than electing to account
consolidated financial statements.
for forfeitures as they occur.
In May 2014, the FASB issued an ASU which superseded the
Excess tax benefits are required to be prospectively excluded
then most current revenue recognition requirements. This new
from assumed future proceeds in the calculation of diluted shares
revenue recognition standard requires entities to recognize rev-
under the adoption of ASU 2016-09. As a result of the adoption,
enue in a way that depicts the transfer of goods or services to
notes to consolidated financial statements
(in thousands except share and per share data)
87
customers in an amount that reflects the consideration which the
into effect on January 1, 2016, extends the partnership through
entity expects to be entitled to in exchange for those goods or ser-
December 31, 2025 without any material changes in operat-
vices. This guidance is effective for annual and interim reporting
ing conditions from the prior license. The license agreement is
periods beginning after December 15, 2017, with early adoption
subject to certain minimum sales, advertising expenditures and
permitted for annual periods after December 31, 2016. We have
royalty payments as are customary in our industry.
evaluated the standard and determined that there will be no ma-
terial impact on our consolidated financial statements.
frenCh ConneCTIon
There are no other recent accounting pronouncements is-
In September 2015, the Company entered into a 12-year license
sued but not yet adopted that would have a material effect on
agreement to create, produce and distribute fragrances and
our consolidated financial statements.
fragrance related products under the French Connection brand
(2) Buyout of license
names. The agreement is subject to certain minimum advertising
expenditures and royalty payments as are customary in our in-
In December 2016, the Company, through its majority owned
dustry. The Company took over distribution of selected fragranc-
Paris-based subsidiary, Interparfums SA, reached an agreement
es within the brand’s existing fragrance portfolio in 2016.
with the Balmain brand calling for Balmain to buyout the Balmain
license agreement, effective December 31, 2016, in exchange
roChas
for a payment aggregating €5.4 million (approximately $5.7 mil-
In May 2015, the Company, through its majority owned Paris-
lion). As a result of the buyout, the Company recognized a gain
based subsidiary, Interparfums SA, acquired the Rochas brand
of $4.7 million and expects to receive the buyout payment by
from The Procter & Gamble Company. This transaction includes
April 30, 2017. The Company has a three month inventory sell-
all brand names and registered trademarks for Rochas (Femme,
off period ending March 31, 2017 and Balmain has also agreed
Madame, Eau de Rochas, etc.), mainly for class 3 (cosmetics) and
to purchase all remaining inventory and tangible assets.
class 25 (fashion). Substantially the entire €106 million purchase
(3) recent agreements
s.T. duPonT
price for the assets acquired (approximately $118 million), includ-
ing approximately $5.4 million in acquisition related expenses,
was allocated to trademarks with indefinite lives including approx-
In September 2016, the Company, through its majority owned
imately $21 million of which was allocated to fashion trademarks.
Paris-based subsidiary, Interparfums SA, extended its license
An additional $4.4 million was paid for related inventory.
agreement with S.T. Dupont by three years. The original agree-
ment, signed in July 1997, together with previous extensions,
CoaCh
provided Interparfums SA with the exclusive worldwide license
In April 2015, the Company, through its majority owned Paris-
rights to create, produce and distribute fragrances and related
based subsidiary, Interparfums SA, entered into an 11-year ex-
products under the S.T. Dupont brand through December 31,
clusive worldwide license with Coach, Inc. to create, produce and
2016. The recent extension is effective on January 1, 2017 and
distribute fragrances and fragrance related products under the
extends the partnership through December 31, 2019 without
Coach brand name. In 2016, Interparfums SA began distributing
any material changes in operating conditions from the prior li-
these fragrances to department stores, specialty stores and duty
cense. The license agreement is subject to certain minimum
free shops, as well as in Coach retail stores. The agreement is
sales, advertising expenditures and royalty payments, as are
subject to certain minimum sales, advertising expenditures and
customary in our industry.
royalty payments as are customary in our industry.
monTblanC
aberCrombIe & fITCh and hollIsTer
In October 2015, the Company, through its majority owned Paris-
In December 2014, the Company entered into a 7-year exclusive
based subsidiary, Interparfums SA, extended its license agree-
worldwide license to create, produce and distribute new fragrances
ment with Montblanc by five years. The original agreement, signed
and fragrance related products under the Abercrombie & Fitch and
in 2010, provided Interparfums SA with the exclusive worldwide
Hollister brand names. In 2016, the Company began to distribute
license rights to create, produce and distribute fragrances and
these fragrances internationally in specialty stores, department
fragrance related products under the Montblanc brand through
stores and duty free shops, and in the U.S., in duty free shops and
December 31, 2020. The new 10-year agreement, which went
in Abercrombie & Fitch and Hollister retail stores. The agreement is
INTER PARFUMS, INC. 2016 ANNUAL REPORT
88
subject to certain minimum sales, advertising expenditures and
Overhead included in inventory aggregated $3.1 million and
royalty payments as are customary in our industry.
$3.7 million as of December 31, 2016 and 2015, respec
(4) inventories
Year Ended December 31,
Raw materials and
component parts
Finished goods
tively. Included in inventories is an inventory reserve, which
represents the difference between the cost of the inventory
and its estimated realizable value, based upon sales fore-
2016
$36,821
60,156
$96,977
2015
casts and the physical condition of the inventories. In ad-
dition, and as necessary, specific reserves for future known
$30,569
or anticipated events may be established. Inventory reserves
67,777
aggregated $5.4 million and $6.6 million as of December
$98,346
31, 2016 and 2015, respectively.
(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, 2016
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
Liabilities:
$94,202
Foreign currency forward exchange contracts
accounted for using hedge accounting
181
–
–
$94,202
181
–
–
Foreign currency forward exchange contracts
not accounted for using hedge accounting
–
–
Interest rate swaps
–
418
908
1,507
418
908
1,507
–
–
–
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:
Interest rate swaps 1,026
–
–
–
–
$82,847
123
–
–
$82,970
–
1,026
–
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.
notes to consolidated financial statements
(in thousands except share and per share data)
89
(6) derivative financial instruments
2015, such valuation resulted in an asset and is included in other
The Company enters into foreign currency forward exchange contracts
current assets on the accompanying balance sheet.
to hedge exposure related to receivables denominated in a foreign
At December 31, 2016, the Company had foreign currency
currency and occasionally to manage risks related to future sales ex-
contracts in the form of forward exchange contracts with notional
pected to be denominated in a foreign currency. Before entering into
amounts of approximately U.S. $69.8 million, GB £1.8 million and
a derivative transaction for hedging purposes, it is determined that a
JPY ¥50.0 million, which all have maturities of less than one year.
high degree of initial effectiveness exists between the change in value
of the hedged item and the change in the value of the derivative in-
(7) equipment and leasehold improvements
strument from movement in exchange rates. High effectiveness means
that the change in the cash flows of the derivative instrument will
effectively offset the change in the cash flows of the hedged item. The
effectiveness of each hedged item is measured throughout the hedged
period and is based on the dollar offset methodology and excludes
Year Ended December 31,
Equipment
Leasehold Improvements
the portion of the fair value of the foreign currency forward exchange
Less accumulated
contract attributable to the change in spot-forward difference which is
depreciation and amortization
reported in current period earnings. Any hedge ineffectiveness is also
recognized as a gain or loss on foreign currency in the income state-
2016 2015
$27,757
$31,325
1,635
32,960
22,884
$10,076
1,631
29,388
20,055
9,333
ment. For hedge contracts that are no longer deemed highly effective,
Depreciation and amortization expense was $3.7 million in
hedge accounting is discontinued and gains and losses accumulated
2016 and $3.3 million in both 2015 and 2014.
in other comprehensive income are reclassified to earnings. If it is
probable that the forecasted transaction will no longer occur, then any
(8) trademarks, licenses and other intangible assets
gains or losses accumulated in other comprehensive income are re-
classified to current-period earnings.
In connection with the Rochas acquisition, $108 million of
the purchase price was paid in cash on the closing date and was
2016
Trademarks
Gross Accumulated
Net Book
Amount
Amortization
Value
financed entirely through a 5-year term loan. As the payment at
(indefinite lives) $115,793
$–
$115,793
closing was due in dollars and we had planned to finance it with
Trademarks
debt in euro, the Company entered into foreign currency forward
(finite lives)
40,794
63
40,731
contracts to secure the exchange rate for the $108 million pur-
Licenses
chase price at $1.067 per 1 euro. This derivative was designated
(finite lives)
62,102
37,206
24,896
and qualified as a cash flow hedge.
Gains and losses in derivatives designated as hedges are ac-
cumulated in other comprehensive income (loss) and gains and
losses in derivatives not designated as hedges are included in
(gain) loss on foreign currency on the accompanying income
Other intangible assets
(finite lives)
Subtotal
Total
12,861
115,757
$231,550
10,413
47,682
$47,682
2,448
68,075
$183,868
statements. Such gains and losses were immaterial in each of the
Gross Accumulated Net Book
years in the three-year period ended December 31, 2016. For
2015
Amount
Amortization
Value
the years ended December 31, 2016 and 2015, interest expense
Trademarks
includes a gain (loss) of $0.1 million and ($1.0) million, respec-
(indefinite lives) $119,459
$–
$119,459
tively, relating to an interest rate swap.
Trademarks
All derivative instruments are reported as either assets or lia-
(finite lives)
42,046
61
41,985
bilities on the balance sheet measured at fair value. The valuation
Licenses
of interest rate swaps resulted in a liability which is included in
(finite lives)
66,082
28,994
37,088
long-term debt on the accompanying balance sheets. The valua-
Other intangible assets
tion of foreign currency forward exchange contracts at December
31, 2016, resulted in a liability and is included in accrued ex-
penses on the accompanying balance sheet and at December 31,
(finite lives)
Subtotal
Total
12,366
120,494
9,563
2,803
38,618
81,876
$239,953
$38,618
$201,335
INTER PARFUMS, INC. 2016 ANNUAL REPORT
90
Amortization expense was $5.9 million, $5.8 million
Lanvin was granted the right to repurchase the brand names and
and $6.6 million in 2016, 2015 and 2014, respectively.
trademarks in 2025 for the greater of €70 million (approximately
Amortization expense is expected to approximate $5.7 mil-
$74 million) or one times the average of the annual sales for
lion in 2017 and 2018, and $4.6 million in 2019, 2020
the years ending December 31, 2023 and 2024 (residual value).
and 2021. The weighted average amortization period for
Because the residual value of the intangible asset exceeds its
trademarks, licenses and other intangible assets with finite
carrying value, the asset is not amortized.
lives are 18 years, 14 years and 2 years, respectively, and 14
years in the aggregate.
(9) loans Payable – Banks
There were no impairment charges for trademarks with indefi-
Loans payable – banks consist of the following:
nite useful lives in 2016, 2015 and 2014. The fair values used
The Company and its domestic subsidiaries have available a
in our evaluations are estimated based upon discounted future
$20 million unsecured revolving line of credit due on demand,
cash flow projections using a weighted average cost of capital
which bears interest at the prime rate minus 0.5% (the prime
of 6.2%. The cash flow projections are based upon a number
rate was 3.75% as of December 31, 2016). The line of credit
of assumptions, including, future sales levels and future cost of
which has a maturity date of December 18, 2017 is expect-
goods and operating expense levels, as well as economic condi-
ed to be renewed on an annual basis. Borrowings outstanding
tions, changes to our business model or changes in consumer
pursuant to lines of credit were zero as of December 31, 2016
acceptance of our products which are more subjective in nature.
and 2015.
The Company believes that the assumptions the Company has
The Company’s foreign subsidiaries have available credit lines,
made in projecting future cash flows for the evaluations de-
including several bank overdraft facilities totaling approximately
scribed above are reasonable and currently no impairment in-
$26 million. These credit lines bear interest at EURIBOR plus be-
dicators exist for our indefinite-lived assets. However, if future
tween 0.5% and 0.8% (EURIBOR was minus 0.08% at December
actual results do not meet our expectations, the Company may
31, 2016). Outstanding amounts were zero as of December 31,
be required to record an impairment charge, the amount of which
2016 and 2015.
could be material to our results of operations.
The weighted average interest rate on short-term borrowings
The cost of trademarks, licenses and other intangible as-
was zero as of December 31, 2016 and 2015.
sets with finite lives is being amortized by the straight line
method over the term of the respective license or the intan-
(10) long-term debt
gible assets estimated useful life which range from three to
In June 2015, the Company financed its Rochas brand acqui-
twenty years. If the residual value of a finite life intangible
sition with a $111 million, 5-year term loan payable in equal
asset exceeds its carrying value, then the asset is not amor-
quarterly installments plus interest. This term loan requires the
tized. The Company reviews intangible assets with finite lives
maintenance of certain financial covenants, tested semi-annually,
for impairment whenever events or changes in circumstances
including a maximum leverage ratio and a minimum interest cov-
indicate that the carrying amount may not be recoverable.
erage ratio. The facility also contains new debt restrictions among
Product sales of our Karl Lagerfeld brand have not met with
other standard provisions. The Company is in compliance with all
our original expectations. During the fourth quarter of 2016,
of the covenants and other restrictions of the debt agreements.
the Company decided that it will most likely exercise its
In order to reduce exposure to rising variable interest rates, the
rights for an early termination of the Karl Lagerfeld license
Company entered into a swap transaction effectively exchanging
in 2024, rather than continue the license through its original
the variable interest rate to a fixed rate of approximately 1.2%.
expiration in 2032. As a result of the shortened expected life
The swap is a derivative instrument and is therefore recorded at
of the license, the Company recorded an impairment loss of
fair value and changes in fair value are reflected in the accompa-
$5.7 million as of December 31, 2016.
nying consolidated statements of income. Maturities of long-term
Trademarks (finite lives) primarily represent Lanvin brand
debt subsequent to December 31, 2016 are approximately $21
names and trademarks and in connection with their purchase,
million per year through 2019 and, $11 million in 2020.
notes to consolidated financial statements
(in thousands except share and per share data)
91
(11) commitments
leases
million, in 2016, 2015 and 2014, respectively, and repre-
sented 7.3%, 7.2% and 7.1% of net sales for the years ended
The Company leases its office and warehouse facilities under oper-
December 31, 2016, 2015 and 2014, respectively.
ating leases which are subject to various step rent provisions, rent
concessions and escalation clauses expiring at various dates through
(12) equity
2023. Escalation clauses are not material and have been excluded
share-based PaymenTs:
from minimum future annual rental payments. Rental expense, which
The Company maintains a stock option program for key em-
is calculated on a straight-line basis, amounted to $10.7 million,
ployees, executives and directors. The plans, all of which have
$9.9 million and $10.1 million in 2016, 2015 and 2014, respec-
been approved by shareholder vote, provide for the granting
tively. Minimum future annual rental payments are as follows:
of both nonqualified and incentive options. Options granted
2017
2018
2019
2020
2021
Thereafter
$5,390
$5,028
$4,568
$3,689
$3,008
$5,952
$27,635
under the plans typically have a six-year term and vest over
a four to five-year period. The fair value of shares vested in
2016 and 2015 aggregated $0.9 million and $0.8 million,
respectively. Compensation cost, net of estimated forfeitures,
is recognized on a straight-line basis over the requisite service
period for the entire award. Forfeitures are estimated based on
historic trends. It is generally the Company’s policy to issue
new shares upon exercise of stock options.
The following table sets forth information with respect to
lICense agreemenTs
nonvested options for 2016:
The Company is party to a number of license and other agree-
ments for the use of trademarks and rights in connection with
the manufacture and sale of its products expiring at various
Weighted Average
Number
of Shares
Grant Date
Fair Value
dates through 2032. In connection with certain of these li-
Nonvested options –
cense agreements, the Company is subject to minimum an-
beginning of year
nual advertising commitments, minimum annual royalties and
Nonvested options
other commitments as follows:
2017
2018
2019
2020
2021
Thereafter
$113,633
$111,489
$114,897
$116,188
$118,169
$332,830
$907,206
granted
Nonvested options
vested or forfeited
Nonvested options –
end of year
414,850
149,850
(162,360)
402,340
$6.86
$7.43
$6.69
$7.14
The effect of share-based payment expenses decreased in-
come statement line items as follows:
Year Ended December 31,
2016 2015 2014
Future advertising commitments are estimated based on
Income before
planned future sales for the license terms that were in ef-
income taxes $1,200 $800 $900
fect at December 31, 2016, without consideration for poten-
Net Income attributable
tial renewal periods. The above figures do not reflect the fact
to Inter Parfums, Inc. 700 500 500
that our distributors share our advertising obligations. Royalty
Diluted earnings per share
expense included in selling, general, and administrative ex-
attributable to
penses, aggregated $37.8 million, $33.8 million and $35.6
Inter Parfums, Inc. 0.02 0.01 0.01
INTER PARFUMS, INC. 2016 ANNUAL REPORT
92
The following table summarizes stock option activity and relat-
The weighted average fair values of options granted by Inter
ed information for the years ended December 31, 2016, 2015
Parfums, Inc. during 2016, 2015 and 2014 were $7.43, $5.99
and 2014:
Year Ended December 31, Weighted Average
2016 Options Exercise Price
Shares under option-
beginning of year 709,300 $24.34
Options granted 149,850
32.61
Options exercised (123,150) 18.69
Options forfeited (50,560) 27.18
Shares under option-
end of year 685,440 26.95
and $7.42 per share, respectively, on the date of grant using the
Black-Scholes option pricing model to calculate the fair value.
The assumptions used in the Black-Scholes pricing model
are set forth in the following table:
Year Ended December 31,
Weighted average expected
stock-price volatility
Weighted average expected
option life
Weighted average risk-free
2016
2015
2014
29%
33%
34%
5.0 yrs
5.0 yrs
5.0 yrs
interest rate
2.0%
1.7%
1.7%
Year Ended December 31, Weighted Average
2015
Options Exercise Price
Weighted average
dividend yield
2.1%
2.1%
1.8%
Shares under option-
beginning of year
Options granted
Options exercised
Options forfeited
Shares under option-
end of year
639,495
158,300
(80,685)
(7,810)
$23.19
23.79
13.82
27.77
Expected volatility is estimated based on historic volatil-
ity of the Company’s common stock. The expected term of
the option is estimated 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
709,300
$24.34
the assumption that the dividend payout as authorized by the
Board of Directors would maintain its current payout ratio as a
Year Ended December 31, Weighted Average
percentage of earnings.
2014 Options Exercise Price
Proceeds, tax benefits and intrinsic value related to stock
Shares under option-
beginning of year
Options granted
Options exercised
Options forfeited
Shares under option-
end of year
options exercised were as follows:
643,595
139,250
(136,640)
(6,710)
$19.58
27.93
11.19
19.37
Year Ended December 31,
Proceeds from stock
options exercised
excluding cashless
639,495
$23.19
exercise of $0.7 million,
$0.5 million and
2016
2015
2014
At December 31, 2016, options for 1,078,755 shares
$0.6 million in 2016,
were available for future grant under the plans. The ag-
2015 and 2014,
gregate intrinsic value of options outstanding is $4.3
million as of December 31, 2016 and unrecognized com-
pensation cost related to stock options outstanding ag-
gregated $2.8 million, which will be recognized over the
next five years.
respectively $1,579 $653 $953
Tax benefits 400 260 670
Intrinsic value of
stock options
exercised
$1,860 $1,137 $2,733
notes to consolidated financial statements
(in thousands except share and per share data)
93
The following table summarizes additional stock option in-
and 2014 an additional 2,179, 1,299 and 3,112 shares, re-
formation as of December 31, 2016:
spectively, for payment of certain withholding taxes resulting
Options
Outstanding
Weighted
Average
Remaining
from his option exercises.
In September 2016, Interparfums SA, approved a plan to
grant an aggregate of 15,100 shares of its stock to employees
with no performance condition requirement, and an aggregate
of 133,000 shares to officers and managers, subject to certain
corporate performance conditions. The shares will be distributed
Exercise
Number
Contractual
Options
in September 2019 so long as the individual is employed by
Prices Outstanding
70,050
$15.59
250
$17.07
87,310
$19.33
2,750
$21.76
2,800
$22.20
127,850
$23.61
$25.29 - $28.82 14,000
$26.40
5,000
$27.80
114,880
2,000
$29.36
$32.12 - $32.83 148,350
110,200
685,440
$35.75
Totals
Life Exercisable
70,050
250
66,530
1,750
1,200
25,570
3,000
–
45,880
1,000
1,750
66,120
283,100
0.99 years
0.08 years
2.00 years
1.08 years
2.08 years
5.00 years
3.79 years
4.08 years
4.00 years
2.68 years
5.91 years
3.00 years
3.85 years
Interparfums SA at the time, and in the case of officers and man-
agers, only to the extent that the performance conditions have
been met. Once distributed, the shares will be unrestricted and
the employees will be permitted to trade their shares.
The fair value of the grant of €22.46 per share (approximately
$25.00 per share) has been determined based on the quoted
stock price of Interparfums SA shares as reported by the NYSE
Euronext on the date of grant taking into account the dividend
yield as no dividends on this grant will be earned until the shares
are distributed. The estimated number of shares to be distributed
of 137,381 has been determined taking into account employee
turnover. The aggregate cost of the grant of €3.1 million (approx-
imately $3.4 million) will be recognized as compensation cost by
Interparfums SA on a straight-line basis over the requisite three
year service period. In 2016, $0.4 million of compensation cost
As of December 31, 2016, the weighted average exercise
has been recognized.
price of options exercisable was $24.20 and the weighted av-
To avoid dilution of the Company’s ownership of Interparfums
erage remaining contractual life of options exercisable is 2.59
SA, all shares to be distributed pursuant to this plan will be pre-ex-
years. The aggregate intrinsic value of options exercisable at De-
isting shares of Interparfums SA, purchased in the open market by
cember 31, 2016 is $2.6 million.
Interparfums SA. As of December 31, 2016, a total of 108,348
The Chief Executive Officer and the President each exer-
shares have been acquired in the open market at an aggregate cost
cised 19,000, 19,000 and 32,875 outstanding stock options
of $2.9 million, and such amount has been classified as an equity
of the Company’s common stock in 2016, 2015 and 2014,
transaction on the accompanying balance sheet.
respectively. The aggregate exercise prices of $0.7 million
in 2016, $0.5 million in 2015 and $0.6 million in 2014
dIvIdends
were paid by them tendering to the Company in 2016, 2015
In October 2016, the Board of Directors of the Company au-
and 2014, an aggregate of 20,658, 18,764 and 19,656
thorized a 13% increase in the annual dividend to $0.68 per
shares, respectively, of the Company’s common stock, pre-
share. The quarterly dividend aggregating approximately $5.3
viously owned by them, valued at fair market value on the
million ($0.17 per share) declared in December 2016 was paid
dates of exercise. All shares issued pursuant to these option
in January 2017. The next quarterly dividend of $0.17 per
exercises were issued from treasury stock of the Company. In
share will be paid on April 14, 2017 to shareholders of record
addition, the Chief Executive Officer tendered in 2016, 2015
on March 31, 2017.
INTER PARFUMS, INC. 2016 ANNUAL REPORT
94
(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 using the treasury stock method. The reconciliation between the numerators and denom-
inators of the basic and diluted EPS computations is as follows:
Year Ended December 31,
Numerator for diluted earnings per share
Denominator:
Weighted average shares
Effect of dilutive securities: stock options
Denominator for diluted earnings per share
Earnings per share:
2016 2015 2014
29,436
30,437
33,331
31,072,328
103,270
31,175,598
30,996,137
30,931,308
104,078
129,018
31,100,215
31,060,326
Net income attributable to Inter Parfums, Inc. common shareholders:
Basic
Diluted
1.07
1.07
0.98
0.98
0.95
0.95
Not included in the above computations is the effect of anti dilutive potential common shares, which consist of out-
standing options to purchase 267,000, 272,000, and 130,000 shares of common stock for 2016, 2015, and 2014,
respectively.
(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:
United States
Europe
Eliminations of intercompany sales
net income attributable to inter Parfums, inc.:
United States
Europe
Eliminations
depreciation and amortization expense
including impairment loss:
2016
$117,256
404,198
)
(382
$521,072
$8,285
25,120
(74
$33,331
)
United States
Europe
$1,816
13,525
$15,341
interest and dividend income:
United States
Europe
$22
3,309
$3,331
2015
2014
$105,851
362,911
(222
)
$105,270
394,164
)
(173
$468,540
$499,261
$7,640
22,797
–
$8,069
21,367
–
$30,437
$29,436
$1,583
7,495
$9,078
$18
2,977
$2,995
$1,554
8,612
$10,166
$3
3,885
$3,888
notes to consolidated financial statements
(in thousands except share and per share data)
segments and Geographical areas continued
Year Ended December 31,
interest expense:
United States
Europe
income tax expense:
United States
Europe
Eliminations
total assets:
United States
95
2016
–
2,340
$2,340
$4,278
19,596
)
(48
$23,826
2015
2014
$2
2,824
$2,826
$3,923
17,604
–
$73
1,405
$1,478
$4,643
14,727
–
$21,527
$19,370
Europe
Eliminations of investment in subsidiary
)
$89,930
602,077
(9,598
$682,409
$80,761
616,199
)
(9,301
$78,740
535,049
)
(9,283
$687,659
$604,506
additions to long-lived assets:
United States
Europe
total long-lived assets:
United States
Europe
deferred tax assets:
United States
Europe
Eliminations
$930
4,812
$5,742
$12,247
181,697
$193,944
$194
7,848
48
$8,090
$1,283
122,663
$123,946
$13,133
197,535
$210,668
$365
6,817
–
$7,182
$1,165
3,059
$4,224
$13,433
94,285
$107,718
$396
6,452
–
$6,848
United States export sales were approximately $77.5 million, $66.3 million and $61.0 million in 2016, 2015 and 2014, respec-
tively. Consolidated net sales to customers by region are as follows:
Year Ended December 31,
2014
North America
$125,900
Europe
Central and South America
Middle East
Asia
Other
$125,700
170,600
177,900
78,200
11,000
41,100
41,900
85,600
11,900
57,700
40,300
2015
2016
149,600
192,800
43,900
42,200
81,600
11,000
$521,100
$468,500
$499,300
Consolidated net sales to customers in major countries are as follows:
Year Ended December 31,
2014
United States
$119,000
United Kingdom
France
2016
$144,000
$31,000
$43,000
$122,000
$32,000
$34,000
$50,000
$37,000
2015
INTER PARFUMS, INC. 2016 ANNUAL REPORT
96
(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, 2016.
The components of income before income taxes consist of the following:
Year Ended December 31,
2014
U.S. operations
$12,712
44,003
$56,715
2016
$12,441
54,633
$67,074
Foreign operations
$60,496
$11,564
48,932
2015
The provision for current and deferred income tax expense (benefit) consists of the following:
Year Ended December 31,
Current:
2016
2015
2014
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Total income tax expense
$3,792
309
21,099
25,200
113
9
(1,496
(1,374
$23,826
)
)
$3,660
220
16,806
20,686
30
1
810
841
$4,374
323
15,229
19,926
)
(84
30
)
(502
)
(556
$21,527
$19,370
The tax effects of temporary differences that give rise to
Valuation allowances are provided for foreign net operating
significant portions of the deferred tax assets and deferred tax
loss carry-forwards, as future profitable operations from cer-
liabilities are as follows:
tain foreign subsidiaries might not be sufficient to realize the
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
deferred tax liabilities (long-term):
Trademarks and licenses
Other
Total deferred tax liabilities
Net deferred tax assets
2016
2015
No other valuation allowances have been provided as
full amount of net operating loss carry-forwards.
management believes that it is more likely than not that
the asset will be realized in the reduction of future taxable
296
income.
2,321
2,442
As previously reported, the French Tax Authorities exam-
ined the 2012 tax return of Interparfums SA, the Compa-
717
ny’s majority owned Paris-based subsidiary, and in August
2015 issued a $6.9 million tax adjustment. It is the Com-
2,170
pany’s position that the French Tax Authorities are incor-
(468
)
rect in their assessments and the Company believes that it
7,478
has strong arguments to support its tax positions. The main
(296
)
issues challenged by the French Tax Authorities related to
7,182
the commission rate and royalty rate paid to Interparfums
Singapore Pte. and Interparfums (Suisse) SARL, respec-
(3,746
)
tively. Interparfums Singapore Pte. and Interparfums (Su-
–
isse) SARL are wholly-owned subsidiaries of Interparfums
(3,746
)
SA. Due to the subjective nature of the issues involved,
$3,436
in April 2016, Interparfums SA reached an agreement in
)
)
)
)
821
1,875
3,187
864
2,888
(724
8,911
(821
8,090
(3,449
–
(3,449
$4,641
notes to consolidated financial statements
(in thousands except share and per share data)
97
principle to settle the entire matter with the French Tax
(16) accumulated other comprehensive income (loss)
Authorities. The settlement requires Interparfums SA to pay
The components of accumulated other comprehensive loss
a tax assessment of $1.9 million covering the issues for not
consist of the following:
only the 2012 tax year, but also covering the issues for the
tax years ended 2013 through 2015. The settlement also in-
Year Ended December 31,
cludes an agreement as to future acceptable commission and
Net derivative instruments,
2016
2015
2014
royalty rates, which is not expected to have a significant im-
beginning of year
$–
pact on cash flow. The settlement, which for 2012, is subject
Net derivative instruments,
to formal documentation with the French Tax Authorities, was
(17
loss, net of tax
)
$–
–
$–
–
accrued as of March 31, 2016. In July 2016, Interparfums SA
paid $1.1 million to the French Tax Authorities relating to tax
years 2013 and 2014.
Net derivative instruments
end of year
–
Cumulative translation
(17
–
)
The Company is no longer subject to U.S. federal, state,
adjustments,
and local or non-U.S. income tax examinations by tax authori-
ties for years before 2013.
The Company has not provided for U.S. deferred income
beginning of year
Translation adjustments
Cumulative translation
(48,091
(9,874
)
)
(15,823
)
25,860
(32,268
)
(41,683
)
taxes on $365 million of undistributed earnings of its non-
U.S. subsidiaries as of December 31, 2016 since the Com
pany intends to reinvest most of these earnings in its for-
adjustments,
end of year
Accumulated other
(57,965
)
(48,091
)
(15,823
)
eign operations indefinitely and the Company believes it
comprehensive
has sufficient foreign tax credits available to offset any
potential tax on amounts that have been and are planned
income (loss)
(57,982
(15,823)
(48,091
)
)
to be repatriated.
(17) net income attributable to inter Parfums, inc.
Differences between the United States Federal statutory
and transfers from the noncontrolling interest
income tax rate and the effective income tax rate were as
follows:
Year Ended December 31, 2016 2015 2014
34.0
Statutory rates
%
34.0
State and local taxes,
34.0
%
%
net of Federal benefit
0.3
0.2
0.1
Effect of foreign taxes
greater than
U.S. statutory rates
Other
)
(0.3
Effective rates
%
34.2
1.5
(0.3
35.5
)
%
35.6
(0.2
1.6
0.4
%
)
Year Ended December 31,
Net income attributable
2016
2015
2014
to Inter Parfums, Inc.
$33,331
$30,437
$29,436
Decrease in
Inter Parfums, Inc.’s
additional paid-in capital
for subsidiary share
transactions
(1,926
)
(335
(192
)
)
Change from net income
attributable to
Inter Parfums, Inc.
and transfers from
noncontrolling interest
$31,405
$30,245
$29,101
INTER PARFUMS, INC. 2016 ANNUAL REPORT
98
directors and executive officers
directors and execUtiVe officers
dIreCTors
Jean madar
exeCuTIve offICers
CorPoraTe InformaTIon
Chief Executive Officer,
Chief Executive Officer,
Jean madar
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
Philippe santi
Executive Vice President
Director General Delegue
Interparfums SA
francois heilbronn
frédéric Garcia-Pelayo
Managing Partner M.M. Friedrich,
Director of Export Sales
Heilbronn & Fiszer
Interparfums SA
Mazars USA, LLP
135 West 50th Street
New York, NY 10020
transfer agent
American Stock Transfer
and Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Jean levy
Business Consultant - Former President
and Chief Executive Officer, Cosmair
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.
corporate and market information
99
The markeT for our Common sToCk
Our Company’s common stock, $.001 par value per share, is traded
2016, our Board of Directors authorized a 15% increase in the
on The Nasdaq Global Select Market under the symbol “IPAR”. The
cash dividend to $0.60 per share on an annual basis. In October
following table sets forth in dollars, the range of high and low closing
2016, our Board of Directors authorized an additional 13%
prices for the past two fiscal years for our common stock.
increase in the annual dividend to $0.68 per share. The next
High Closing Low Closing
2017 to shareholders of record on March 31, 2017.
quarterly cash dividend of $0.17 per share is payable on April 14,
fiscal 2016
Fourth Quarter
Price Price
29.40
36.40
27.05
35.07
Third Quarter
27.19
Second Quarter 31.71
20.37
32.47
First Quarter
form 10k
a copy of the company’s 2016 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,
Fiscal 2015 Price Price
High Closing Low Closing
nY 10176 attention: corporate secretary.
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
33.45
35.22
34.83
29.37
22.33
29.97
23.40
22.73
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, 2017, the number of record holders,
Inc., CCA Industries, Inc., Colgate-Palmolive Co., Estee Lauder
which include brokers and broker’s nominees, etc., of our com-
Companies, Inc., Inter Parfums, Inc., Kimberly Clark Corp.,
mon stock was 42. We believe there are approximately 9,500
Natural Health Trends Corp., Proctor & Gamble Co., Revlon, Inc.,
beneficial owners of our common stock.
Spectrum Brands Holdings, Inc., Stephan Co., Summer Infant,
dIvIdends
Inc. and United Guardian, Inc. The graph assumes that the value
of the investment in our common stock and each index was $100
In January 2015, our Board of Directors authorized an 8%
at the beginning of the period indicated in the graph, and that all
increase in the annual dividend to $0.52 per share and in January
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 12/31/11 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
12/11
100.00
100.00
100.00
12/12
127.37
116.41
108.26
12/13
241.41
165.47
135.85
12/14
188.05
188.69
153.37
12/15
166.25
200.32
145.85
12/16
233.18
216.54
152.71
INTER PARFUMS, INC. 2016 ANNUAL REPORT
Montblanc Emblem Intense
551 F I F T H AV E N U E N Y, N Y 10176
T E L : 21 2 9 83 2 6 4 0 FA X : 212 9 83 419 7
W W W. I N T E R PA R F U M S I NC .C OM