100
Abercrombie & Fitch
2019
Anna Sui
Boucheron
Coach
Dunhill
Guess
Graff
Hollister
Jimmy Choo
Karl Lagerfeld
Kate Spade
Lanvin
Mcm
Monblanc
Oscar de la Renta
Paul Smith
Repetto
Rochas
S.T. Dupont
Van Cleef & Arpels
1
table of contents
FINANCIAL HIGHLIGHTS 02
LETTER TO OUR SHAREHOLDERS 04
THE COMPANY 08
THE PRODUCTS 14
THE ORGANIZATION 60
2
Financial
Highlights
NET SALES
(in millions(cid:23))
2019
2018
2017
2016
2015
NET INCOME ATTRIBUTABLE
TO INTER PARFUMS, INC.
(in millions(cid:23))
2019
2018
2017
2016
2015
$60.2
$53.8
$41.6
$33.3
$30.4
INTER PARFUMS, INC.
SHAREHOLDERS’ EQUITY
(in millions(cid:23))
2019
2018
2017
2016
2015
$713.5
$675.6
$591.3
$521.1
$468.5
$468.0
$447.6
$433.3
$370.4
$365.6
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.
2019
2018
2017
2016
2015
(In thousands, except per share data)
Years Ended December 31,
INCOME STATEMENT DATA:
Net Sales
Cost of Sales
Expenses
Operating Income
Income Before Taxes
Net Income Attributable to the
Noncontrolling Interest
Net Income Attributable to Inter Parfums, Inc.
Net Income Attributable to Inter Parfums, Inc.
Common Shareholders’ per Share:
Basic
Diluted
$713,514
267,578
341,209
104,727
105,146
15,821
60,249
$1.92
$1.90
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)
Lease liabilities (including current portion)
Inter Parfums, Inc. Shareholders’ Equity
Dividends Declared per Share
31,451
31,689
$8,729
$192,417
60,714
388,831
828,832
−0−
23,060
29,991
468,004
$1.155
$675,574
$591,251
$521,072
$468,540
248,012
332,831
94,731
95,859
15,922
53,793
$1.72
$1.71
31,308
31,522
$11,031
214,965
295,540
78,623
78,065
13,659
41,594
$1.33
$1.33
31,172
31,305
$11,914
194,601
258,787
66,678
67,074
9,917
33,331
$1.07
$1.07
31,072
31,176
$15,341
179,069
228,268
61,203
60,496
8,532
30,437
$0.98
$0.98
30,996
31,100
$9,078
$193,136
$208,343
$161,828
$176,967
67,870
382,425
797,829
-0-
46,061
N/A
447,607
$0.905
69,899
382,171
777,772
-0-
60,579
N/A
433,298
$0.72
94,202
337,977
682,409
-0-
74,562
N/A
370,391
$0.62
82,847
337,674
687,659
-0-
98,606
N/A
365,587
$0.52
4
2019
Letter to our
Shareholders
DEAR FELLOW SHAREHOLDERS,
As we write this letter, the COVID-19 coronavirus pandemic
has been raging throughout the world, particularly hitting hard
in New York City and Paris, the headquarters of our U.S. and
European operations. Our hearts go out to all those who have
lost friends and family members and those who have been
sickened by the virus.
Before discussing recent and near-term business conditions
along with actions being taken and plans in the works related
to the COVID-19 environment, we will review the events and
accomplishments of 2019.
Jean Madar and Philippe Benacin
letter to shareholders
5
YEAR-OVER-YEAR FINANCIAL OVERVIEW
19% ahead of 2017. Similarly, sales growth in Western Europe
• Net sales increased 5.6% to a record $713.5 million from
of 2.5% in 2019 comes on the heels of 9% sales gains in 2018.
$675.6 million. At comparable foreign currency exchange
In Eastern Europe, net sales rose nearly 5% layering upon the
rates, net sales increased 7.6%.
7% gain in the preceding year. The biggest percentage gainer
• Sales by European based operations rose 0.8% to $542.1
was the Middle East where 2019 sales surged 22% over 2018,
million from $537.6 million; in comparable foreign currency
which were 17% ahead of 2017. Sales in Asia, our third larg-
exchange rates, net sales for European based operations
est market, were down nominally in actual dollars in 2019,
were up 4%.
but ahead in constant dollars, which we consider quite re-
• U.S. based operations generated net sales of $171.4 mil-
spectable in light of trade tariffs on goods coming in and out
lion, an increase of 24.2% from $138.0 million.
of China from the United States. Also keep in mind our sales
• Gross margin was 62.5% compared to 63.3%.
in Asia climbed 24% in 2018, setting a high bar for 2019. Our
• S, G & A expense as a percentage of sales was 47.8% com-
smallest market, Central and South America, continued to
pared to 49.3%.
decline, not surprisingly in light of the region’s political, eco-
• Operating income rose 10.6% to $104.7 million from $94.7
nomic and social turmoil.
million.
• Operating margin increased by 70 basis points to 14.7%
2019 EUROPEAN BASED OPERATIONS
from 14.0%.
Montblanc, Jimmy Choo and Coach continued to place first,
• Our effective tax rate was 27.7% compared to 27.3%.
second and third among our brands by sales. Montblanc
• Net income attributable to Inter Parfums, Inc. increased
grew full year sales by 22.7% with the excellent perfor-
12% to $60.2 million from $53.8 million.
mance of the new Montblanc Explorer scent as well as the
• Diluted net income per share was $1.90, an increase of
continued strength of the brand’s Legend fragrance fam-
11.1% compared to $1.71.
ily. In constant dollars, Jimmy Choo brand sales were up
• The annual dividend rate increased 20% to $1.32 from
slightly, however, due to the strength of the dollar, brand
$1.10.
sales were down nominally in actual dollars. In addition to
Of note, for the full years ended December 31, 2019 and
several brand extensions, Jimmy Choo ended the year with
2018, the average dollar/euro exchange rates were 1.12 and
the launch of an entirely new men’s scent, Urban Hero with
1.18, respectively. The strong U.S. dollar throughout 2019 had
a 2020 rollout ongoing. Similarly, Coach brand sales were
a negative impact on our 2019 net sales but favorably affected
also down slightly in 2019 in actual dollars but ahead of 2018
earnings, because over 45% of net sales of our European oper-
in constant dollars. It is also worth mentioning that Coach
ations were denominated in U.S. dollars, while almost all costs
brand sales were 73.3% greater in 2018 compared to 2017.
of those operations were incurred in euro.
Two of our mid-sized brands, Karl Lagerfeld and Van Cleef
& Arpels, achieved year-over-year sales growth of 5.0% and
OTHER 2019 FINANCIAL HIGHLIGHTS
6.8%, respectively.
• Our business generated cash flow from operating activities
The big news within European operations was the addition
of approximately $76.5 million.
of a new brand, Kate Spade New York, for which an exclusive,
• We closed the year with working capital of $389 million in-
11-year worldwide license was signed in June 2019. Under the
cluding approximately $253 million in cash, cash equivalents
agreement, we are creating and producing new perfumes and
and short-term investments, resulting in a working capital
fragrance-related products and distributing them globally to
ratio of over 3 to 1.
department and specialty stores and duty-free shops, as well
• At year-end, long-term debt aggregated $10.7 million.
as in Kate Spade New York retail stores. Since its launch in
• We added two new brands to our portfolio.
1993 Kate Spade New York is a global life and style house with
• We extended the duration of our license agreements with
handbags, ready-to-wear, jewelry, footwear, gifts, and home
three brands.
décor and more. Kate Spade New York’s founding principles,
polished ease, thoughtful details and a modern, sophisticated
CONTINUING TO GROW OUR MARKETS
use of color, celebrates confident women with a youthful spirit.
For the third year in a row, North America was our largest
Kate Spade New York is part of the Tapestry house of brands,
market where 2019 sales were 11% ahead of 2018, which were
as is Coach, our third largest brand. We are assuming distri-
6
bution of two of the brand’s most popular scents, and currently
Rochas looked promising. Just under the wire, our six-scent
plan to launch our first new scent under the brand.
collection for Graff unveiled exclusively in London’s Harrod’s
U.S. BASED OPERATIONS
in March. Our sales for January and February were pretty
good, except in China. But in March, as the COVID-19 infection
The surge in sales by U.S. operations was primarily due to the
spread, brick and mortar stores shuttered, air travel halted,
GUESS brand. In fact, GUESS has emerged as our fourth larg-
stay-at-home directives were implemented, and many busi-
est brand across our entire portfolio in its first full year under
nesses, including ours, slowed beyond recognition. Since that
license with us. Of note, the increase in GUESS brand sales
time, there has been a severe economic downturn character-
was attributable to legacy scents and brand extensions, rather
ized by unprecedented layoffs in many of the markets where
than major product launches. GUESS is a major brand in the
we do business. As a result, our April and May sales have
Middle East, which also happened to be our fastest growing
been minimal.
market in 2019.
As the COVID-19 infection spread, we took immediate
Also contributing to the more than 24% top line growth by
action and developed plans for the balance of the year. To
U.S. operations in 2019 were Abercrombie & Fitch and Hollis-
keep our staff safe and productive, our people set up home
ter, both of which achieved significant sales growth spurred
offices interfacing with each other via video conferences.
by the launch of the Authentic fragrance duo for Abercrom-
While we implemented a hiring freeze and cut bonuses, no
bie & Fitch and brand extensions for the Wave and Festival
one was laid off, because the last thing we want to do is to
fragrance families for Hollister. Oscar de la Renta fragrance
lose the great talent that brought us to 2019’s record sales
sales rose slightly, supported by legacy scents and our grow-
and who will be responsible for reenergizing our business
ing Bella fragrance family.
once the worst of the pandemic is behind us. Nonetheless,
For U.S. operations, a catalyst for future incremental sales
we have taken several actions to minimize expenses and
took place in November 2019 with the signing of an exclusive,
protect our cash flows during this crisis. Most of the major
10-year worldwide license agreement with German luxury
product launches scheduled for 2020 have been postponed
fashion house MCM. Since 1976, MCM has been pushing fash-
until 2021, along with their related advertising and promo-
ion boundaries and redefining luxury leather goods on a global
tional programs. We’ve cut travel, internal company events
scale through innovation, cutting-edge technology, exception-
and nearly all other non-essential expenses. In addition, we
al creativity and superior quality. Work has begun on develop-
temporarily suspended the quarterly dividend, reduced our
ing extraordinary fragrances for women and men that capture
already nominal capex budget from 2019 levels and in March
the creative spirit of MCM, with launches targeted for next
2020 budgeted fixed expenses for the remainder of the year
year. Our distribution strategy will include MCM stores, high-
at under $25 million per quarter.
end department stores and prestige beauty retailers, with a
Our strong balance sheet and conservative financial tradi-
geographic focus on Asia, the Americas and Europe.
tion have put us in an advantageous position relative to some
During 2019, we extended our licensing arrangement with
of our peers. We closed the first quarter of 2020 with working
the Oscar de la Renta brand through the end of 2031, with an
capital of $386 million, including approximately $204 mil-
additional five-year option. In addition, we extended our li-
lion in cash, cash equivalents and short-term investments,
cense for both the Abercrombie & Fitch and Hollister brands
a working capital ratio of over 3.7 to 1 and only $9.8 million
until December 31, 2022 and added automatic renewals unless
of long-term debt. We also have $47 million available in un-
terminated with three years advance notice.
tapped credit facilities.
As noted, most of our major launches and corresponding
2020 AN OPTIMISTIC START AND THEN …
advertising and promotion have been postponed until 2021.
We began 2020 full of optimism for the new year. We had a
The line-up for the coming year now includes a women’s signa-
vibrant new product pipeline which included initial products
ture scent for Montblanc, and other women’s scents including
for our newer brands. We had issued sales guidance of $742
Anna Sui Sky, GUESS Bella Vita, Jimmy Choo I Want Choo, and
million and built up inventory and developed advertising and
our first ever Kate Spade New York scent. For our Hollister, we
promotion programs to support our sales goals. Our first
have a new pillar called Canyon Escape which again features
major launch of the year, Coach Dreams was doing very well,
a men’s and women’s scent. Also in the works for 2021, are
and the early returns for Byzance by Rochas and L’Homme
our first men’s and women’s scents for the newest brand in our
letter to shareholders
7
portfolio, MCM and a new pillar for Oscar de la Renta, called
pandemic are beyond our control. But our strengths in the
Alibi. We also have a men’s grooming and fragrance collection
best of times, namely our diverse portfolio of brands, financial
under development for the GUESS brand.
strength, global distribution network, and dedicated staff and
Operationally, we are prepared for increased demand in the
partners throughout the world, will, we are confident, be im-
post-COVID-19 environment, with inventory levels of compo-
measurably important as we emerge from these difficult and
nents and finished goods, based upon our original 2020 sales
often heartbreaking days.
projections. As we write this letter, parts of Asia have already
showed signs of a comeback, with internet sales especially
Sincerely yours,
strong. Other markets in North America, Europe and the Mid-
dle East are likewise opening, but slowly and with restrictions.
We recognize that the challenges will be many, even in the
aftermath of the pandemic. The economic downturn, vast un-
employment, slow to start up air travel and the related travel
retail business, and the pressures social distancing places on
ordinary shopping at department and specialty stores count
Chairman of the Board
Vice Chairman of the Board
among them. The duration, scale, and spread of the COVID-19
Chief Executive Officer
President
Montblanc Explorer
8
The
Company
Founded in 1982, we operate in the fragrance
business, and manufacture, market and dis-
tribute a wide array of prestige fragrance,
and fragrance related products.
Our worldwide headquarters and the office of our four (4)
wholly-owned United States subsidiaries, Jean Philippe
Fragrances, LLC, Inter Parfums USA, LLC and Interstellar
Brands LLC, all New York limited liability companies, and IP
Beauty, Inc., a Delaware corporation, are located at 551 Fifth
Avenue, New York, New York 10176, and our telephone number
is 212.983.2640. We also own 100% of Inter Parfums USA Hong
Kong Limited indirectly through our wholly-owned subsidiary,
Inter Parfums USA, LLC.
Our consolidated wholly-owned subsidiary, Inter Parfums
Holdings, S.A., and its majority-owned subsidiary, Inter-
parfums SA, maintain executive offices at 4 Rond Point des
Champs Elysees, 75008 Paris, France. Our telephone number
in Paris is 331.5377.0000. Interparfums SA is the sole owner
of three (3) distribution subsidiaries: Inter Parfums srl for Ita-
ly, Inter España Parfums et Cosmetiques, SL, for Spain and In-
terparfums Luxury Brands, Inc., a Delaware corporation, for
distribution of prestige brands in the United States. Interpar-
fums SA is also the majority owner of Parfums Rochas Spain,
SL, a Spanish limited liability company, which specializes in
the distribution of Rochas fragrances. In addition, Interpar-
fums SA is also the sole owner of Interparfums (Suisse) SARL,
a company formed to hold and manage certain brand names,
and Interparfums Asia Pacific Pte., Ltd., an Asian sales and
marketing office.
Our common stock is listed on The Nasdaq Global Select
Market under the trading symbol “IPAR”. The common shares
of our subsidiary, Interparfums SA, are traded on the Eu-
ronext Exchange.
The Securities and Exchange Commission (“SEC”) maintains
an internet site at http://www.sec.gov that contains financial
reports, proxy and information statements, and other informa-
tion regarding issuers that file electronically with the SEC. We
maintain our internet website at www.interparfumsinc.com,
which is linked to the SEC internet site. You can obtain through
our website, free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, interactive data files, current
reports on Form 8-K, beneficial ownership reports (Forms 3,
Jimmy Choo Urban Hero
4 and 5) and amendments to those reports filed or furnished
pursuant to Section 13(a) of the Securities Exchange Act of
1934 as soon as reasonably practicable after they have been
electronically filed with or furnished to the SEC.
the company
9
Guess Bella Vita
10
We operate in the fragrance business and manufacture,
market and distribute a wide array of fragrance and fragrance
European Operations
We produce and distribute our fragrance products primarily
related products. We manage our business in two segments,
under license agreements with brand owners, and fragrance
European based operations and United States based opera-
product sales through our European operations represent-
tions. Certain prestige fragrance products are produced and
ed approximately 76% of net sales for 2019. We have built a
marketed by our European operations through our 73% owned
portfolio of prestige brands, which include Boucheron, Coach,
subsidiary in Paris, Interparfums SA, which is also a publicly
Jimmy Choo, Karl Lagerfeld, Kate Spade New York, Lanvin,
traded company as 27% of Interparfums SA shares trade on
Montblanc, Paul Smith, Repetto, Rochas, S.T. Dupont and Van
the NYSE Euronext.
Cleef & Arpels, whose products are distributed in over 120
Our business is not capital intensive, and it is important to
countries around the world.
note that we do not own manufacturing facilities. We act as a
general contractor and source our needed components from
our suppliers. These components are received at one of our
United States Operations
Prestige brand fragrance products are also marketed through
distribution centers and then, based upon production needs,
our United States operations, and represented 24% of sales
the components are sent to one of several third party fillers
for the year ended December 31, 2019. These fragrance prod-
which manufacture the finished product for us and deliver
ucts are sold under trademarks owned by us or pursuant to
them to one of our distribution centers.
license or other agreements with the owners of brands, which
Our fragrance products focus on prestige brands, each with
include Abercrombie & Fitch, Agent Provocateur, Anna Sui,
a devoted following. By concentrating in markets where the
bebe, Dunhill, French Connection, Graff, GUESS?, Hollister, Lily
brands are best known, we have had many successful product
Aldridge, MCM and Oscar de la Renta.
launches. We typically launch new fragrance families for our
brands every year or two, and more frequently seasonal and
limited edition fragrances are introduced as well.
The creation and marketing of each product family is in-
BUSINESS STRATEGY
Focus On Prestige Beauty Brands
Prestige beauty brands are expected to contribute signifi-
timately linked with the brand’s name, its past and present
cantly to our growth. We focus on developing and launching
positioning, customer base and, more generally, the prevail-
quality fragrances utilizing internationally renowned brand
ing market atmosphere. Accordingly, we generally study the
names. By identifying and concentrating in the most recep-
market for each proposed family of fragrance products for
tive market segments and territories where our brands are
almost a full year before we introduce any new product into
known, and executing highly targeted launches that capture
the market. This study is intended to define the general posi-
the essence of the brand, we have had a history of success-
tion of the fragrance family and more particularly its scent,
ful launches. Certain fashion designers and other licensors
bottle, packaging and appeal to the buyer. In our opinion, the
choose us as a partner, because our Company’s size enables
unity of these four elements of the marketing mix makes for
us to work more closely with them in the product develop-
a successful product.
ment process as well as our successful track record.
As with any business, many aspects of our operations are
subject to influences outside our control. We believe we have
a strong brand portfolio with global reach and potential. As
part of our strategy, we plan to continue to make investments
Grow Portfolio Brands Through
New Product Development And Marketing
We grow through the creation of fragrance family extensions
behind fast-growing markets and channels to grow market
within the existing brands in our portfolio. Every year or two,
share. We discuss in greater detail risk factors relating to our
we create a new family of fragrances for each brand in our
business in Item 1A of this Annual Report on Form 10-K for the
portfolio. We frequently introduce seasonal and limited edition
fiscal year ended December 31, 2019, and the reports that we
fragrances as well. With new introductions, we leverage our
file from time to time with the SEC.
ability and experience to gauge trends in the market and
the company
11
further leverage the brand name into different product
brands. We believe such product offerings meet customer needs
families in order to maximize sales and profit potential. We
and further strengthen customer loyalty.
have had success in introducing new fragrance families
(sub-brands, flanker brands or flankers) within our brand
franchises. Furthermore, we promote the performance of
our prestige fragrance operations through knowledge of
Continue To Build
Global Distribution Footprint
Our business is a global business and we intend to contin-
the market, detailed analysis of the image and potential of
ue to build our global distribution footprint. In order to adapt
each brand name, and a highly professional approach to
to changes in the environment and our business, in addition
international distribution channels.
to our arrangements with third party distributors globally, we
Continue To Add New Brands
To Our Portfolio Through New
Licenses Or Acquisitions
Prestige brands are the core of our business and we in-
are operating distribution subsidiaries or divisions in the major
markets of the United States, France and Spain for distribution
of prestige fragrances. We may look into future joint arrange-
ments or acquire distribution companies within other key mar-
kets to distribute certain of our prestige brands. While building
tend to add new prestige beauty brands to our portfolio.
a global distribution footprint is part of our long-term strategy,
Over the past 25 years, we have built our portfolio of well-
we may need to make certain decisions based on the short-term
known prestige brands through acquisitions and new
needs of the business. We believe that in certain markets, ver-
license agreements. We intend to further build on our
tical integration of our distribution network may be one of the
success in prestige fragrances and pursue new licenses
keys to future growth of our Company, and ownership of such
and acquire new brands to strengthen our position in the
distribution should enable us to better serve our customers’
prestige beauty market. To that end, in 2017, we extended
needs in local markets and adapt more quickly as situations may
our Jimmy Choo license through December 31, 2031 and
determine.
our Paul Smith license until December 2021. In 2018, we
signed new license agreements with GUESS? Inc., Graff
and Lily Aldridge and extended our license with Van Cleef
& Arpels. In 2019, we extended our license agreements for
RECENT DEVELOPMENTS
Abercrombie & Fitch and Hollister
In November 2019, we extended our license for both the
Abercrombie & Fitch, Hollister and Oscar de la Renta, and
Abercrombie & Fitch and Hollister brands until December 31,
signed new licenses for Kate Spade New York and MCM. As
2022, and added automatic renewals unless terminated on 3
of December 31, 2019, we had cash, cash equivalents and
years notice.
short-term investments of approximately $253 million,
which we believe should assist us in entering new brand
licenses or out-right acquisitions. We identify prestige
MCM
In September 2019, we entered into an exclusive, 10-year world-
brands that can be developed and marketed into a full and
wide license agreement with German luxury fashion house MCM
varied product families and, with our technical knowledge
for the creation, development and distribution of fragrances un-
and practical experience gained over time, take licensed
der the MCM brand. Our rights under such license are subject to
brand names through all phases of concept, development,
certain minimum advertising expenditures and royalty payments
manufacturing, marketing and distribution.
as are customary in our industry.
Expand Existing Portfolio
Into New Categories
We selectively broaden our product offering beyond the
Oscar de la Renta
In September 2019, we extended our license through December 31,
2031, and added an additional five-year extension option through
fragrance category and offer other fragrance related prod-
December 31, 2036. The original license agreement, signed in
ucts and personal care products under some of our existing
October 2013, would have expired on December 31, 2025.
12
Kate Spade New York
In June 2019, we entered into an exclusive 11-year worldwide
and are primarily manufactured in France. For United States
operations, components for our prestige fragrances are
license agreement with Kate Spade New York for the creation,
sourced from many suppliers around the world and are pri-
development and distribution under the Kate Spade brand. Our
marily manufactured in the United States.
rights under such license are subject to certain minimum ad-
vertising expenditures and royalty payments as are customary
MARKETING AND DISTRIBUTION
in our industry.
PRODUCTION AND SUPPLY
Our products are distributed in over 120 countries around the
world through a selective distribution network. For our inter-
national distribution, we either contract with independent dis-
The stages of the development and production process for all
tribution companies specializing in luxury goods or distribute
fragrances are as follows:
prestige products through our distribution subsidiaries. In
• Simultaneous discussions with perfume designers and
each country, we designate anywhere from one to three distrib-
creators (includes analysis of esthetic and olfactory
utors on an exclusive basis for one or more of our name brands.
trends, target clientele and market communication
We also distribute our products through a variety of duty free
approach)
• Concept choice
operators, such as airports and airlines and select vacation
destinations.
• Produce mock-ups for final acceptance of bottles and packaging
As our business is a global one, we intend to continue to
• Receive bids from component suppliers (glass makers,
build our global distribution footprint. For distribution of
plastic processors, printers, etc.) and packaging companies
brands within our European based operations we operate
• Choose suppliers
through our distribution subsidiaries or divisions in the major
• Schedule production and packaging
markets of the United States, France, Italy and Spain, in addi-
• Issue component purchase orders
tion to our arrangements with third party distributors globally.
• Follow quality control procedures for incoming components;
Our third party distributors vary in size depending on the num-
and
ber of competing brands they represent. This extensive and di-
• Follow packaging and inventory control procedures
verse network together with our own distribution subsidiaries
provides us with a significant presence in over 100 countries
Suppliers who assist us with product development include:
around the world.
• Independent perfumery design companies (Aesthete, Carré
Over 45% of our European based prestige fragrance net
Basset, PI Design, Cent Degres)
sales are denominated in U.S. dollars. We address certain
• Perfumers (IFF, Givaudan, Firmenich, Robertet, Takasago,
financial exposures through a controlled program of risk
Mane) which create a fragrance consistent with our expec-
management that includes the use of derivative financial in-
tations and, that of the fragrance designers and creators
struments. 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, Texen
The business of our European operations has become in-
Group) or boxes (Autajon , MMPP, Nortier, Draeger)
creasingly seasonal due to the timing of shipments by our dis-
• Production specialists who carry out packaging (CCI,
tribution subsidiaries and divisions to their customers, which
Edipar, Jacomo, SDPP, MF Productions,Biopack) or logis
are weighted to the second half of the year.
tics (Bolloré Logistics for storage, order preparation and
For our United States operations, we distribute product to
shipment)
retailers and distributors in the United States as well as inter-
nationally, including duty free and other travel-related retail-
Suppliers’ accounts for our European operations are pri-
ers. We utilize our in-house sales team to reach our third party
marily settled in euro and for our United States operations,
distributors and customers outside the United States. In addi-
suppliers’ accounts are primarily settled in U.S. dollars. For
tion, the business of our United States operations has become
our European operations components for our prestige fra-
increasingly seasonal as shipments are weighted toward the
grances are purchased from many suppliers around the world
second half of the year.
the company
13
Coach Coach Dreams
14
Our licenses for these brands expire on the following dates:
Brand Name
Expiration Date
Abercrombie & Fitch
Extends until either party
terminates on 3 years notice
Anna Sui
December 31, 2021,
plus two 5-year optional terms if
certain conditions are met
bebe Stores
Boucheron
June 30, 2023
December 31, 2025,
Coach
Dunhill
plus a 5-year optional term
if certain sales targets are met
June 30, 2026
September 30, 2023
French Connection
December 31, 2027, plus a 10-
Graff
GUESS
Hollister
year optional term if certain
sales targets are met
December 31, 2026,
plus 3 optional 3-year terms
if certain sales targets are met
December 31, 2033
Extends until either party
terminates on 3 years notice
Kate Spade New York
June 30, 2030
Jimmy Choo
Karl Lagerfeld
Lily Aldridge
MCM
Montblanc
December 31, 2031
October 31, 2032
December 31, 2023
December 31, 2030,
plus 4 option years
December 31, 2025
Oscar de la Renta
December 31, 2031,
Paul Smith
Repetto
S.T. Dupont
plus a 5-year optional term
if certain sales targets are met
December 31, 2021
December 31, 2024
December 31, 2020,
plus automatic annual renewals,
unless terminated on 6 months’
notice by either party
Van Cleef & Arpels
December 31, 2024
In connection with the acquisition of the Lanvin brand names
and trademarks for our class of trade, we granted the seller
the right to repurchase the brand names and trademarks in
2025 for the greater of €70 million (approximately $79 million)
or one times the average of the annual sales for the years end-
ing December 31, 2023 and 2024.
The
Products
We are the owner of the Rochas brand, and
the Lanvin brand name and trademark for
our class of trade. In addition, we have built
a portfolio of licensed prestige brands where-
by we produce and distribute our prestige fra-
grance products under license agreements
with brand owners. Under license agreements,
we obtain the right to use the brand name, cre-
ate 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 li-
cense agreements are also generally subject
to certain minimum sales requirements and
advertising expenditures as are customary in
our industry.
the products
15
Fragrance
Portfolio
16
In 2014, we entered into a worldwide license to create, produce
and distribute new fragrances and fragrance related products
under the Abercrombie & Fitch brand name. We distribute
these fragrances internationally in specialty stores, high-end
department stores and duty free shops, and in the U.S., in duty
free shops and in select Abercrombie & Fitch retail stores.
Our initial men’s scent, First Instinct was launched in 2016
followed by a women’s version in 2017. During 2018 and early
2019, we introduced several First Instinct brand extensions.
In the spring of 2019, we unveiled a new fragrance family for
Abercrombie & Fitch, Authentic, for men and women, and for
2020, we have a brand extension duo planned.
Abercrombie & Fitch believes that every day should feel as
exceptional as the start of the long weekend. Since 1892, the
brand has been a specialty retailer of quality apparel, outer-
wear and fragrance – designed to inspire our global customers
to feel confident, be comfortable and face their Fierce.
the products
17
Abercrombie & Fitch Authentic Night
18
In 2011, we entered into an exclusive worldwide fragrance
license to create, produce and distribute fragrances and fra-
grance related products under the Anna Sui brand. We work in
partnership with American designer, Anna Sui, and her creative
team to build upon the brand’s growing customer appeal, and
develop new fragrances that capture the brand’s very sweet
feminine girly aspect, combined with touch of nostalgia, hip-
ness and rock-and-roll. Anna Sui’s devoted customer base,
which spans the world, is concentrated in Asia.
After a period of weaker sales, due primarily to a decline
in China’s economy, the 2017 successful launch of Fantasia by
Anna Sui and the benefit that accrued from our continued com-
mitment to advertising and marketing commitment, produced a
significant increase in 2018 brand sales. However, brand sales
declined modestly 2019, as the 2018 and 2019 product launches
were primarily brand extensions. We look to Sky by Anna Sui to
reinvigorate brand sales when it debuts in 2021.
the products
19
Anna Sui Fantasia Mermaid
20
In 2010, we entered into an exclusive 15-year worldwide
license agreement
for the creation, development and
distribution of fragrances under the Boucheron brand.
Boucheron is the French jeweler “par excellence”. Founded
by Frederic Boucheron in 1858, the House has produced
some of the world’s most beautiful and precious creations.
Today, Boucheron creates
jewelry and timepieces and,
under license from global brand leaders, fragrances and
sunglasses. Currently Boucheron operates through over
40 boutiques worldwide as well as an e-commerce site.
Boucheron brand sales continue to be driven by legacy
scents Boucheron Femme and Boucheron Homme as well as
its legendary Jaipur lines. A six scent collection was launched
under the Boucheron brand in 2017, and additional scents were
added in 2018. In 2019, two new fragrances, Boucheron Fleurs
and Boucheron Quatre en Rouge, were added to the Boucheron
collection.
the products
21
Boucheron Collection Boucheron
22
In 2015, we entered into an exclusive 11-year worldwide li-
cense to create, produce and distribute new men’s and wom-
en’s fragrances and fragrance related products under the
Coach brand name. We distribute these fragrances globally
to department stores, specialty stores and duty free shops, as
well as in Coach retail stores.
Coach, established in New York City in 1941, is a leading de-
sign house of modern luxury accessories and lifestyle collec-
tions with a rich heritage of pairing exceptional leathers and
materials with innovative design. Coach branded products
are sold worldwide through Coach stores, select department
stores and specialty stores, and through Coach’s website.
In 2016, we launched our first Coach fragrance, a women’s
scent, and in 2017, a men’s scent, both of which have quick-
ly become top selling prestige fragrances. In 2018, the Coach
brand achieved remarkable sales growth and quickly become
one of the largest brands in our portfolio. Coach sales were
driven by the continued popularity of the Coach signature
lines, as well as the success of flankers, Coach Floral and
Coach Platinum, which rolled out in 2018. For 2019 we added
Coach Floral Blush, and we have a new Coach women’s scent
Coach Dreams debuting in early 2020. Coach is part of the
Tapestry house of brands.
the products
23
Coach Coach Dreams
24
In 2012, we entered into an exclusive 10-year worldwide fragrance
license to create, produce and distribute fragrances and fragrance
related products under the Dunhill brand.
The house of Dunhill was established in 1893 and since that
time has been dedicated to providing high quality men’s luxury
products, with core collections offered in menswear, leather
goods and accessories. The brand has global reach through
a premium mix of self-managed retail outlets, high-level de-
partment stores and specialty stores. Known for its commit-
ment to elegance and innovation and being a leader of British
men’s style, the brand continues to blend innovation and cre-
ativity with traditional craftsmanship.
Beginning in 2015, we rolled out a new Dunhill scent, Icon,
the success of which has made the Dunhill brand one of the
stars within our United States based operations. Building
upon the established success of the Icon fragrance family, we
launched several product extensions including Icon Absolute,
Icon Elite and Icon Racing. In 2018 we introduced a new Dunhill
scent for men called Century, and in 2019 Century Blue. Also
in 2019 the Dunhill Signature Collection debuted exclusive-
ly at Harrod’s followed by a global rollout. Brand extensions
dominate our plans for Dunhill in 2020 with a new pillar, Drive,
launching in 2021.
.
the products
25
Dunhill Signature Collection
26
In 2018, the Company entered into an exclusive, 8-year world-
wide license agreement with London-based Graff for the
creation, development and distribution of fragrances under
the Graff brand. The 8-year agreement has three 3-year auto-
matic renewal options, potentially extending the license until
December 31, 2035.
Since Laurence Graff OBE founded the company in 1960,
Graff has been dedicated to sourcing and crafting diamonds
and gemstones of untold beauty and rarity, and transforming
them into spectacular pieces of jewelry that move the heart
and stir the soul. Throughout its rich history, Graff has be-
come the world leader for diamonds of rarity, magnitude and
distinction. Most notably, it has dominated the list of historical
and important rough diamonds discovered, cut and polished
this century. Each jewelry creation is designed and manufac-
tured in Graff’s London atelier, where master craftsman em-
ploy stone-led design techniques to emphasize the beauty of
each individual stone. The company remains a family business,
overseen by Francois Graff, Chief Executive Officer.
For Graff, a six-scent collection for women debuted exclu-
sively at Harrods in March 2020. The global rollout will begin
with selective luxury travel retail in 2021. Additionally, we are
exploring opportunities for luxury travel amenities, including
five star hotels.
the products
27
Graff Lesedi La Rona Fragrances
28
In 2018, the Company entered into an exclusive, 15-year
worldwide license agreement with GUESS?, Inc. for the cre-
ation, development and distribution of fragrances under the
GUESS brand.
Established in 1981, GUESS began as a jeans company and
has since successfully grown into a global lifestyle brand.
GUESS?, Inc. designs, markets, distributes and licenses a
lifestyle collection of contemporary apparel, denim, hand-
bags, watches, footwear and other related consumer prod-
ucts. GUESS products are distributed through branded GUESS
stores as well as better department and specialty stores
around the world.
This license took effect on April 1, 2018 and we began sell-
ing GUESS legacy scents in 2018. In 2019 the GUESS brand
became the largest within our U.S. operations, with legacy fra-
grances dominating the sales mix. In the 2019 third quarter,
we began shipments of 1981 Los Angeles and Seductive Noir,
both flankers of established scents, which accelerated brand
growth further.
Nearly two years in the making, our first new blockbuster
scent, Bella Vita, will debut for the GUESS brand domestically in
2021, followed in the fall by an international rollout. In addition,
a new men’s grooming and fragrance collection is being readied
for a 2021 launch. In its first full year of sales, GUESS has be-
come the fourth largest brand in our portfolio.
the products
29
Guess Bella Vita Rosa
30
We have a worldwide license to create, produce and distrib-
ute new fragrances and fragrance related products under the
Hollister brand name. The Company distributes these fragranc-
es internationally in specialty stores, high-end department
stores and duty free shops, and in the U.S., in duty free shops
as well as select Hollister retail stores. In 2016 we launched
a men’s and women’s scent, Wave, for Hollister. In 2017, we
introduced a fragrance duo, Wave 2, to complement the Wave
franchise by Hollister. During 2018 we debuted an entirely new
fragrance family for Hollister, Festival Vibes, as well as Free
Wave, both for men and women. In 2019, we launched the Wave
limited edition duo, plus our first Festival brand extension,
Festival Nite. For 2021, we have a duo in the works, Canyon
Escape for men and women scheduled.
The quintessential retail brand of the global teen consumer,
Hollister Co. believes in liberating the spirit of an endless sum-
mer inside everyone. At Hollister, summer isn’t just a season;
it’s a state of mind. Hollister creates carefree style designed
to make all teens feel celebrated and comfortable in their own
skin, so they can live in a summer mindset all year long, what-
ever the season.
the products
31
Hollister Festival Party
32
In 2009, we entered into an exclusive 12-year worldwide li-
cense agreement for the creation, development and distribu-
tion of fragrances under the Jimmy Choo brand, and in 2017,
we extended the license agreement which now runs through
December 31, 2031.
Jimmy Choo encompasses a complete luxury accesso-
ries brand. Women’s shoes remain the core of the product
offering, alongside handbags, small leather goods, scarves,
eyewear, belts, fragrance and men’s shoes. Management at
Jimmy Choo share a vision to create one of the world’s most
treasured luxury brands. Jimmy Choo has a global store net-
work encompassing more than 150 stores and is present in
the most prestigious department and specialty stores world-
wide. Jimmy Choo is part of the Capri Holdings Limited luxury
fashion group.
Our first fragrance under the Jimmy Choo brand, a wom-
en’s signature scent, rolled out globally in 2011. In 2013, we
launched our second Jimmy Choo line, Flash, and in 2014,
we debuted Jimmy Choo Man, our first men’s scent. In 2015,
the launch of Jimmy Choo Illicit, our third women’s fragrance
under that label hit the market. In 2017, building on the very
strong fragrance family trees of the women’s signature scent
and Jimmy Choo Man, we successfully launched Jimmy Choo
L’Eau for women and Jimmy Choo Man Ice. In 2018 we released
another men’s flanker, Jimmy Choo Man Blue, and the brand’s
women’s signature scent added Jimmy Choo Fever. During
2019, we introduced a Jimmy Choo Floral line, and an entirely
new scent for men, Jimmy Choo Urban Hero, launched late in
the year. For 2021, we are expanding our product line to in-
clude a lipstick and nail polish line, and our new women’s fra-
grance, I Want Choo should be ready towards the end of the
year with much of the sell-in continuing into 2021.
the products
33
Jimmy Choo Urban Hero
34
In 2012, we entered into a 20-year worldwide license agree-
ment with Karl Lagerfeld B.V., the internationally renowned
haute couture fashion house, to create, produce and distribute
fragrances under the Karl Lagerfeld brand.
Under the creative direction of the late Karl Lagerfeld, one
of the world’s most influential and iconic designers, the Lager-
feld Portfolio represents a modern approach to distribution, an
innovative digital strategy and a global 360 degree vision that
reflects the designer’s own style and soul. In 2017, we changed
the strategic positioning and instituted new pricing with the
launch of a new duo called Les Parfums Matières. Building on
excellent sales results of the initial scents, in the second half
of 2018, we expanded the Les Parfums Matières line with an-
other fragrance duo, and in 2019, we added new scents to the
brand’s expanding multi-scent collection.
the products
35
Karl Lagerfeld Les Parfums Matières
36
In 2019, we entered into an exclusive, 11-year worldwide li-
cense agreement with Kate Spade New York to create, produce
and distribute new perfumes and fragrance-related products
under the Kate Spade brand. We will distribute these fragranc-
es globally to department and specialty stores and duty-free
shops, as well as in Kate Spade New York retail stores begin-
ning with our first new scent in 2021. We also took over distri-
bution of the Kate Spade’s existing fragrance portfolio.
Since its launch in 1993 with a collection of six essential
handbags, Kate Spade New York has always stood for opti-
mistic femininity. Today, the brand is a global life and style
house with handbags, ready-to-wear, jewelry, footwear, gifts,
home décor and more. Polished ease, thoughtful details and
a modern, sophisticated use of color—Kate Spade New York’s
founding principles define a unique style synonymous with joy.
Under the vision of its creative director, the brand continues to
celebrate confident women with a youthful spirit. Kate Spade
New York is part of the Tapestry house of brands.
the products
37
Kate Spade
38
In 2007, we acquired the worldwide rights to the Lanvin brand
names and international trademarks listed in Class 3, our
class of trade. A synonym of luxury and elegance, the Lanvin
fashion house, founded in 1889 by Jeanne Lanvin, expanded
into fragrances in the 1920s.
Lanvin fragrances occupy an important position in the se-
lective distribution market in France, Eastern Europe and Asia,
and we have several lines currently in distribution, including:
Arpège, Lanvin L’Homme, Éclat d’Arpège, Rumeur 2 Rose,
Jeanne Lanvin, Marry Me, Modern Princess and A Girl in Ca-
pri. Our Éclat d’Arpège line accounts for almost 50% of brand
sales. To capitalize on the success of our Éclat d’Arpège line,
in 2015 we launched Éclat d’Arpège Homme as well as Éclat de
Fleurs. In late 2016, we released a new women’s line, Modern
Princess which rolled out to broader international distribution
in 2017. We added two flankers, Modern Princess Eau Sen-
suelle and Éclat de Nuit in 2018, and we debuted a new scent
called A Girl in Capri in 2019.
the products
39
Lanvin A Girl in Capri
40
In 2019, we entered into an exclusive, 10-year worldwide li-
cense agreement with German luxury fashion house MCM for
the creation, development and distribution of fragrances un-
der the MCM brand. The agreement has a 4-year automatic re-
newal option, potentially extending the license until December
31, 2034.
Fusing modern German craftsmanship and the traditional
art of French perfumery, Inter Parfums will develop exception-
al fragrances for women and men that will celebrate the bold-
ness, attitude and essence of MCM which defined the brand
since its birth in Munich. The long-term collaboration will
thrive on innovation with a passionate, tailor-made approach
built on a mastery of fragrance expertise. Positioned in the
prestige fine fragrance arena, MCM fragrances will fuse luxury
with an expressive spirit of originality and optimism. Every de-
tail will enhance MCM’s identity, transcending perfumery with
elegance and excellence.
Our plan is to develop extraordinary fragrances for women
and men that capture the creative spirit of MCM, with the first
launch targeted for the first quarter of 2021. We expect our
distribution strategy to include MCM stores, high-end depart-
ment stores and prestige beauty retailers, with a geographic
focus on Asia, the Americas and Europe.
the products
41
MCM
42
In 2010, we entered into an exclusive license agreement to cre-
ate, develop and distribute fragrances and fragrance related
products under the Montblanc brand. In 2015, we extended the
agreement which now runs through December 31, 2025.
Montblanc has achieved a world-renowned position in
the luxury segment and has become a purveyor of exclusive
products, which reflect today’s exacting demands for time-
less design, tradition and master craftsmanship. Through
its leadership positions in writing instruments, watches and
leather goods, promising growth outlook in women’s jewelry,
active presence in more than 70 countries, network of more
than 350 boutiques worldwide and high standards of product
design and quality, Montblanc has grown to be our largest
fragrance brand.
In 2011, we launched our first new Montblanc fragrance,
Legend, which quickly became our best-selling men’s line.
In 2012, we launched our first women’s fragrance under the
Montblanc brand, and our second men’s line, Emblem, was
launched in 2014. The Emblem line was expanded in 2015 to
include Montblanc Emblem Intense and a new women’s scent,
Lady Emblem. In 2016, we further extended our successful
Montblanc Legend line with another men’s scent, Montblanc
Legend Spirit. For 2017, we continued the rollout of the highly
successful launch of Montblanc Legend Spirit and launched
Montblanc Legend Night. In 2019, we unveiled Montblanc Ex-
plorer, a new men’s scent, with distribution in all geographic
markets around the globe. For 2021, the Montblanc brand will
introduce a new women’s scent.
the products
43
Montblanc Explorer
44
In 2013, we entered into an exclusive worldwide license to
create, produce and distribute fragrances and fragrance re-
lated products under the Oscar de la Renta brand. In 2019, the
agreement was extended through December 31, 2031, with an
additional five-year option potentially extending the agreement
through December 31, 2036. In 2014, we took over distribution
of fragrances within the brand’s legacy fragrance portfolio,
and our first new women’s fragrance under the Oscar de la
Renta brand, Extraordinary, was launched in 2015. Oscar de
la Renta Bella Blanca, a new Oscar de la Renta scent, debuted
in early 2018, and the Bella Rosa flanker was introduced in
2019. In 2020, the Oscar de la Renta Bella pillar will add Bella
Essence to the family tree.
Oscar de la Renta is one of the world’s leading luxury goods
firms. The New York-based company was established in 1965,
and encompasses a full line of women’s accessories, bridal,
children’s wear, fragrance, beauty and home goods, in addition
to its internationally renowned signature women’s ready to
wear collection. Oscar de la Renta products are sold globally
in fine department and specialty stores, www.oscardelarenta.
com and through wholesale channels. The Oscar de la Renta
brand has a loyal following in the United States, Canada and
Latin America.
the products
45
T H E N E W F R AG R A N C E F O R H E R
Oscar de la Renta Bella Essence
46
In 2017, the Company renewed its license agreement for an
additional four years with Paul Smith for the creation, de-
velopment, and distribution of fragrance products through
December 2021, without any material changes in terms and
conditions. Our initial 12-year license agreement with Paul
Smith was signed in 1998, and had previously been extended
through December 31, 2017.
Paul Smith is an internationally renowned British design-
er who creates fashion with a clear identity. Paul Smith has a
modern style which combines elegance, inventiveness and a
sense of humor and enjoys a loyal following, especially in the
UK and Japan. Fragrances include: Paul Smith, Paul Smith Ex-
trême, Paul Smith Rose Hello You, and Paul Smith Essential.
the products
47
Paul Smith London
48
In 2011, we entered into a 13-year exclusive worldwide license
agreement to create, produce and distribute fragrances under
the Repetto brand.
Created in 1947 by Rose Repetto at the request of her son,
dancer and choreographer Roland Petit, Repetto is today a leg-
endary name in the world of dance. For a number of years, it
has developed timeless and must-have collections with a fully
modernized signature style ranging from dance shoes, ballet
slippers, flat shoes, and sandals to more recently handbags
and high-end accessories.
With Repetto boutiques in several countries throughout the
world, the brand has branched out into Asia, notably China,
Hong Kong, Singapore, Thailand, South Korea and Japan with
a mix of cross-generational appeal and French chic. Our first
Repetto fragrance line was launched in 2013 and a floral scent
was added in 2015. Despite this brand’s success with footwear,
handbags and high-end accessories, fragrance sales have
been modest. Repetto’s most recent new scent, Dance with
Repetto, debuted in 2018.
the products
49
Repetto So Repetto
50
In 2015, we acquired the Rochas brand from The Procter &
Gamble Company. Founded by Marcel Rochas in 1925, the
brand began as a fashion house and expanded into perfum-
ery in the 1950s under Hélène Rochas’ direction. This trans-
action included all brand names and registered trademarks
for Rochas (Femme, Madame, Eau de Rochas, etc.), mainly for
fragrance, cosmetics and fashion.
This acquisition opened a new page in the Company’s histo-
ry by integrating for the first time both fragrances and fashion,
allowing us to apply a global approach to managing a fragrance
brand with complete freedom in terms of creativity and aes-
thetic choices. At the same time, we enjoy a very high degree of
visibility establishing a position of even greater preeminence
for Rochas in the luxury goods universe. Rochas brand sales
currently include approximately $2.2 million of royalties gen-
erated by the fashion and accessory business via its portfolio
of license agreements. Our first new fragrance for Rochas,
Mademoiselle Rochas, had a successful launch that began in
the first quarter of 2017 in its traditional markets of France
and Spain. In 2018, we debuted flankers for Eau de Rochas and
Mademoiselle Rochas and in late 2018, we launched our first
new men’s line, Rochas Moustache. In 2019, a seasonal limited
edition called Escapade Exotique came to market, as well as
the debut of Mademoiselle Rochas Couture. A new men’s line,
L’Homme Rochas and a new women’s line, Byzance, debuted
in early 2020.
the products
51
Rochas Byzance
52
In 1997, we signed an exclusive worldwide license agreement
with S.T. Dupont for the creation, manufacture and distribu-
tion of S.T. Dupont fragrances. The license agreement had
been renewed several times and is now renewed annually,
without any material changes in terms and conditions. S.T.
Dupont is a French luxury goods house founded in 1872,
which is known for its fine writing instruments, lighters and
leather goods. S.T. Dupont fragrances include: S.T. Dupont
Classic, S.T. Dupont Essence Pure, S.T. Dupont Collection and
Be Exceptional.
the products
53
S.T. Dupont Golden Wood
54
In 2018, the Company renewed its license agreement for an
additional six years with Van Cleef & Arpels for the creation,
development, and distribution of fragrance products through
December 2024. Our initial 12-year license agreement with
Van Cleef & Arpels was signed in 2006.
Van Cleef & Arpels fragrances in current distribution
include: First and Collection Extraordinaire. Sales of the
Collection Extraordinaire line have experienced continued
growth since its debut. We continue to introduce new addi-
tions to the Van Cleef & Arpels Collection Extraordinaire as-
sortment annually.
the products
55
Van Cleef & Arpels Collection Extraordinaire, Santal Blanc
56
Abercrombie & Fitch First Instinct Together
quaterly financial data
57
QUARTERLY DATA: (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2019
(In thousands, except per share data)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Net Sales
Gross Margin
Net Income
Net Income Attributable to
$178,242
109,841
24,978
$166,242
106,974
15,600
$191,227
114,437
26,658
$177,803
114,684
8,834
Full Year
$713,514
445,936
76,070
Inter Parfums, Inc.
18,894
12,318
20,848
8,189
60,249
Net Income Attributable to
Inter Parfums, Inc. per Share:
Basic
Diluted
Weighted Average Common Shares
Outstanding:
Basic
Diluted
$0.60
$0.60
31,431
31,679
$0.39
$0.39
31,449
31,687
$0.66
$0.66
31,452
31,676
$0.26
$0.26
31,473
31,713
$1.92
$1.90
31,451
31,689
QUARTERLY DATA: (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2018
(In thousands, except per share data) 1st Quarter 2nd Quarter
$149,367
$171,767
Net Sales
3rd Quarter
$177,213
4th Quarter
$177,227
Gross Margin
Net Income
Net Income Attributable to
105,629
21,862
95,654
14,259
109,147
24,426
117,132
9,168
Full Year
$675,574
427,562
69,715
Inter Parfums, Inc.
15,909
10,899
18,938
8,047
53,793
Net Income Attributable to
Inter Parfums, Inc. per Share:
Basic
Diluted
Weighted Average Common Shares
Outstanding:
Basic
Diluted
$0.51
$0.51
31,267
31,429
$0.35
$0.35
31,299
31,490
$0.60
$0.60
31,326
31,587
$0.26
$0.26
31,340
31,584
$1.72
$1.71
31,308
31,522
5858
North America
33%
CONSOLIDATED NET SALES TO CUSTOMERS BY REGION
(in thousands)
Year Ended December 31,
North America
Europe
Asia
Middle East
Central and
South America
Other
2019
$234,200
240,800
106,500
72,600
2018
$210,200
233,600
109,000
59,300
2017
$176,900
214,800
88,000
50,500
46,200
13,400
$713,500
51,700
11,800
51,200
9,900
$675,600
$591,300
CONSOLIDATED NET SALES TO CUSTOMERS
IN MAJOR COUNTRIES ARE AS FOLLOWS:
(in thousands)
Year Ended December 31,
United States
France
Russia
United Kingdom
2019
$225,300
43,500
36,800
35,800
2018
$204,000
2017
$173,000
44,000
35,000
36,000
44,000
34,000
33,000
Central &
South America
6%
5959
Europe
34%
ASIA
15%
Middle East
10%
60
The
Organization
All Corporate Functions:
Including product analysis and development, production and
sales, and finance are coordinated at the Company’s corpo-
rate headquarters in New York and at the corporate offices
of Interparfums SA in Paris. Each company is organized into
two operational units that report directly to general man-
agement, and European operations ultimately report to
Mr. Benacin and United States operations ultimately report to
Mr. Madar.
Finance, Investor Relations
And Administration:
Russell Greenberg in the United States and Philippe Santi
in France:
• Financial policy and communication, investor relations;
• Financial accounting, cost accounting, budgeting and
cash flow management;
• Disclosure requirements of the Securities and Ex-
change Commission and Commission des Operations
de Bourse;
• Labor relations, tax and legal matters and management
information systems.
Operations:
Brian Gibbons in the United States and Axel Marot in France:
• Product development;
• Logistics and transportation;
• Purchasing and industrial relations;
• Quality control and inventory cost supervision.
Export Sales:
Herve Bouillonnec in the United States and Frédéric Garcia-
Pelayo in France:
• International development strategy;
• Establishment of distributor networks and negotiation
of contracts;
• Monitoring of profit margins and advertising expenditures.
Domestic (Home Country) Sales:
Jean-Claude Sanchez in the United States and Jérôme Thermoz
in France:
• Establish and apply domestic sales strategy and
distribution policy;
• Sales team management and development;
• Monitoring of profit margins and advertising expenditures.
the organization
61
SIMPLIFIED CHART OF THE ORGANIZATION
45%
PHILIPPE BENACIN
JEAN MADAR
55%
PUBLIC
SHAREHOLDERS
100%
100%
100%
100%
INTER PARFUMS
HOLDINGS, SA
JEAN PHILIPPE
FRAGRANCES, LLC
INTER PARFUMS
USA, LLC
INTERSTELLAR
BRANDS, LLC
73%
100%
INTERPARFUMS SA
[ EURONEXT -
PARIS ]
INTER PARFUMS
USA
HONG KONG LTD
rparfums
srl
(italy)
100%
100%
100%
100%
100%
INTERPARFUMS
LUXURY BRANDS,
INC
INTERPARFUMS
[ SUISSE ] SARL
INTERPARFUMS
SINGAPORE PTE,
LTD
INTER ESPAÑA
PARFUMS
ET COSMÉTIQUES
SL [ SPAIN ]
INTERPARFUMS
SRL
[ ITALY ]
51%
PARFUMS ROCHAS
SPAIN, SL
62
contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS AND EXECUTIVE OFFICERS
63
72
73
75
80
98
management’s discussion and analysis
of financial condition and results of operations
63
tions represented 24%, 20% and 19% of net sales in 2019, 2018
and 2017, respectively. These fragrance products are sold or
to be sold primarily pursuant to license or other agreements
with the owners of the Abercrombie & Fitch, Anna Sui, bebe,
Dunhill, French Connection, Graff, GUESS, Hollister, MCM and
Oscar de la Renta brands.
With respect to the Company’s largest brands, we own the
Lanvin brand name for our class of trade, and license the
Montblanc, Jimmy Choo, Coach and GUESS brand names. As a
percentage of net sales, product sales for the Company’s larg-
est brands were as follows:
Management’s Discussion
And Analysis Of
Financial Condition And
Results Of
Operations
2019 2018 2017
21%
19%
Years ended December 31,
Montblanc
Jimmy Choo
Coach
22%
16%
14%
GUESS (license commenced
April 1, 2018)
Lanvin
10%
8%
17%
15%
n/a
10%
18%
10%
n/a
11%
Quarterly sales fluctuations are influenced by the timing of
new product launches as well as the third and fourth quarter
holiday season. In certain markets where we sell directly to
retailers, seasonality is more evident. We sell directly to re-
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
tailers in France as well as through our own distribution sub-
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
sidiaries in Italy, Spain and the United States.
OVERVIEW
We grow our business in two distinct ways. First, we grow by
We operate in the fragrance business, and manufacture, mar-
adding new brands to our portfolio, either through new licens-
ket and distribute a wide array of fragrances and fragrance
es or other arrangements or out-right acquisitions of brands.
related products. We manage our business in two segments,
Second, we grow through the introduction of new products and
European based operations and United States based opera-
by supporting new and established products through advertis-
tions. Certain prestige fragrance products are produced and
ing, merchandising and sampling as well as by phasing out un-
marketed by our European operations through our 73% owned
derperforming products so we can devote greater resources to
subsidiary in Paris, Interparfums SA, which is also a publicly
those products with greater potential. The economics of devel-
traded company as 27% of Interparfums SA shares trade on
oping, producing, launching and supporting products influence
the NYSE Euronext.
our sales and operating performance each year. Our introduc-
We produce and distribute our European based fragrance
tion of new products may have some cannibalizing effect on
products primarily under license agreements with brand own-
sales of existing products, which we take into account in our
ers, and European based fragrance product sales represented
business planning.
approximately 76%, 80% and 81% of net sales for 2019, 2018 and
Our business is not capital intensive, and it is important to
2017, respectively. We have built a portfolio of prestige brands,
note that we do not own manufacturing facilities. We act as a
which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld,
general contractor and source our needed components from
Kate Spade New York, Lanvin, Montblanc, Paul Smith, Repetto,
our suppliers. These components are received at one of our
Rochas, S.T. Dupont and Van Cleef & Arpels, whose products
distribution centers and then, based upon production needs,
are distributed in over 120 countries around the world.
the components are sent to one of several third party fillers,
Through our United States operations, we also market fra-
which manufacture the finished product for us and then deliver
grance and fragrance related products. United States opera-
them to one of our distribution centers.
64
As with any global business, many aspects of our operations
are subject to influences outside our control. We believe we have
Kate Spade New York
In June 2019, we entered into an exclusive 11-year worldwide
a strong brand portfolio with global reach and potential. As part
license agreement with Kate Spade New York for the cre-
of our strategy, we plan to continue to make investments behind
ation, development and distribution of fragrances under the
fast-growing markets and channels to grow market share.
Kate Spade brand. Our rights under such license are subject
Our reported net sales are impacted by changes in foreign
to certain minimum advertising expenditures and royalty
currency exchange rates. A strong U.S. dollar has a negative
payments as are customary in our industry.
impact on our net sales. However, earnings are positively af-
fected by a strong dollar, because over 45% of net sales of our
DISCUSSION OF CRITICAL ACCOUNTING POLICIES
European operations are denominated in U.S. dollars, while
We make estimates and assumptions in the preparation of
almost all costs of our European operations are incurred in
our financial statements in conformity with accounting prin-
euro. Conversely, a weak U.S. dollar has a favorable impact on
ciples generally accepted in the United States of America.
our net sales while gross margins are negatively affected. We
Actual results could differ significantly from those estimates
address certain financial exposures through a controlled pro-
under different assumptions and conditions. We believe the
gram of risk management that includes the use of derivative
following discussion addresses our most critical account-
financial instruments, and primarily enter into foreign curren-
ing policies, which are those that are most important to the
cy forward exchange contracts to reduce the effects of fluctu-
portrayal of our financial condition and results of operations.
ating foreign currency exchange rates. We are also carefully
These accounting policies generally require our manage-
monitoring currency trends in the United Kingdom as a result
ment’s most difficult and subjective judgments, often as a re-
of the volatility created from the United Kingdom’s exit from
sult of the need to make estimates about the effect of matters
the European Union. We have evaluated our pricing models and
that are inherently uncertain. Management of the Company
we do not expect any significant pricing changes. However, if
has discussed the selection of significant accounting policies
the devaluation of the British Pound worsens, it may affect fu-
and the effect of estimates with the Audit Committee of the
ture gross profit margins from sales in the territory.
Board of Directors.
RECENT IMPORTANT EVENTS
Abercrombie & Fitch and Hollister
In November 2019, we extended our license for both the
Sales Returns
Generally, we do not permit customers to return their unsold prod-
ucts. However, for U.S. based customers, we allow returns if prop-
Abercrombie & Fitch and Hollister brands until December 31,
erly requested, authorized and approved. We regularly review and
2022, and added automatic renewals unless terminated on 3
revise, as deemed necessary, our estimate of reserves for future
years’ notice.
sales returns based primarily upon historic trends and relevant
current data, including information provided by retailers regarding
MCM
In September 2019, we entered into an exclusive, 10-year world-
their inventory levels. In addition, as necessary, specific accruals
may be established for significant future known or anticipated
wide license agreement with German luxury fashion house MCM
events. The types of known or anticipated events that we consid-
for the creation, development and distribution of fragrances un-
er include, but are not limited to, the financial condition of our
der the MCM brand. Our rights under such license are subject to
customers, store closings by retailers, changes in the retail envi-
certain minimum advertising expenditures and royalty payments
ronment and our decision to continue to support new and existing
as are customary in our industry.
products. We record our estimate of potential sales returns as a
Oscar de la Renta
In September 2019, we extended our license through
reduction of sales and cost of sales with corresponding entries to
accrued expenses, to record the refund liability, and inventory, for
the right to recover goods from the customer. Returned products
December 31, 2031, and added an additional five-year exten-
are valued based upon their estimated realizable value. The physi-
sion option through December 31, 2036. The original license
cal condition and marketability of returned products are the major
agreement, signed in October 2013, would have expired on
factors we consider in estimating realizable value. Actual returns,
December 31, 2025.
as well as estimated realizable values of returned products, may
management’s discussion and analysis
of financial condition and results of operations
65
differ significantly, either favorably or unfavorably, from our esti-
tors exist for an amortizable intangible asset, the undiscount-
mates, if factors such as economic conditions, inventory levels or
ed future cash flows associated with the expected service
competitive conditions differ from our expectations.
potential of the asset are compared to the carrying value of
Long-Lived Assets
We evaluate indefinite-lived intangible assets for impairment at
the asset. If our projection of undiscounted future cash flows
is in excess of the carrying value of the intangible asset, no im-
pairment charge is recorded. If our projection of undiscounted
least annually during the fourth quarter, or more frequently when
future cash flows is less than the carrying value of the intangi-
events occur or circumstances change, such as an unexpected
ble asset, an impairment charge would be recorded to reduce
decline in sales, that would more likely than not indicate that
the intangible asset to its fair value. The cash flow projections
the carrying value of an indefinite-lived intangible asset may
are based upon a number of assumptions, including future
not be recoverable. When testing indefinite-lived intangible
sales levels and future cost of goods and operating expense
assets for impairment, the evaluation requires a comparison
levels, as well as economic conditions, changes to our busi-
of the estimated fair value of the asset to the carrying value of
ness model or changes in consumer acceptance of our prod-
the asset. The fair values used in our evaluations are estimated
ucts which are more subjective in nature. In those cases where
based upon discounted future cash flow projections using
we determine that the useful life of long-lived assets should
a weighted average cost of capital of 7.94%. The cash flow
be shortened, we would amortize the net book value in excess
projections are based upon a number of assumptions, including,
of the salvage value (after testing for impairment as described
future sales levels and future cost of goods and operating
above), over the revised remaining useful life of such asset
expense levels, as well as economic conditions, changes to
thereby increasing amortization expense. We believe that the
our business model or changes in consumer acceptance of our
assumptions we have made in projecting future cash flows for
products which are more subjective in nature. If the carrying
the evaluations described above are reasonable.
value of an indefinite-lived intangible asset exceeds its fair
In determining the useful life of our Lanvin brand names and
value, an impairment charge is recorded.
trademarks, we applied the provisions of ASC topic 350-30-35-
We believe that the assumptions we have made in project-
3. The only factor that prevented us from determining that the
ing future cash flows for the evaluations described above are
Lanvin brand names and trademarks were indefinite life intan-
reasonable. However, if future actual results do not meet our
gible assets was Item c. “Any legal, regulatory, or contractual
expectations, we may be required to record an impairment
provisions that may limit the useful life.” The existence of a re-
charge, the amount of which could be material to our results
purchase option in 2025 may limit the useful life of the Lanvin
of operations.
brand names and trademarks to the Company. However, this
At December 31, 2019 indefinite-lived intangible assets ag-
limitation would only take effect if the repurchase option were
gregated $121.0 million. The following table presents the im-
to be exercised and the repurchase price was paid. If the re-
pact a change in the following significant assumptions would
purchase option is not exercised, then the Lanvin brand names
have had on the calculated fair value in 2019 assuming all other
and trademarks are expected to continue to contribute directly
assumptions remained constant:
to the future cash flows of our Company and their useful life
would be considered to be indefinite.
Increase (decrease)
With respect to the application of ASC topic 350-30-35-
$ in millions
Change
to fair value
8, the Lanvin brand names and trademarks would only have
Weighted average cost of capital
Weighted average cost of capital
Future sales levels
Future sales levels
+10% $(14.9)
$15.0
−10%
$13.3
+10%
$(13.3)
−10%
a finite life to our Company if the repurchase option were
exercised, and in applying ASC topic 350-30-35-8, we as-
sumed that the repurchase option is exercised. When exer-
cised, Lanvin has an obligation to pay the exercise price and
the Company would be required to convey the Lanvin brand
Intangible assets subject to amortization are evaluated for
names and trademarks back to Lanvin. The exercise price to
impairment testing whenever events or changes in circum-
be received (Residual Value) is well in excess of the carrying
stances indicate that the carrying amount of an amortizable
value of the Lanvin brand names and trademarks, therefore
intangible asset may not be recoverable. If impairment indica-
no amortization is required.
66
Quantitative Analysis
During the three-year period ended December 31, 2019, we have not made any material changes in our assumptions underlying
these critical accounting policies or to the related significant estimates. The results of our business underlying these assumptions
have not differed significantly from our expectations.
While we believe the estimates we have made are proper 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 of reported net sales, cost
of sales, and selling, general and administrative expenses as they relate to the provisions for anticipated sales returns, allowance
for doubtful accounts and inventory obsolescence reserves. For 2019, had these estimates been changed simultaneously by 5% in
either direction, our reported gross profit would have increased or decreased by approximately $0.5 million and selling, general
and administrative expenses would have changed by approximately $0.1 million. The collective impact of these changes on 2019 op-
erating income, net income attributable to Inter Parfums, Inc., and net income attributable to Inter Parfums, Inc. per diluted share
would be an increase or decrease of approximately $0.5 million, $0.2 million and $0.01, respectively.
RESULTS OF OPERATIONS
Net Sales
(in millions)
Years Ended December 31,
European-based product sales
United States-based product sales
Total net sales
2019 % Change
1%
$542.1
24%
171.4
6%
$713.5
$537.6
2018 % Change
13%
20%
138.0
$675.6
14%
2017
$476.5
114.8
$591.3
Net sales increased 6% in 2019 to $713.5 million, as compared to $675.6 million in 2018. At comparable foreign currency exchange
rates, net sales increased 8%. Net sales increased 14% in 2018 to $675.6 million, as compared to $591.3 million in 2017. At compa-
rable foreign currency exchange rates, net sales increased 13%. The average U.S. dollar/euro exchange rates were 1.12 in 2019 and
1.18 in 2018 and 1.13 in 2017.
European based product sales increased 1% in 2019 to $542.1 million, as compared to $537.6 million in 2018. At comparable for-
eign currency exchange rates, European based product sales increased 4% in 2019. European based product sales increased 13%
in 2018 to $537.6 million, as compared to $476.5 million in 2017. At comparable foreign currency exchange rates, European based
product sales increased 11% in 2018.
European based product sales came in as expected in 2019 despite fighting a stronger dollar throughout the year. Our largest
brand, Montblanc, grew full year sales by 23% with the excellent performance of the new Montblanc Explorer scent as well as the
continued strength of the brand’s Legend fragrance family. In constant dollars, Jimmy Choo brand sales were up slightly. However,
due to the strengthening of the dollar brand sales for our second largest brand were down nominally in actual dollars. Coach brand
sales were also down slightly in 2019 in actual dollars but ahead of 2018 in constant dollars. Of note, Coach brand sales in 2018
were 73.3% ahead of the prior year. Two of our mid-sized brands, Karl Lagerfeld and Van Cleef & Arpels, achieved year-over-year
sales growth of 5.0% and 6.8%, respectively.
European based product sales in 2018 were stronger than our original expectations even though no new fragrance families were
launched that year. Top line growth was primarily attributed to established scents and brand extensions for our largest brands.
Coach brand sales accounted for much of the 2018 upside surprise with brand sales increasing 73.3% in 2018 to $99.7 million, as
compared to $57.5 million in 2017, making it our portfolio’s third largest brand. The other largest brands in our European opera-
tions portfolio performed as expected with Montblanc, Jimmy Choo and Lanvin, achieving year-over-year sales growth of 1%, 8%,
and 7%, respectively.
United States based product sales increased 24% in 2019 to $171.4 million, as compared to $138.0 million in 2018. GUESS brand
fragrances had an extraordinary year due to the addition of two brand extensions, 1981 Los Angeles and Seductive Noir, the con-
tinued popularity of legacy scents, and the success of our international distribution and marketing programs. Also contributing
management’s discussion and analysis
of financial condition and results of operations
67
to the top line growth by U.S. operations were Abercrombie
& Fitch and Hollister, both of which achieved significant sales
Net Sales to Customers by Region
(in millions)
growth spurred by the launch of the Authentic fragrance duo
Years ended December 31,
for Abercrombie & Fitch, and brand extensions for the Wave
North America
and Festival fragrance families for Hollister. Oscar de la Renta
Western Europe
fragrance sales rose slightly, supported by legacy scents and
Asia
our growing Bella fragrance family.
Middle East
United States based product sales increased 20% in 2018 to
Eastern Europe
$138.0 million, as compared to $114.8 million in 2017. The in-
Central & South America
clusion of legacy GUESS fragrances, which began in the second
Other
quarter of 2018, was a major contributor to the increase in net
sales. Also factoring into the 2018 increase was the successful
2019
$234.2
185.5
106.3
72.6
55.3
46.2
13.4
$713.5
2018
$210.1
180.9
109.0
59.3
52.8
51.7
11.8
2017
$176.9
165.4
88.0
50.5
49.4
51.2
9.9
$675.6
$591.3
launch of brand extensions for Abercrombie & Fitch and Hol-
Virtually all regions registered growth for the year ended
lister. With the popularity of Anna Sui fragrances throughout
December 31, 2019, as compared to 2018 with Central and
Asia, we enjoyed dramatic increases in Anna Sui brand sales
South America being the only decline. Even Asia, which ap-
in that region in 2018.
pears to be down slightly in 2019, is actually up in constant
We maintain confidence in our future as we continue to
dollars. The strongest gains were achieved by the Middle East,
strengthen advertising and promotional investments sup-
North America and Eastern Europe, which increased sales by
porting all portfolio brands, accelerate brand development
22%, 11% and 5%, respectively. For the year ended December
and build upon the strength of our worldwide distribution
31, 2018, as compared to 2017, the strongest gains were
network. We have a more robust launch schedule in 2020 on
achieved by Asia, North America and the Middle East, which
both sides of the Atlantic. For U.S. operations, the most im-
increased sales by 24%, 19% and 17%, respectively.
portant launch will be our first blockbuster scent for women
under the GUESS brand unveiling this spring, domestically,
followed in the fall by an international rollout. A new fra-
Gross Margins
(in millions)
grance duo for Hollister, Canyon Escape, is scheduled for
Years ended December 31,
a spring launch. We look to Sky by Anna Sui to reinvigorate
Net sales
brand sales when it debuts in the fall of 2020. Our first fra-
Cost of sales
grance collection under the Graff label debuts in Harrod’s
Gross margin
for a six-month exclusive starting in the spring, followed by
Gross margin as
2019
$713.5
267.6
$445.9
2018
$675.6
248.0
2017
$591.3
215.0
$427.6
$376.3
select international luxury distribution. For European opera-
a percent of net sales
62.5%
63.3%
63.6%
tions, our new Coach scent for women, Coach Dreams, came
to market this winter. We have new women’s scents for the
As a percentage of net sales, gross profit margin was 62.5%,
Montblanc brand debuting in the spring, and for Kate Spade
63.3%, and 63.6% in 2019, 2018 and 2017, respectively. For
New York our first scent is coming to market this summer.
European based operations, gross profit margin as a percent-
For Jimmy Choo our new women’s fragrance launch should
age of net sales was 65.7%, 66.3% and 67.1% in 2019, 2018 and
be close to year-end, with much of the sell-in continuing into
2017, respectively. We carefully monitor movements in foreign
2021. In addition, as always, we will strengthen fragrance
currency exchange rates as over 45% of our European based
families with brand extensions as well as limited edition and
operations net sales is denominated in U.S. dollars, while most
holiday programs throughout the year.
of our costs are incurred in euro. From a margin standpoint,
Lastly, we hope to benefit from our strong financial posi-
a strong U.S. dollar has a positive effect on our gross margin
tion to potentially acquire one or more brands, either on a
while a weak U.S. dollar has a negative effect. The average dol-
proprietary basis or as a licensee. However, we cannot as-
lar/euro exchange rate was 1.12 in 2019, as compared to 1.18
sure you that any new license or acquisition agreements will
in 2018. The stronger dollar in 2019 resulted in a benefit to our
be consummated.
gross margin in 2019, however, our new Montblanc Explorer
68
product line has a greater than typical cost of sales, which
For United States operations, selling, general and ad-
more than offset the benefit of the stronger dollar.
ministrative expenses increased 20.2% in 2019 and 25.0% in
The small fluctuation in gross margin as a percentage of
2018, as compared to the corresponding prior year period and
sales for our European operations in 2018, as compared to
represented 38.5%, 39.8% and 38.2% of sales in 2019, 2018
2017, is primarily the effect of exchange rate changes as the
and 2017, respectively. The increase, which is also in line with
average dollar/euro exchange rate was 1.18 in 2018, as com-
the increase in sales, is the result of royalties and promo-
pared to 1.13 in 2017.
tional and advertising expenses required under our license
For United States operations, gross profit margin was
agreements.
52.5%, 51.4% and 49.3% in 2019, 2018 and 2017, respectively.
Promotion and advertising included in selling, general and
Sales growth for our United States operations has primarily
administrative expenses aggregated $144.6 million, $139.7
come from increased sales of higher margin prestige products
million and $123.7 million in 2019, 2018 and 2017, respective-
under licenses.
ly. Promotion and advertising as a percentage of sales repre-
Costs relating to purchase with purchase and gift with pur-
sented 20.3%, 20.7% and 20.9% of net sales in 2019, 2018 and
chase promotions are reflected in cost of sales, and aggregat-
2017, respectively. We continue to invest heavily in promotional
ed $38.9 million, $36.4 million and $33.8 million in 2019, 2018
spending to support new product launches and to build brand
and 2017, respectively, and represented 5.5%, 5.4% and 5.7% of
awareness. We anticipated that on a full year basis, promotion
net sales, respectively.
and advertising expenditure would aggregate approximately
Generally, we do not bill customers for shipping and han-
21% of 2019 net sales, which was in line with prior year’s annu-
dling costs and such costs, which aggregated $7.7 million, $7.1
al promotion and advertising expenditures as a percentage of
million and $5.9 million in 2019, 2018 and 2017, respectively,
sales. The slight decline in promotion and advertising expense
are included in selling, general and administrative expenses in
as a percentage of sales in 2019 is the result of minor fluctua-
the consolidated statements of income. As such, our Compa-
tions in launch schedules.
ny’s gross margins may not be comparable to other companies,
Royalty expense included in selling, general and admin-
which may include these expenses as a component of cost of
istrative expenses aggregated $53.0 million, $48.9 million
goods sold.
Selling, General & Administrative Expenses
(in millions)
and $39.6 million in 2019, 2018 and 2017, respectively. Royal-
ty expense as a percentage of sales represented 7.4%, 7.2%
and 6.7% of net sales in 2019, 2018 and 2017, respectively.
The increase in 2019 and 2018, as a percentage of sales, is
Years ended December 31,
Selling, general
2019
2018
2017
directly related to new licenses and increased royalty based
product sales.
& administrative expenses
$341.2
$332.8
$295.5
Service fees, which are fees paid within our European op-
Selling, general
& administrative expenses
erations to third parties relating to the activities of our distri-
bution subsidiaries, aggregated $7.5 million, $9.7 million and
as a percent of net sales
47.8%
49.3% 50.0%
$11.7 million in 2019, 2018 and 2017, respectively. The 2019 and
2018 decrease is primarily the result of the discontinuation of
Although selling, general and administrative expenses increased
certain European distribution subsidiaries, and a return to a
2.5% in 2019 as compared to 2018 and increased 12.6% in 2018 as
third party distribution model in those territories.
compared to 2017, as a percentage of sales, selling, general and
administrative expenses exhibited a steady decrease, and were
47.8%, 49.3% and 50.0% in 2019, 2018 and 2017, respectively. For
Impairment Loss
The Company reviews intangible assets with finite lives for im-
European operations, selling, general and administrative expenses
pairment whenever events or changes in circumstances indi-
declined 1.0% in 2019 and increased 10.5% in 2018, as compared to
cate that the carrying amount may not be recoverable. Product
the corresponding prior year period and represented 50.8%, 51.7%
sales of some of our mass market product lines have been
and 52.8% of sales in 2019, 2018 and 2017, respectively. As dis-
declining for many years. In 2017, the Company set in motion a
cussed in more detail below, the fluctuations which are in line with
plan to discontinue several of these product lines over the next
the fluctuations in sales for European operations, are primarily
few years. As a result, the Company recorded an impairment
from variations in promotion and advertising expenditures.
loss of $2.1 million in 2017.
management’s discussion and analysis
of financial condition and results of operations
69
Income from Operations
As a result of the above analysis regarding net sales, gross
federal corporate tax rate discussed above; (ii) a general elim-
ination of U.S. federal income taxes on dividends from foreign
profit margins, selling, general and administrative expenses
subsidiaries; (iii) a provision designed to tax global intangible
and impairment loss, income from operations increased 10.6%
low-taxed income (“GILTI”); and (iv) a provision that allows a
to $104.7 million in 2019 as compared to $94.7 million in 2018,
domestic corporation an immediate deduction for a portion of
which was an increase of 20.5% from $78.6 million in 2017.
its foreign derived intangible income (“FDII”).
Operating margins aggregated 14.7%, 14.0% and 13.3% for the
The Securities and Exchange Commission staff issued Staff
years ended December 31, 2019, 2018 and 2017, respectively.
Accounting Bulletin (“SAB”) 118, which provides a measurement
In summary, small fluctuations in gross margin were mitigat-
period that was not to extend beyond one year from the Tax Act
ed by small fluctuations in selling, general and administrative
enactment date for companies to complete the related account-
expenses, primarily promotion and advertising expenditures.
ing under ASC 740, Accounting for Income Taxes. In accordance
Overall the Company has been able to increase sales with a
with SAB 118, a company must reflect the income tax effects of
steady increase in its operating margin.
those aspects of the Tax Act for which the accounting under ASC
Other Income and Expenses
Interest expense aggregated $2.1 million, $2.6 million and
740 is complete. To the extent that a company’s accounting for
a certain income tax effect of the Tax Act was incomplete, but it
was able to determine a reasonable estimate, it was required to
$2.0 million in 2019, 2018 and 2017, respectively. Interest
record a provisional estimate in the financial statements.
expense is primarily related to the financing of brand and
In connection with its initial analysis of the impact of the Tax
licensing acquisitions. We use the credit lines available to
Act, the Company recorded a tax expense of $1.1 million for
us, as needed, to finance our working capital needs as well
the year ended December 31, 2017. This estimate consists of
as our financing needs for acquisitions. Long-term debt in-
no expense for the one-time transition tax, and an expense of
cluding current maturities aggregated $23.1 million, $46.1
$1.1 million related to revaluation of deferred tax assets and li-
million and $60.6 million as of December 31, 2019, 2018 and
abilities caused by the lower corporate tax rate. There were no
2017, respectively.
material differences between the Company’s 2017 estimates
Foreign currency losses aggregated $1.1 million, $0.3 million
and the final calculated amounts.
and $1.5 million in 2019, 2018 and 2017, respectively. We typi-
The Company has estimated of the effect of GILTI and has
cally enter into foreign currency forward exchange contracts to
determined that it has no tax liability related to GILTI as of De-
manage exposure related to receivables from unaffiliated third
cember 31, 2019 and 2018.
parties denominated in a foreign currency and occasionally to
The Tax Act also contains a provision that allows a domestic
manage risks related to future sales expected to be denominat-
corporation an immediate deduction for a portion of its foreign
ed in a foreign currency. Over 45% of 2019 net sales of our Euro-
derived intangible income (“FDII”). The Company estimated
pean operations were denominated in U.S. dollars.
the effect of FDII and recorded a tax benefit of $0.9 million and
Interest and dividend income aggregated $3.7 million,
$0.6 million as of December 31, 2019 and 2018, respectively.
$4.0 million and $3.0 million in 2019, 2018 and 2017, respec-
Our effective income tax rate was 27.7%, 27.3% and 29.2% in
tively. Cash and cash equivalents and short-term invest-
2019, 2018 and 2017, respectively. The French government had
ments are primarily invested in certificates of deposit with
introduced a 3% tax on dividends or deemed dividends for en-
var ying maturities.
Income Taxes
In December 2017, the U.S. government passed the Tax Cuts and
tities subject to French corporate income tax in 2012. In 2017,
the French Constitutional Court released a decision declaring
that the 3% tax on dividends or deemed dividends is unconsti-
tutional. As a result of that decision, the Company filed a claim
Jobs Act (“the Tax Act”). The Tax Act made broad and complex
for refund of approximately $3.9 million for these taxes paid
changes to the U.S. tax code, including, but not limited to reducing
since 2015 including accrued interest of approximately $0.4
the U.S. federal corporate tax rate from 35% to 21% beginning in
million. The Company recorded the refund claim as of Decem-
2018, and requiring companies to pay a one-time transition tax on
ber 31, 2017 and received the entire refund in 2018.
certain unremitted earnings of foreign subsidiaries.
Excluding the 2017 adjustment to deferred tax benefit as a
The Tax Act also established new tax laws that took effect in
result of the Tax Act and the 2017 claim for refund, our effec-
2018, including, but not limited to: (i) the reduction of the U.S.
tive tax rate for 2017 was 32.4%.
70
The French authorities are considering that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does
not, in and of itself, constitute a permanent establishment and therefore Interparfums, SA should pay French taxes on all or part
of the profits of that entity. The French Tax Authority recently notified the Company that IP Suisse will be the subject of a tax audit
covering the period January 1, 2010 through December 31, 2018. No claim or assessment for any taxes or penalties has been made
at this time. The Company disagrees and is prepared to vigorously defend its position. Consequently, no provision has been made
in the accompanying financial statements as we believe it is more likely than not that our position will be sustained based on its
technical merits. Although we believe that we have sufficient arguments to support our position, there exists a risk that the French
authorities may prevail. The Company’s exposure in connection with this matter is approximately $5.8 million, net of recover taxes
already paid to the Swiss authorities, and excluding interest.
Lastly, pursuant to an action plan released by the French Prime Minister, the French corporate income tax rate is expected to
be cut from approximately 33% to 25% over a three-year period which began in 2020. Other than as discussed above, we did not
experience any significant changes in tax rates, and none were expected in jurisdictions where we operate.
Net Income and Earnings per Share
(In thousands, except share and per share data)
Years ended December, 31
Net income attributable to European operations
Net income attributable to United States operations
Net income
Less: Net income attributable to the noncontolling 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
2019
$56,343
19,727
76,070
15,821
$60,249
2018
$56,469
13,246
69,715
15,922
2017
$48,236
7,017
55,253
13,659
$53,793
$41,594
$1.92
1.90
$1.72
1.71
$1.33
1.33
31,451,093
31,688,700
31,307,991
31,522,371
31,172,285
31,305,101
Net income has continued to increase over the past three years, and aggregated $76.1 million, $69.7 million and $55.3 million in
2019, 2018 and 2017, respectively. Net income attributable to European operations was $56.3 million, $56.5 million and $48.2 mil-
lion in 2019, 2018 and 2017, respectively, while net income attributable to United States operations was $19.7 million, $13.2 million
and $7.0 million in 2019, 2018 and 2017, respectively. The fluctuations in net income for European operations are directly related to
the previous discussions relating to changes in sales, gross profit margins, selling, general and administrative expenses and the
French tax refund.
For United States operations the significant fluctuations in net income are also directly related to the previous discussions relat-
ing to changes in sales, gross profit margins and selling, general and administrative expenses. In addition, results for 2017 include
the effect of the $2.1 million impairment loss.
The noncontrolling interest arises primarily from our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly
traded company as 27% of Interparfums SA shares trade on the NYSE Euronext. Net income attributable to the noncontrolling in-
terest is related to the profitability of our European operations, and aggregated 28.1%, 28.2% and 28.3% of European operations net
income in 2019, 2018 and 2017, respectively. Net income attributable to Inter Parfums, Inc. aggregated $60.2 million, $53.8 million
and $41.6 million in 2019, 2018 and 2017, respectively. Net margins attributable to Inter Parfums, Inc. aggregated 8.4%, 8.0% and
7.0% in 2019, 2018 and 2017, respectively.
management’s discussion and analysis
of financial condition and results of operations
71
Liquidity and Capital Resources
The Company’s financial position remains strong. At December
Our business is not capital intensive as we do not own any
manufacturing facilities. On a full year basis, we spent approxi-
31, 2019, working capital aggregated $389 million, and we had
mately $5.4 million on capital expenditures including tools and
a working capital ratio of over 3 to 1. Cash and cash equiva-
molds needed to support our new product development calen-
lents and short-term investments aggregated $253 million
dar. Capital expenditures also include amounts for office fix-
most of which is held in euro by our European operations and
tures, computer equipment and industrial equipment needed
is readily convertible into U.S. dollars. We have not had any
at our distribution centers. Payments for licenses, trademarks
liquidity issues to date, and do not expect any liquidity issues
and other intangible assets primarily represent upfront entry
relating to such cash and cash equivalents and short-term
fees incurred in connection with new license agreements. In
investments held by our European operations. Approximately
December 2016, the Company agreed to a buyout of one of its
81% of the Company’s total assets are held by European op-
licenses, effective December 31, 2016, for a payment aggre-
erations including approximately $176 million of trademarks,
gating approximately $5.9 million. The Company received the
licenses and other intangible assets.
buyout payment in May 2017.
The Company hopes to benefit from its strong financial po-
In 2018, in connection with a new license agreement, we
sition to potentially acquire one or more brands, either on a
agreed to pay $15.0 million in equal annual installments of $1.1
proprietary basis or as a licensee. Opportunities for external
million including interest imputed at 4.1%. In 2015, in connec-
growth continue to be examined, with the priority of maintain-
tion with a brand acquisition, we entered into a 5-year term
ing the quality and homogeneous nature of our portfolio. How-
loan payable in equal quarterly installments of Ð5.0 million
ever, we cannot assure you that any new license or acquisition
(approximately $5.6 million) plus interest. In order to reduce
agreements will be consummated.
exposure to rising variable interest rates, we entered into a
Cash provided by operating activities aggregated $76.5
swap transaction effectively exchanging the variable interest
million, $63.0 million and $35.9 million in 2019, 2018 and
rate to a fixed rate of approximately 1.2%.
2017, respectively. In 2019, working capital items used $11.7
Our short-term financing requirements are expected to be
million in cash from operating activities, as compared to
met by available cash on hand at December 31, 2019, cash gen-
$20.9 million in 2018 and $32.5 million in 2017. Although ac-
erated by operations and short-term credit lines provided by do-
counts receivable is up slightly from that of the prior year,
mestic and foreign banks. The principal credit facilities for 2020
day’s sales outstanding improved to 68 days in 2019, as com-
consist of a $20.0 million unsecured revolving line of credit pro-
pared to 71 days and 67 days in 2018 and 2017, respectively.
vided by a domestic commercial bank and approximately $28.1
Inventory days on hand aggregated 225 days in 2019, as com-
million in credit lines provided by a consortium of international
pared to 223 days in 2018 and 189 days in 2017, respectively.
financial institutions. There were no balances due from short-
The increase in 2018 was primarily the result of the required
term borrowings as of December 31, 2019 and 2018.
buildup of inventory for new licenses entered into in 2018
Purchase of subsidiary shares from noncontrolling interest
where we do not have a full year of sales. At year-end 2019,
primarily represents the purchase of treasury shares of Inter-
higher inventory levels were needed to support our robust
parfums SA, which are expected to be issued to Interparfums
new product launch schedule for 2020. In terms of cash flow,
SA employees pursuant to its Free Share Plan.
inventory levels at December 31, 2019 are up only 3.7% from
In October 2017, our Board authorized a 24% increase in the
that date of the prior year.
annual dividend to $0.84 per share. In October 2018, our Board
Cash flows used in investing activities reflect the purchase
authorized a 31% increase in the annual dividend to $1.10 per
and sales of short-term investments. These investments are
share and in October 2019, our Board authorized a further 20%
primarily certificates of deposit with maturities greater than
increase in the annual dividend to $1.32 per share. The next
three months. At December 31, 2019, approximately $65 mil-
quarterly cash dividend of $0.33 per share is payable on April
lion of certificates of deposit contain penalties where we would
15, 2020 to shareholders of record on March 31, 2020. Divi-
forfeit a portion of the interest earned in the event of early
dends paid, including dividends paid once per year to noncon-
withdrawal.
trolling stockholders of Interparfums SA, aggregated $44.2
72
report on internal control
over financial reporting
million, $35.0 million and $27.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. The cash dividends to
be paid in 2020 are not expected to have any significant impact on our financial position.
We believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facili-
ties, so that they will provide us with sufficient resources to meet all present and reasonably foreseeable future operating needs.
Inflation rates in the U.S. and foreign countries in which we operate did not have a significant impact on operating results for the
year ended December 31, 2019.
Contractual Obligations
The following table summarizes our contractual obligations over the periods indicated, as well as our total contractual obligations
($ in thousands):
Contractual Obligations
Long-Term Debt
Lease Liabilities
Purchase Obligations(1)
Total
Total
$23,060
$29,991
$1,665,369
$1,718,420
Payments Due by Period
Less than Years Year More than
5-years
$6,450
1-year
$12,326
2-3
$2,142
4-5
$2,142
$5,871
$173,159
$191,356
$9,772
$350,386
$362,300
$7,759
$344,796
$354,697
$6,589
$797,028
$810,067
(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, 2019, without consideration for
potential renewal periods and do not reflect the fact that our distributors share our advertising obligations.
MANAGEMENT’S ANNUAL REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Inter Parfums, Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13(a)-15(f) under the Securities Exchange Act of 1934. With the participation of the Chief Executive
Officer and the Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework and criteria established in Internal Control – Integrated Framework (2013), issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has conclud-
ed that our internal control over financial reporting was effective as of December 31, 2019.
Our independent auditor, Mazars USA LLP, a registered public accounting firm, has issued its report on its audit of our internal
control over financial reporting. This report appears on the following page.
Jean Madar
Russell Greenberg
Chief Executive Officer,
Executive Vice President
Chairman of the
and Chief Financial Officer
Board of Directors
report of independent registered
public accounting firm
73
REPORT OF INDEPENDENT REGISTERED
We conducted our audits in accordance with the standards
PUBLIC ACCOUNTING FIRM
To Shareholders and the Board of Directors of
Inter Parfums, Inc.
Opinions on the Financial Statements and Internal Control over
Financial Reporting
of the PCAOB. Those standards require that we plan and per-
form the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material
We have audited the accompanying consolidated balance sheets
respects.
of Inter Parfums, Inc. (the “Company”) as of December 31, 2019
Our audits of the consolidated financial statements included
and 2018, and the related consolidated statements of income,
performing procedures to assess the risks of material mis-
comprehensive income, shareholders’ equity, and cash flows
statement of the consolidated financial statements, whether
for each of the years in the three-year period ended December
due to error or fraud, and performing procedures that respond
31, 2019, and the related notes and the schedule listed in the
to those risks. Such procedures included examining, on a test
Index in Item 15(a)(2) (collectively referred to as the “finan-
basis, evidence regarding the amounts and disclosures in the
cial statements”). We also have audited the Company’s inter-
consolidated financial statements. Our audits also includ-
nal control over financial reporting as of December 31, 2019,
ed evaluating the accounting principles used and significant
based on criteria established in Internal Control - Integrated
estimates made by management, as well as evaluating the
Framework: (2013) issued by the Committee of Sponsoring
overall presentation of the consolidated financial statements.
Organizations of the Treadway Commission (COSO).
Our audit of internal control over financial reporting included
In our opinion, the consolidated financial statements re-
obtaining an understanding of internal control over financial
ferred to above present fairly, in all material respects, the fi-
reporting, assessing the risk that a material weakness exists,
nancial position of the Company as of December 31, 2019 and
and testing and evaluating the design and operating effective-
2018, and the results of its operations and its cash flows for
ness of internal control based on the assessed risk. Our audits
each of the years in the three-year period ended December 31,
also included performing such other procedures as we consid-
2019, in conformity with accounting principles generally ac-
ered necessary in the circumstances. We believe that our au-
cepted in the United States of America. Also in our opinion, the
dits provide a reasonable basis for our opinions.
Company maintained, in all material respects, effective inter-
nal control over financial reporting as of December 31, 2019,
Definition and Limitations of Internal Control
based on criteria established in Internal Control - Integrated
over Financial Reporting
Framework: (2013) issued by COSO.
A company’s internal control over financial reporting is a process
Basis for Opinion
designed to provide reasonable assurance regarding the reli-
ability of financial reporting and the preparation of consolidated
The Company’s management is responsible for these consol-
financial statements for external purposes in accordance with
idated financial statements, for maintaining effective internal
generally accepted accounting principles. A company’s internal
control over financial reporting, and for its assessment of
control over financial reporting includes those policies and pro-
the effectiveness of internal control over financial reporting
cedures that (1) pertain to the maintenance of records that, in
included in the accompanying Management’s Annual Report
reasonable detail, accurately and fairly reflect the transactions
on Internal Control over Financial Reporting. Our responsi-
and dispositions of the assets of the company; (2) provide rea-
bility is to express an opinion on the Company’s consolidated
sonable assurance that transactions are recorded as necessary
financial statements and an opinion on the Company’s internal
to permit preparation of consolidated financial statements in ac-
control over financial reporting based on our audits. We are
cordance with generally accepted accounting principles, and that
a public accounting firm registered with the Public Company
receipts and expenditures of the company are being made only
Accounting Oversight Board (United States) (“PCAOB”) and
in accordance with authorizations of management and directors
are required to be independent with respect to the Company
of the company; and (3) provide reasonable assurance regarding
in accordance with the U.S. federal securities laws and the ap-
prevention or timely detection of unauthorized acquisition, use,
plicable rules and regulations of the Securities and Exchange
or disposition of the company’s assets that could have a material
Commission and the PCAOB.
effect on the consolidated financial statements.
74
report of independent registered
public accounting firm
Because of its inherent limitations, internal control over fi-
The determination of the future cash flows of the intangible
nancial reporting may not prevent or detect misstatements.
assets requires management to make significant estimates and
Also, projections of any evaluation of effectiveness to future peri-
assumptions related to forecasts of future revenues, operat-
ods are subject to the risk that controls may become inadequate
ing margins and discount rates. As disclosed by management,
because of changes in conditions, or that the degree of compli-
changes in these assumptions could have a significant impact
ance with the policies or procedures may deteriorate.
on either the future cash flows and therefore, on the amount
Critical Audit Matters
of any impairment charge. The determination of an impairment
indicator on the finite – life intangible assets requires manage-
The critical audit matters communicated below are matters
ment judgments and involves assumptions.
arising from the current period audit of the consolidated fi-
We identified the impairment assessment of intangible as-
nancial statements that were communicated or required to be
sets as a critical audit matter. Auditing management’s judg-
communicated to the audit committee and that: (1) relate to
ments regarding the evaluation of impairment indicators,
accounts or disclosures that are material to the consolidated
forecasts of future revenue and operating margin, and the dis-
financial statements and (2) involved our especially challeng-
count rate to be applied involve a high degree of subjectivity.
ing, subjective, or complex judgments. The communication of
The primary procedures we performed to address this criti-
critical audit matters does not alter in any way our opinion on
cal audit matter included:
the consolidated financial statements, taken as a whole, and
• Reviewing the analysis of the identification of impairment
we are not, by communicating the critical audit matters below,
evidence for each indefinite and finite-life asset based on three
providing separate opinions on the critical audit matters or on
indicators (sales analysis, new products launches, payment of
the accounts or disclosures to which they relate.
minimum guarantees), and then corroborate that analysis with
As described in Notes 1 and 7 to the consolidated financial
external information and evidence obtained in other areas of
statements, the Company’s consolidated indefinite and finite
the audit.
—life intangible assets balance was $202 million at December
• Testing the effectiveness of controls relating to
31, 2019. Indefinite lived intangible assets principally consist of
management’s impairment tests, including controls over
trademarks and finite-lived intangible assets represent fees to
the impairment indi- cators and determination of the future
acquire, or enter into a license.
cash flows.
Those intangible assets are tested for impairment as follows:
• In testing management’s process for determining the future
• Indefinite – life intangible assets are tested for impairment
cash flows we evaluated the reasonableness of manage-
at least annually at the reporting unit level or more
ment’s forecasts of future revenue and operating margin by
frequently when events occur or circumstances change.
performing a retrospective review in comparing these fore-
The evaluation requires a comparison of the estimated fair
casts to historical operating results and evaluating whether
value of the asset to the carrying value of the asset. The
the assumptions used were reasonable considering current
fair value is estimated based upon discounted future cash
information as well as future expectations as well as using
flow projections. If the carrying value of an indefinite-lived
additional evidence obtained in other areas of the audit.
intangible asset exceeds its fair value, an impairment charge
• Utilizing a valuation specialist to assist in auditing
is recorded.
the discount rate. It includes evaluating whether the
• Finite – life intangible assets are tested for impairment
assumptions used were reasonable by comparing with third
testing whenever events or changes in circumstances indicate
party market data.
that the carrying amount of the asset may not be recoverable.
If impairment indicators exist, the undiscounted future cash
flows associated with the expected service potential of the
asset are compared to the carrying value of the asset. If the
projection of undiscounted cash flows is less than the carrying
We have served as the Company’s auditor since 2004.
value of a finite-lived intangible asset, an impairment charge
New York, New York
would be recorded.
March 2, 2020
financial statements
75
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
Years Ended December 31,
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Receivables, other
Other current assets
Income taxes receivable
Total current assets
Equipment and leasehold improvements, net
Rights of use assets, net
Trademarks, licenses and other intangible assets, net
Deferred tax assets
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
Current portion of lease liabilities
Accounts payable - trade
Accrued expenses
Income taxes payable
Dividends payable
Total current liabilities
Long–term debt, less current portion
Lease liabilities, less current portion
Equity:
Inter Parfums, Inc. shareholders’ equity:
Preferred stock, $0.001 par value. Authorized 1,000,000 shares; none issued
−
Common stock, $0.001 par value. Authorized 100,000,000 shares;
outstanding, 31,513,018 and 31,382,127 shares
at December 31, 2019 and 2018, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost, 9,864,805 common shares
at December 31, 2019 and 2018
Total Inter Parfums, Inc. shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
(See accompanying notes to consolidated financial statements.)
31
70,664
474,637
(39,853)
(37,475)
468,004
140,994
608,998
$828,832
2019
2018
$192,417
$193,136
60,714
133,010
167,809
2,054
17,123
169
573,296
11,107
28,359
201,983
8,004
6,083
$828,832
12,326
5,356
54,098
96,421
5,865
10,399
184,465
10,734
24,635
67,870
133,320
161,778
2,112
12,576
810
571,602
9,839
-
204,325
5,761
6,302
$797,829
23,155
-
58,328
94,668
4,396
8,630
189,177
22,906
-
-
31
69,970
448,731
(33,650)
(37,475)
447,607
138,139
585,746
$797,829
76
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
Years Ended December 31,
Net sales
Cost of sales
Gross margin
Selling, general, and administrative expenses
Impairment loss
Income from operations
Other expenses (income):
Interest expense
Loss on foreign currency
Interest and dividend income
Income before income taxes
Income taxes
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
Dividends declared per share
(See accompanying notes to consolidated financial statements.)
2019
$713,514
267,578
445,936
341,209
−
104,727
2,146
1,128
(3,693)
(419)
105,146
29,076
76,070
15,821
$60,249
$1.92
1.90
2018
$675,574
248,012
427,562
332,831
−
94,731
2,578
251
(3,957)
(1,128)
95,859
26,144
69,715
15,922
2017
$591,251
214,965
376,286
295,540
2,123
78,623
1,992
1,549
(2,983)
558
78,065
22,812
55,253
13,659
$53,793
$41,594
$1.72
1.71
$1.33
1.33
31,451,093
31,688,700
$1.16
31,307,991
31,522,371
$0.91
31,172,285
31,305,101
$0.72
financial statements
77
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except share and per share data)
Years Ended December 31,
Net income
Other comprehensive income:
Net derivative instrument, net of tax
Transfer of OCI into earnings
Translation adjustments, net of tax
Comprehensive income
Comprehensive income attributable to noncontrolling interests:
Net income
Net derivative instrument income (loss), net of tax
Transfer of OCI into earnings
Translation adjustments, net of tax
Comprehensive income attributable to Inter Parfums, Inc.
(See accompanying notes to consolidated financial statements.)
2019
$76,070
22
(136)
(8,712)
(8,826)
67,244
15,821
(30)
−
(2,593)
13,198
$54,046
2018
$69,715
175
(37)
(22,555)
(22,417)
47,298
15,922
39
−
(6,638)
9,323
$37,975
2017
$55,253
54
22
55,995
56,071
111,324
13,659
17
5
15,899
29,580
$81,744
78
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands, except share and per share data)
Years Ended December 31,
Common stock, beginning and end of year
Additional paid-in capital, beginning of year
Shares issued upon exercise of stock options
Purchase of subsidiary shares from noncontrolling interests
Stock-based compensation
Additional paid-in capital, end of year
Retained earnings, beginning of year
Net income
Dividends
Stock-based compensation
Retained earnings, end of year
Accumulated other comprehensive loss, beginning of year
Foreign currency translation adjustment, net of tax
Transfer from other comprehensive income into earnings
Net derivative instrument gain, net of tax
Accumulated other comprehensive loss, end of year
2019
$31
69,970
4,458
(5,167)
1,403
$70,664
448,731
60,249
(36,349)
2,006
474,637
(33,650)
(6,119)
(136)
52
(39,853)
2018
$31
66,004
3,406
(572)
1,132
2017
$31
63,103
1,963
-
938
$69,970
$66,004
422,570
(53,793)
(28,356)
724
448,731
(17,832)
(15,917)
(37)
136
402,714
41,594
(22,460)
722
422,570
(57,982)
40,096
17
37
(33,650)
(17,832)
Treasury stock, beginning and end of year
(37,475)
(37,475)
(37,475)
Noncontrolling interest, beginning of year
Net income
Foreign currency translation adjustment, net of tax
Transfer from other comprehensive income into earnings4
Net derivative instrument gain (loss), net of tax
Purchase of subsidiary shares from noncontrolling interest
Dividends
Stock-based compensation
Noncontrolling interest, end of year
Total equity
(See accompanying notes to consolidated financial statements.)
138,139
15,821
(2,593)
−
(30)
(920)
(9,654)
231
140,994
$608,998
137,339
15,922
(6,638)
-
39
(236)
(8,706)
419
138,139
$585,746
113,267
13,659
15,899
5
17
-
(6,039)
531
137,339
$570,637
financial statements
79
INTER PARFUMS, INC. AND SUBSIDIARIES
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
Noncash stock compensation
Lease expense
Deferred tax benefit
Change in fair value of derivatives
Changes in:
Accounts receivable
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
Proceeds from sale of trademark
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Repayment of long-term debt
Proceeds from exercise of options
Dividends paid
Dividends paid to noncontrolling interests
Purchase of subsidiary shares from noncontrolling interests
Net cash 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.)
2019
2018 2017
$76,070
$69,715
$55,253
8,729
1,380
3,394
1,068
(2,330)
(169)
1,124
(5,925)
(4,945)
(4,960)
3,016
76,452
(38,958)
44,814
(5,427)
(6,067)
−
(5,638)
(22,321)
4,458
(34,579)
(9,654)
(6,087)
(68,183)
(3,350)
(719)
193,136
$192,417
11,031
1,442
2,205
-
(158)
(302)
(21,532)
(29,341)
(1,016)
25,592
5,405
63,041
(10,030)
8,859
(3,956)
(8,509)
-
(13,636)
(23,487)
3,406
(26,287)
(8,706)
(808)
(55,882)
(8,730)
(15,207)
11,914
939
2,093
-
(591)
(1,254)
(4,116)
(28,518)
(1,173)
5,696
(4,352)
35,891
(31,874)
66,981
(3,023)
(1,046)
5,886
36,924
(22,362)
1,963
(21,192)
(6,039)
-
(47,630)
21,330
46,515
208,343
$193,136
161,828
$208,343
$1,764
26,332
$1,745
24,995
$1,813
24,337
80
notes to consolidated financial statements
(in thousands, except share and per share data)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
estimates. Significant estimates for which changes in the near
(1) The Company and its Significant
term are considered reasonably possible and that may have a
Accounting Policies
Business Of The Company
Inter Parfums, Inc. and its subsidiaries (the “Company”) are in
the fragrance business and manufacture and distribute a wide
array of fragrances and fragrance related products.
material impact on the financial statements are disclosed in
these notes to the consolidated financial statements.
Foreign Currency Translation
For foreign subsidiaries with operations denominated in a
Substantially all of our prestige fragrance brands are li-
foreign currency, assets and liabilities are translated to U.S.
censed from unaffiliated third parties, and our business is
dollars at year end exchange rates. Income and expense
dependent upon the continuation and renewal of such licens-
items are translated at average rates of exchange prevailing
es. With respect to the Company’s largest brands, we own
during the year. Gains and losses from translation adjust-
the Lanvin brand name for our class of trade, and license the
ments are accumulated in a separate component of share-
Montblanc, Jimmy Choo, Coach, and GUESS brand names. As a
holders’ equity.
percentage of net sales, product sales for the Company’s larg-
est brands were as follows:
Year Ended December 31,
Montblanc
Jimmy Choo
Coach
22%
16%
14%
GUESS (license commenced
April 1, 2018) 10%
8%
Lanvin
2019 2018 2017
21%
19%
17%
15%
n/a
10%
18%
10%
n/a
11%
Cash And Cash Equivalents
And Short-Term Investments
All highly liquid investments purchased with a maturity of
three months or less are considered to be cash equivalents.
From time to time, the Company has short-term investments
which consist of certificates of deposit with maturities greater
than three months. The Company monitors concentrations of
credit risk associated with financial institutions with which the
Company conducts significant business. The Company believes
its credit risk is minimal, as the Company primarily conducts
business with large, well-established financial institutions.
No other brand represented 10% or more of consolidated
Substantially all cash and cash equivalents are primarily held
net sales.
at financial institutions outside the United States and are read-
ily convertible into U.S. dollars.
Basis Of Preparation
The consolidated financial statements include the accounts of the
Company, including 73% owned Interparfums SA, a subsidiary
Accounts Receivable
Accounts receivable represent payments due to the Company
whose stock is publicly traded in France. In 2018, the Company
for previously recognized net sales, reduced by allowances for
formed Interstellar Brands, LLC, (“Interstellar”), a wholly owned
doubtful accounts or balances which are estimated to be un-
subsidiary in the United States. Interstellar’s partnership with
collectible, which aggregated $2.5 million and $2.6 million as
IMG Models allows for the two groups to collaborate on exploring
of December 31, 2019 and 2018, respectively. Accounts receiv-
and developing compelling e-commerce businesses for clients
able balances are written-off against the allowance for doubt-
of IMG Models. All material intercompany balances and transac-
ful accounts when they become uncollectible. Recoveries of
tions have been eliminated.
accounts receivable previously recorded against the allow-
Management Estimates
Management makes assumptions and estimates to prepare
when received. We generally grant credit based upon our anal-
ysis of the customer’s financial position, as well as previously
ance are recorded in the consolidated statement of income
financial statements in conformity with accounting principles
established buying patterns.
generally accepted in the United States of America. Those as-
sumptions and estimates directly affect the amounts reported
and disclosures included in the consolidated financial state-
Inventories
Inventories, including promotional merchandise, only include
ments. Actual results could differ from those assumptions and
inventory considered saleable or usable in future periods, and
notes to consolidated financial statements
(in thousands, except share and per share data)
81
are stated at the lower of cost and net realizable value, with
inite-lived intangible assets for impairment at least annually
cost being determined on the first-in, first-out method. Cost
during the fourth quarter, or more frequently when events oc-
components include raw materials, direct labor and over-
cur or circumstances change, such as an unexpected decline
head (e.g., indirect labor, utilities, depreciation, purchasing,
in sales, that would more-likely-than-not indicate that the
receiving, inspection and warehousing) as well as inbound
carrying value of an indefinite-lived intangible asset may not
freight. Promotional merchandise is charged to cost of sales
be recoverable. When testing indefinite-lived intangible assets
at the time the merchandise is shipped to the Company’s
for impairment, the evaluation requires a comparison of the
customers.
estimated fair value of the asset to the carrying value of the
asset. The fair values used in our evaluations are estimated
Derivatives
All derivative instruments are recorded as either assets or
based upon discounted future cash flow projections using a
weighted average cost of capital of 7.94% and 6.21% in 2019
liabilities and measured at fair value. The Company uses de-
and 2018, respectively. The cash flow projections are based
rivative instruments to principally manage a variety of market
upon a number of assumptions, including future sales levels,
risks. For derivatives designated as hedges of the exposure
future cost of goods and operating expense levels, as well as
to changes in fair value of the recognized asset or liability
economic conditions, changes to our business model or chang-
or a firm commitment (referred to as fair value hedges), the
es in consumer acceptance of our products which are more
gain or loss is recognized in earnings in the period of change
subjective in nature. If the carrying value of an indefinite-lived
together with the offsetting loss or gain on the hedged item
intangible asset exceeds its fair value, an impairment charge
attributable to the risk being hedged. The effect of that ac-
is recorded.
counting is to include in earnings the extent to which the
Intangible assets subject to amortization are evaluated for
hedge is not effective in achieving offsetting changes in fair
impairment testing whenever events or changes in circum-
value. For cash flow hedges, the effective portion of the de-
stances indicate that the carrying amount of an amortizable
rivative’s gain or loss is initially reported in equity (as a com-
intangible asset may not be recoverable. If impairment indica-
ponent of accumulated other comprehensive income) and is
tors exist for an amortizable intangible asset, the undiscount-
subsequently reclassified into earnings in the same period or
ed future cash flows associated with the expected service
periods during which the hedged forecasted transaction af-
potential of the asset are compared to the carrying value of the
fects earnings. The ineffective portion of the gain or loss of
asset. If our projection of undiscounted future cash flows is in
a cash flow hedge is reported in earnings immediately. The
excess of the carrying value of the intangible asset, no impair-
Company also holds certain instruments for economic pur-
ment charge is recorded. If our projection of undiscounted fu-
poses that are not designated for hedge accounting treatment.
ture cash flows is less than the carrying value of the intangible
For these derivative instruments, changes in their fair value
asset, an impairment charge would be recorded to reduce the
are recorded in earnings immediately.
intangible asset to its fair value.
Equipment And Leasehold Improvements
Equipment and leasehold improvements are stated at cost
Revenue Recognition
The Company sells its products to department stores, perfum-
less accumulated depreciation and amortization. Depreciation
eries, specialty stores and domestic and international whole-
and amortization are provided using the straight line method
salers and distributors. Our revenue contracts represent
over the estimated useful lives for equipment, which range
single performance obligations to sell our products to cus-
between three and ten years and the shorter of the lease term
tomers. Sales of such products by our domestic subsidiaries
or estimated useful asset lives for leasehold improvements.
are denominated in U.S. dollars, and sales of such products by
Depreciation provided on equipment used to produce invento-
our foreign subsidiaries are primarily denominated in either
ry, such as tools and molds, is included in cost of sales.
euro or U.S. dollars. The Company recognizes revenues when
Long-Lived Assets
Indefinite-lived intangible assets principally consist of trade-
contract terms are met, the price is fixed and determinable,
collectability is reasonably assured and control of the assets
has passed to the customer based on the agreed upon ship-
marks which are not amortized. The Company evaluates indef-
ping terms. Net sales are comprised of gross revenues less
82
returns, trade discounts and allowances. The Company does
promotions as cost of sales. Certain other incentive arrange-
not bill its customers’ freight and handling charges. All ship-
ments require the payment of a fee to customers based on
ping and handling costs, which aggregated $7.7 million, $7.1
their attainment of pre-established sales levels. These fees
million and $5.9 million in 2019, 2018 and 2017, respectively,
have been recorded as a reduction of net sales.
are included in selling, general and administrative expenses
in the consolidated statements of income. The Company grants
credit to all qualified customers and does not believe it is ex-
Advertising and Promotion
Advertising and promotional costs are expensed as incurred
posed significantly to any undue concentration of credit risk.
and recorded as a component of cost of goods sold (in the case
No one customer represented 10% or more of net sales in 2019,
of free goods given to customers) or selling, general and ad-
2018 or 2017.
Sales Returns
Generally, the Company does not permit customers to return
ministrative expenses. Advertising and promotional costs in-
cluded in selling, general and administrative expenses were
$144.6 million, $139.7 million and $123.7 million for 2019, 2018
and 2017, respectively. Costs relating to purchase with pur-
their unsold products. However, for U.S. based customers, we
chase and gift with purchase promotions that are reflected in
allow returns if properly requested, authorized and approved.
cost of sales aggregated $38.9 million, $36.4 million and $33.8
The Company regularly reviews and revises, as deemed nec-
million in 2019, 2018 and 2017, respectively.
essary, its estimate of reserves for future sales returns based
primarily upon historic trends and relevant current data
including information provided by retailers regarding their
Package Development Costs
Package development costs associated with new products
inventory levels. In addition, as necessary, specific accruals
and redesigns of existing product packaging are expensed as
may be established for significant future known or anticipat-
incurred.
ed events. The types of known or anticipated events that we
consider include, but are not limited to, the financial condition
of our customers, store closings by retailers, changes in the
Operating Leases
The Company leases its offices and warehouses, vehicles, and
retail environment and our decision to continue to support new
certain office equipment, substantially all of which are classi-
and existing products. The Company records its estimate of
fied as operating leases. The Company currently has no materi-
potential sales returns as a reduction of sales and cost of sales
al financing leases. The Company determines if an arrangement
with corresponding entries to accrued expenses, to record the
is a lease at inception. Operating lease assets and obligations
refund liability, and inventory, for the right to recover goods
are recognized at the lease commencement date based on the
from the customer. The refund liability associated with esti-
present value of lease payments over the lease term.
mated returns was $4.1 million and $2.2 million at December
31, 2019 and 2018, respectively, and the amounts recognized
for the rights to recover products was $1.6 million and $0.8
License Agreements
The Company’s license agreements generally provide the
million at December 31, 2019 and 2018, respectively. The
Company with worldwide rights to manufacture, market and
physical condition and marketability of returned products are
sell fragrance and fragrance related products using the licen-
the major factors we consider in estimating realizable value.
sors’ trademarks. The licenses typically have an initial term
Actual returns, as well as estimated realizable values of re-
of approximately 5 to 15 years, and are potentially renewable
turned products, may differ significantly, either favorably or
subject to the Company’s compliance with the license agree-
unfavorably, from our estimates, if factors such as economic
ment provisions. The remaining terms, excluding potential re-
conditions, inventory levels or competitive conditions differ
newal periods, range from approximately 1 to 14 years. Under
from our expectations.
each license, the Company is required to pay royalties in the
Payments to Customers
The Company records revenues generated from purchase with
net sales to third parties.
In certain cases, the Company may pay an entry fee to acquire,
purchase and gift with purchase promotions as sales and the
or enter into, a license where the licensor or another licens-
costs of its purchase with purchase and gift with purchase
ee was operating a pre-existing fragrance business. In those
range of 5% to 10% to the licensor, at least annually, based on
notes to consolidated financial statements
notes to consolidated financial statements
(in thousands, except share and per share data)
(in thousands, except share and per share data)
83
cases, the entry fee is capitalized as an intangible asset and
are held in treasury for general corporate purposes, includ-
amortized over its useful life.
ing issuances under various employee stock option plans.
Most license agreements require minimum royalty pay-
Treasury shares are accounted for under the cost method
ments, incremental royalties based on net sales levels and
and reported as a reduction of equity. Share Repurchase
minimum spending on advertising and promotional activities.
Authorizations may be suspended, limited or terminated at
Royalty expenses are accrued in the period in which net sales
any time without notice.
are recognized while advertising and promotional expenses
are accrued at the time these costs are incurred.
In addition, the Company is exposed to certain concentration
Recent Accounting Pronouncements
In August 2017, the Financial Accounting Standards Board
risk. Most of our prestige fragrance brands are licensed from
(“FASB”) issued an Accounting Standards Update (“ASU”)
unaffiliated third parties, and our business is dependent upon
to improve accounting for hedging activities. The objective
the continuation and renewal of such licenses.
of the ASU is to improve the financial reporting of hedging
relationships in order to better portray the economic results
Income Taxes
The Company accounts for income taxes using an asset and
of an entity’s risk management activities in its financial
statements and to make certain targeted improvements to
liability approach that requires the recognition of deferred
simplify the application of hedge accounting guidance. This
tax assets and liabilities for the expected future tax conse-
ASU is effective for annual and interim periods beginning
quences of events that have been recognized in its financial
after December 15, 2018 and early adoption is permitted.
statements or tax returns. The net deferred tax assets as-
We have evaluated the standard and determined that there
sume sufficient future earnings for their realization, as well
has been no material impact on our consolidated financial
as the continued application of currently enacted tax rates.
statements.
Included in net deferred tax assets is a valuation allowance
In June 2016, the FASB issued ASU 2016-13, “Financial In-
for deferred tax assets, where management believes it is
struments - Credit Losses (Topic 326): Measurement of Cred-
more-likely-than-not that the deferred tax assets will not
it Losses on Financial Instruments”, as updated in 2019 and
be realized in the relevant jurisdiction. If the Company de-
2020, which require a financial asset measured at amortized
termines that a deferred tax asset will not be realizable, an
cost basis to be presented at the net amount expected to be
adjustment to the deferred tax asset will result in a reduction
collected. The new rules eliminate the probable initial recogni-
of net earnings at that time. Accrued interest and penalties
tion threshold and, instead, reflect an entity’s current estimate
are included within the related tax asset or liability in the ac-
of all expected credit losses. The new rules will be effective for
companying financial statements.
the Company in the first quarter of 2020. The Company expects
Issuance of Common Stock by
Consolidated Subsidiary
The difference between the Company’s share of the proceeds
the new rules to apply to its trade receivables, but does not
expect the adoption to have a material impact on our consoli-
dated financial statements.
In February 2016, the FASB issued an ASU which requires
received by the subsidiary and the carrying amount of the por-
lessees to recognize lease assets and lease liabilities aris-
tion of the Company’s investment deemed sold, is reflected as
ing from operating leases on the balance sheet. This ASU is
an equity adjustment in the consolidated balance sheets.
effective for annual and interim reporting periods beginning
after December 15, 2018. The standard requires entities to
Treasury Stock
The Board of Directors may authorize share repurchas-
recognize a lease liability to cover lease payments and a lease
asset representing its right to use the underlying asset for the
es of the Company’s common stock (Share Repurchase
lease term. The Company has adopted the standard on Jan-
Authorizations). Share repurchases under Share Repurchase
uary 1, 2019 using the modified retrospective method in the
Authorizations may be made through open market transac-
year of adoption with certain transition practical expedients
tions, negotiated purchase or otherwise, at times and in such
with no restatement of prior period amounts. Upon adoption,
amounts within the parameters authorized by the Board.
the Company recognized right-of-use assets of $31.8 million
Shares repurchased under Share Repurchase Authorizations
and lease liabilities of $32.4 million and made no adjustments
84
to retained earnings. Adoption of the new standard did not ma-
partnership through December 31, 2031, and added an addi-
terially impact our consolidated net income and cash flows.
tional five-year extension option through December 31, 2036.
There are no other recent accounting pronouncements is-
The original license agreement, signed in October 2013, would
sued but not yet adopted that would have a material effect on
have expired on December 31, 2025.
our consolidated financial statements.
Reclassifications
Certain prior year’s amounts in the accompanying consoli-
Kate Spade New York
In June 2019, the Company entered into an exclusive, 11-year world-
wide license agreement with Kate Spade New York for the creation,
dated balance sheet and statements of cash flows have been
development and distribution of fragrances under the Kate Spade
reclassified to conform to current period presentation.
brand. This license took effect on January 1, 2020, and our rights
(2) Recent Agreements
Abercrombie & Fitch and Hollister
In November 2019, we extended our license for both the
under such license are subject to certain minimum advertising ex-
penditures and royalty payments as are customary in our industry.
(3) Inventories
Abercrombie & Fitch and Hollister brands until December 31,
Year Ended December 31,
2019
2018
2022, and added automatic renewals unless terminated on 3
Raw materials and
years’ notice.
MCM
In September 2019, the Company entered into an exclusive, 10-
component parts
Finished goods
$71,895
95,914
$167,809
$67,508
94,270
$161,778
year worldwide license agreement with German luxury fashion
Overhead included in inventory aggregated $4.3 million and $4.2
house MCM for the creation, development and distribution of
million as of December 31, 2019 and 2018, respectively. Included
fragrances under the MCM brand. Our rights under such li-
in inventories is an inventory reserve, which represents the
cense are subject to certain minimum advertising expenditures
difference between the cost of the inventory and its estimated
and royalty payments as are customary in our industry.
realizable value, based upon sales forecasts and the physical
Oscar de la Renta
In September 2019, the Company and Oscar de la Renta en-
cific reserves for future known or anticipated events may be
established. Inventory reserves aggregated $4.9 million as of
tered into an amended license agreement extending their
December 31, 2019 and 2018.
condition of the inventories. In addition, and as necessary, spe-
notes to consolidated financial statements
(in thousands, except share and per share data)
85
(4) 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, 2019
Quoted Prices in
Significant
Significant
Active Markets for Other Observable
Unobservable
Total
Identical Assets Inputs Inputs
(Level 3)
(Level 2)
(Level 1)
Assets:
Short-term investments
Foreign currency forward exchange contracts
accounted for using hedge accounting
Foreign currency forward exchange contracts
not accounted for using hedge accounting
Liabilities:
Interest rate swap
FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2018
$60,714
$−
$60,714
$−
16
112
$60,842
$30
−
−
−
$−
16
−
112
$60,842
$30
−
−
$−
Quoted Prices in
Significant
Significant
Active Markets for Other Observable
Unobservable
Total
Identical Assets Inputs Inputs
(Level 3)
(Level 2)
(Level 1)
Assets:
Short-term investments
Foreign currency forward exchange contracts
accounted for using hedge accounting
Liabilities:
Foreign currency forward exchange contracts
not accounted for using hedge accounting
Interest rate swap
$67,870
179
$68,049
45
$207
$252
$-
-
-
-
$-
$-
$67,870
179
$68,049
45
$207
$252
$-
-
-
-
$-
$-
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.
86
(5) Derivative Financial Instruments
All derivative instruments are reported as either assets or
The Company enters into foreign currency forward exchange
liabilities on the balance sheet measured at fair value. The val-
contracts to hedge exposure related to receivables denomi-
uation of interest rate swaps resulted in a liability which is in-
nated in a foreign currency and occasionally to manage risks
cluded in long-term debt on the accompanying balance sheets.
related to future sales expected to be denominated in a foreign
The valuation of foreign currency forward exchange contracts
currency. Before entering into a derivative transaction for
at December 31, 2019 and December 31, 2018, resulted in an as-
hedging purposes, it is determined that a high degree of initial
set and is included in other current assets on the accompanying
effectiveness exists between the change in value of the hedged
balance sheets.
item and the change in the value of the derivative instrument
At December 31, 2019, the Company had foreign currency
from movement in exchange rates. High effectiveness means
contracts in the form of forward exchange contracts with no-
that the change in the cash flows of the derivative instrument
tional amounts of approximately U.S. $18.5 million, GB £2.7
will effectively offset the change in the cash flows of the hedged
million and JPY ¥105.0 million, which all have maturities of less
item. The effectiveness of each hedged item is measured
than one year.
throughout the hedged period and is based on the dollar offset
methodology and excludes the portion of the fair value of the
6) Equipment and Leasehold Improvements
foreign currency forward exchange contract attributable to the
change in spot-forward difference which is reported in current
period earnings. Any hedge ineffectiveness is also recognized
Year Ended December 31,
Equipment
as a gain or loss on foreign currency in the income statement.
Leasehold Improvements
For hedge contracts that are no longer deemed highly effec-
tive, hedge accounting is discontinued and gains and losses
Less accumulated
accumulated in other comprehensive income are reclassified
depreciation and amortization
to earnings. If it is probable that the forecasted transaction
will no longer occur, then any gains or losses accumulated in
2019
2018
$37,743 $36,465
1,760 1,639
38,104
39,503
28,396
$11,107
28,265
$9,839
other comprehensive income are reclassified to current-period
Depreciation and amor tization expense was $3.7 million,
earnings.
$4.1 million and $3.8 million in 2019, 2018, and 2017, re-
In connection with a 2015 brand acquisition, $108 million of
spectively.
the purchase price was paid in cash on the closing date and was
financed entirely through a 5-year term loan. As the payment
(7) Trademarks, Licenses and Other Intangible Assets
at closing was due in dollars and we had planned to finance it
with debt in euro, the Company entered into foreign currency
forward contracts to secure the exchange rate for the $108 mil-
lion purchase price at $1.067 per 1 euro. This derivative was
2019
Trademarks
Gross Accumulated
Net Book
Amount Amortization Value
designated and qualified as a cash flow hedge.
(indefinite lives)
$121,001
$−
$121,001
Gains and losses in derivatives designated as hedges are
Trademarks
accumulated in other comprehensive income (loss) and gains
(finite lives)
43,464
67
43,397
and losses in derivatives not designated as hedges are included
Licenses
in (gain) loss on foreign currency on the accompanying income
(finite lives)
88,008
53,714
34,294
statements. Such gains and losses were immaterial in each of
Other intangible assets
the years in the three-year period ended December 31, 2019.
(finite lives)
For the years ended December 31, 2019 and 2018, interest ex-
Subtotal
pense includes a gain of $0.2 million and $0.3 million, respec-
Total
15,436
146,908
$267,909
12,145
65,926
3,291
80,982
$65,926 $201,983
tively, relating to an interest rate swap.
notes to consolidated financial statements
(in thousands, except share and per share data)
87
Gross Accumulated Net Book
2018 Amount Amortization Value
Trademarks
The cost of trademarks, licenses and other intangible assets
with finite lives is being amortized by the straight line method
over the term of the respective license or the intangible assets
(indefinite lives) $123,287
$- $123,287
estimated useful life which range from three to twenty years.
Trademarks
If the residual value of a finite life intangible asset exceeds its
(finite lives)
44,300
69
44,231
carrying value, then the asset is not amortized. The Compa-
Licenses
(finite lives)
Other intangible assets
85,100
50,539
34,561
whenever events or changes in circumstances indicate that the
ny reviews intangible assets with finite lives for impairment
carrying amount may not be recoverable.
(finite lives)
Subtotal
Total
13,619
143,019
11,373
61,981
2,246
81,038
Trademarks (finite lives) primarily represent Lanvin brand
names and trademarks and in connection with their pur-
$266,306
$61,981
$204,325
chase, Lanvin was granted the right to repurchase the brand
Amortization expense was $5.0 million, $7.0 million and $6.0
lion (approximately $79 million) or one times the average
million in 2019, 2018 and 2017, respectively. Amortization ex-
of the annual sales for the years ending December 31, 2023
pense is expected to approximate $5.3 million in 2020 and 2021,
and 2024 (residual value). Because the residual value of the
$3.8 million in 2022 and 2023 and $3.6 million in 2024. The
intangible asset exceeds its carrying value, the asset is not
names and trademarks in 2025 for the greater of €70 mil-
weighted average amortization period for trademarks, licens-
being amortized.
es and other intangible assets with finite lives are 18 years, 15
years and 2 years, respectively, and 14 years on average.
(8) Accrued Expenses
The Company reviews intangible assets with indefinite lives
Accrued expenses consist of the following:
for impairment whenever events or changes in circumstanc-
es indicate that the carrying amount may not be recoverable.
Year Ended December 31,
In 2017, the Company set in motion a plan to discontinue some
Advertising liabilities
of its mass market product lines. As a result, the Company re-
Salary (including bonus
corded an impairment loss of $2.1 million as of December 31,
and related taxes)
2017. There were no impairment charges for trademarks with
Royalties
indefinite useful lives in 2019 and 2018. The fair values used in
Due vendors (not yet invoiced)
our evaluations are estimated based upon discounted future
Retirement reserves
cash flow projections using a weighted average cost of capital
Refund (return) liability
of 7.94%, 6.21%, 6.22% as of December 31, 2019, 2018 and 2017,
Other
respectively. The cash flow projections are based upon a num-
ber of assumptions, including, future sales levels and future
2019 2018
$14,868
$25,713
16,173
16,646
19,196
9,907
4,131
4,655
$96,421
19,939
14,533
29,790
9,616
2,200
3,722
$94,668
cost of goods and operating expense levels, as well as economic
(9) Loans Payable – Banks
conditions, changes to our business model or changes in con-
Loans payable – banks consist of the following:
sumer acceptance of our products which are more subjective in
The Company and its domestic subsidiaries have available a
nature. The Company believes that the assumptions it has made
$20 million unsecured revolving line of credit due on demand,
in projecting future cash flows for the evaluations described
which bears interest at the daily one-month LIBOR plus 2%
above are reasonable and currently no other impairment indi-
(the one-month LIBOR was 1.76% as of December 31, 2019).
cators exist for our indefinite-lived assets. However, if future
The line of credit which has a maturity date of December 18,
actual results do not meet our expectations, the Company may
2020 is expected to be renewed on an annual basis. Borrow-
be required to record an impairment charge, the amount of
ings outstanding pursuant to lines of credit were zero as of De-
which could be material to our results of operations.
cember 31, 2019 and 2018.
88
The Company’s foreign subsidiaries have available credit lines, including several bank overdraft facilities totaling approximately
$28 million. These credit lines bear interest at EURIBOR plus between 0.5% and 0.8% (EURIBOR was minus 0.379% at December
31, 2019). Outstanding amounts were zero as of December 31, 2019 and 2018.
As there were no borrowings outstanding as of December 31, 2019 and 2018, there is no weighted average interest rate on short-
term borrowings as of December 31, 2019 and 2018.
(10) Long-term Debt
Long-term debt consists of the following:
Year Ended December 31
$15.0 million payable in 14 equal annual installments of $1.1 million
beginning in January 2020 including interest imputed at 4.1% per annum
$111.0 million 5-year term loan payable in 20 equal quarterly
installments plus interest at 1.2% per annum
Other
Less current maturities
Total
2019
$11,806
11,254
−
23,060
12,326
$10,734
2018
$11,291
34,350
420
46,061
23,155
$22,906
The $111.0 million 5-year term loan requires the maintenance of certain financial covenants, tested semi-annually, including
a maximum leverage ratio and a minimum interest coverage ratio. The facility also contains new debt restrictions among other
standard provisions. The Company is in compliance with all of the covenants and other restrictions of the debt agreements. In
order to reduce exposure to rising variable interest rates, the Company entered into a swap transaction effectively exchanging
the variable interest rate to a fixed rate of approximately 1.2%. The swap is a derivative instrument and is therefore recorded
at fair value and changes in fair value are reflected in the accompanying consolidated statements of income. Maturities of
long-term debt subsequent to December 31, 2019 are approximately $12.3 million in 2020 and $1.1 million per year thereafter
through 2033.
(11) Commitments
Leases
The Company leases its offices and warehouses, vehicles, and certain office equipment, substantially all of which are classified as
operating leases. The Company currently has no material financing leases. The Company determines if an arrangement is a lease at
notes to consolidated financial statements
(in thousands, except share and per share data)
89
inception. Operating lease assets and obligations are recognized
at the lease commencement date based on the present value of
License Agreements
The Company is party to a number of license and other agree-
lease payments over the lease term.
ments for the use of trademarks and rights in connection
In determining lease asset value, the Company considers fixed
with the manufacture and sale of its products expiring at var-
or variable payment terms, prepayments, incentives, and options
ious dates through 2033. In connection with certain of these
to extend or terminate, depending on the lease. Renewal, termi-
license agreements, the Company is subject to minimum
nation or purchase options affect the lease term used for deter-
annual advertising commitments, minimum annual royalties
mining lease asset value only if the option is reasonably certain
and other commitments as follows:
to be exercised. The Company generally uses its incremental
borrowing rate based on information available at the lease com-
mencement date for the location in which the lease is held in de-
termining the present value of lease payments.
As of December 31, 2019, the weighted average remaining
lease term was 6.6 years and the weighted average discount rate
2020
2021
2022
2023
2024
used to determine the operating lease liability was 2.8%. Rental
Thereafter
expense related to operating leases was $7.5 million, $7.0 mil-
lion, and $6.5 million for the years ended December 31, 2019,
$173,159
178,951
171,435
177,442
167,355
797,028
$1,665,370
2018 and 2017, respectively. Operating lease payments included
Future advertising commitments are estimated based on
in operating cash flows totaled $6.0 million and noncash addi-
planned future sales for the license terms that were in effect
tions to operating lease assets totaled $34.9 million.
at December 31, 2019, without consideration for potential re-
Maturities of lease liabilities subsequent to December 31,
newal periods. The above figures do not reflect the fact that
2019 are as follows:
2020
2021
2022
2023
2024
Thereafter
33,093
Less imputed interest (based on 2,8%
weighted-average discount rate)
our distributors share our advertising obligations. Royalty ex-
pense included in selling, general, and administrative expens-
$5,871
es, aggregated $53.0 million, $48.9 million and $39.6 million,
5,159
4,613
3,968
3,790
9,692
in 2019, 2018 and 2017, respectively, and represented 7.4%,
7.2% and 6.7% of net sales for the years ended December 31,
2019, 2018 and 2017, respectively.
(12) Equity
Share-Based Payments:
The Company maintains a stock option program for key em-
(3,102)
$29,991
ployees, executives and directors. The plans, all of which have
been approved by shareholder vote, provide for the granting of
90
both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to five-
year period. The fair value of shares vested aggregated $1.4 million and $1.1 million in 2019 and 2018, 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 nonvested options for 2019:
Nonvested options – beginning of year
Nonvested options granted
Nonvested options vested or forfeited
Nonvested options-end of year
Number of Shares
485,360
194,050
(165,200)
514,210
Weighted Average
Grant Date Fair Value
$10.72
$14.14
$9.65
$12.36
The effect of share-based payment expenses decreased income statement line items as follows:
Year Ended December 31, 2019
$3,390
Income before income taxes
Net Income attributable
to Inter Parfums, Inc.
2,060
Diluted earnings per share attributable to
2018
$2,200
1,390
2017
$2,100
1,150
Inter Parfums, Inc
0.07
0.04
0.04
The following table summarizes stock option activity and related information for the years ended December 31, 2019, 2018
and 2017:
Year Ended December 31, 2019
2018 2017
Weighted Average Weighted Average Weighted Average
Options Exercise Price
Options Exercise Price
Options Exercise Price
Shares under option-
beginning of year
Options granted
Options exercised
Options forfeited
Shares under option-
776,171
194,050
(130,891)
(23,530)
$41.33
72.89
34.06
45.48
730,980
196,350
(140,579)
(10,580)
$31.92
63.91
24.21
37.64
684,540
174,600
(103,230)
(24,930)
$26.94
43.48
19.03
29.49
end of year
815,800
49.89
776,171
41.33
730,980
31.92
At December 31, 2019, options for 573,695 shares were available for future grant under the plans. The aggregate intrinsic value
of options outstanding is $18.7 million as of December 31, 2019 and unrecognized compensation cost related to stock options out-
standing aggregated $6.0 million, which will be recognized over the next five years.
The weighted average fair values of options granted by Inter Parfums, Inc. during 2019, 2018 and 2017 were $14.14, $14.31 and
$9.82 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value.
notes to consolidated financial statements
(in thousands, except share and per share data)
91
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 interest rate
Weighted average dividend yield
2019
25%
5.0 yrs
1.7%
2.0%
2018
27%
5.0 yrs
2.5%
2.0%
2017
28%
5.0 yrs
2.2%
2.0%
Expected volatility is estimated based on historic volatility 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 the assumption that the dividend payout as authorized by the Board of Directors would
maintain its current payout ratio as a percentage of earnings.
Proceeds, tax benefits and intrinsic value related to stock options exercised were as follows:
Year Ended December 31,
Proceeds from stock options exercised
Tax benefits
Intrinsic value of stock options exercised
2019
$4,458
$690
$4,520
2018
$3,406
$807
$4,310
2017
$1,963
$600
$2,258
The following table summarizes additional stock option information as of December 31, 2019:
Exercice Price Options Outstanding Contractual Life Options Exercisable
$23.61 − $27.80
$32.83 − $33.95
$40.15 − $46.90
$65.25−$66.46
$73.09
Totals
179,740
108,280
158,380
181,350
188,050
815,800
1.52 years
2.97 years
3.96 years
4.97 years
6.00 years
3.99 years
153,820
57,180
55,520
35,070
−
301,590
As of December 31, 2019, the weighted average exercise price of options exercisable was $35.05 and the weighted average re-
maining contractual life of options exercisable is 2.62 years. The aggregate intrinsic value of options exercisable at December 31,
2019 is $11.4 million.
In September 2016, Interparfums SA, our 73% owned French subsidiar y, 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 corporate performance conditions were met and
therefore in September 2019, 172,851 shares, adjusted for stock splits, were distributed. The aggregate cost of the grant of
approximately $3.9 million was recognized as compensation cost on a straight-line basis over the requisite three-year ser-
vice period.
In December 2018, Interparfums SA approved an additional plan to grant an aggregate of 26,600 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 cor-
porate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2022 and will follow
the same guidelines as the September 2016 plan.
92
The fair value of the grant has been determined based on the quoted stock price of Interparfums SA shares as reported by the
NYSE Euronext on the date of grant. The estimated number of shares to be distributed of 142,379 has been determined taking into
account employee turnover. The aggregate cost of the grant of approximately $4.4 million will be recognized as compensation cost
on a straight-line basis over the requisite three and a half year service period.
Similar to the September 2016 plan, in order to avoid dilution of the Company’s ownership of Interparfums SA, all shares
distributed or to be distributed pursuant to these plans will be pre-existing shares of Interparfums SA, purchased in the open
market by Interparfums SA. During the year ended December 31, 2019, the Company acquired 131,613 shares at an aggregate
cost of $5.8 million.
All share purchases and issuances have been classified as equity transactions on the accompanying balance sheet.
Dividends
In October 2019, the Board of Directors of the Company authorized a 20% increase in the annual dividend to $1.32 per share. The
quarterly dividend aggregating approximately $10.4 million ($0.33 per share) declared in December 2019 was paid in January 2020.
The next quarterly dividend of $0.33 per share will be paid on April 15, 2020 to shareholders of record on March 31, 2020.
(14) 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 incre-
mental shares outstanding assuming the exercise of dilutive stock options using the treasury stock method.
The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows:
Year Ended December 31,
Numerator for diluted earnings per share
Denominator:
Weighted average shares
Effect of dilutive securities: stock options
Denominator for diluted earnings per share
Earnings per share:
Net income attributable to Inter Parfums,
Inc. common shareholders:
Basic
Diluted
2019
$60,249
31,451,093
237,607
31,688,700
2018
$53,793
2017
$41,594
31,307,991
31,172,285
214,380
132,816
31,522,371
31,305,101
$1.92
$1.90
$1.72
$1.71
$1.33
$1.33
Not included in the above computations is the effect of anti dilutive potential common shares, which consist of outstanding op-
tions to purchase 183,000, 89,000, and 165,000 shares of common stock for 2019, 2018, and 2017, respectively.
notes to consolidated financial statements
(in thousands, except share and per share data)
93
(15) 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:
2019
2018
2017
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:
United States
Europe
Interest income:
United States
Europe
Eliminations
United States
Europe
Eliminations
Income tax expense:
United States
Europe
Eliminations
$173,522
542,226
(2,234)
$713,514
$140,768
537,805
(2,999)
$675,574
$13,071
$19,365
40,840
$60,249
40,877
44 (155)
$53,793
$3,088
5,641
$8,729
$2,711
8,320
$11,031
$137
$345
3,820
3,501
(153) -
$3,957
$419
$673
1,626
(153) -
2,159
$2,146
$2,578
$116,244
476,660
(1,653)
$591,251
$7,051
34,577
(34)
$41,594
$3,943
7,971
$11,914
$58
2,925
-
$2,983
$-
1,992
-
$1,992
$3,764
19,069
$3,693
Interest expense:
$3,945
25,101
30
29,076
$2,264
23,898
(18) (21)
26,144
22,812
94
Segments and Geographical Areas continued
Year Ended December 31,
Total assets:
United States
Europe
Eliminations
Additions to long-lived assets:
United States
Europe
Total long-lived assets:
United States
Europe
Deferred tax assets:
United States
Europe
Eliminations
2019
2018
2017
$166,180
670,657
(8,005)
$828,832
$5,851
5,643
$11,494
$44,473
196,976
$241,449
$705
7,241
58
$8,004
$133,706
684,485
(20,362)
$797,829
$19,181
4,188
$23,369
$25,753
188,411
$214,164
$650
5,023
88
$5,761
$92,909
694,385
(9,522)
$777,772
$980
3,089
$4,069
$9,284
201,541
$210,825
$781
4,987
69
$5,837
United States export sales were approximately $113.2 million, $95.5 million and $71.4 million in 2019, 2018 and 2017, respectively.
Consolidated net sales to customers by region are as follows:
Year Ended December 31,
North America
Europe
Asia
Middle East
Central and South America
Other
Consolidated net sales to customers in major countries are as follows:
Year Ended December 31,
United States
France
Russia
United Kingdom
(16) Income Taxes
2019
$234,000
240,800
106,500
72,600
46,200
13,400
$713,500
2019
$225,300
$43,500
$36,800
$35,800
2018
$210,200
233,600
109,000
59,300
51,700
11,800
2017
$176,900
214,800
88,000
50,500
51,200
9,900
$675,600
$591,300
2018
$204,000
$44,000
$35,000
$36,000
2017
$173,000
$44,000
$34,000
$33,000
The Company and 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, 2019.
notes to consolidated financial statements
(in thousands, except share and per share data)
95
The components of income before income taxes consist of the
Valuation allowances are provided for foreign net operating
following:
loss carry-forwards, as future profitable operations from cer-
tain foreign subsidiaries might not be sufficient to realize the
Year Ended December 31,
U.S. operations
Foreign operations
2019
$23,384
81,762
$105,146
2018
$15,162
80,697
2017
$10,761
67,304
full amount of net operating loss carry-forwards.
No other valuation allowances have been provided as man-
agement believes that it is more likely than not that the asset
$95,859
$78,065
will be realized in the reduction of future taxable income.
The provision for current and deferred income tax expense
(benefit) consists of the following:
Tax Cuts and Jobs Act
In December 2017, the U.S. government passed the Tax Cuts
and Jobs Act (“the Tax Act”). The Tax Act made broad and com-
Year Ended December 31,
2019
2018
2017
plex changes to the U.S. tax code, including, but not limited to
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Total income
tax expense
$3,280
713
27,412
31,405
(3)
(22)
(2,304)
(2,329)
$1,629
$4,050
21% beginning in 2018, and requiring companies to pay a one-
reducing the future U.S. federal corporate tax rate from 35% to
497
24,175
26,301
302
19,051
23,403
113
-
(270)
(157)
(554)
(55)
18
(591)
time transition tax on certain unremitted earnings of foreign
subsidiaries.
The Tax Act also established new tax laws that took ef-
fect in 2018, including, but not limited to: (i) the reduction
of the U.S. federal corporate tax rate discussed above; (ii)
a general elimination of U.S. federal income taxes on div-
idends from foreign subsidiaries; (iii) a provision designed
to tax global intangible low-taxed income (“GILTI”); and (iv)
a provision that allows a domestic corporation an immedi-
$29,076
$26,144
$22,812
ate deduction for a por tion of its foreign derived intangible
income (“FDII”).
The tax effects of temporary differences that give rise to sig-
The Securities and Exchange Commission staff issued Staff
nificant portions of the deferred tax assets and deferred tax
Accounting Bulletin (“SAB”) 118, which provides a measure-
2019 2018
Tax Act enactment date for companies to complete the relat-
ment period that was not to extend beyond one year from the
liabilities are as follows:
December 31,
Net deferred tax assets:
Foreign net operating loss
carry
-forwards
Inventory and accounts receivable
Profit sharing
Stock option compensation
Effect of inventory profit
elimin ation
Other
Total gross deferred
tax assets, net
Valuation allowance
Net deferred tax assets
$362
1,231
4,812
588
$468
658
4,561
626
4,630
3,267
214 (23)
11,837
9,557
(361) (258)
9,299
11,476
Deferred tax liabilities (long-term):
Trademarks and licenses
Net deferred tax assets
(3,472)
$8,004
(3,538)
$5,761
ed accounting under ASC 740, Accounting for Income Taxes.
In accordance with SAB 118, a company must reflect the in-
come tax effects of those aspects of the Tax Act for which the
accounting under ASC 740 is complete. To the extent that a
company’s accounting for a certain income tax effect of the Tax
Act was incomplete, but it was able to determine a reasonable
estimate, it was required to record a provisional estimate in
the financial statements.
In connection with its initial analysis of the impact of the Tax
Act, the Company recorded a tax expense of $1.1 million for the
year ended December 31, 2017. This estimate consists of no ex-
pense for the one-time transition tax, and an expense of $1.1 mil-
lion related to revaluation of deferred tax assets and liabilities
caused by the lower corporate tax rate. There were no material
differences between the Company’s 2017 estimates and the final
calculated amounts.
96
The Company has estimated of the effect of GILTI and has determined that it has no tax liability related to GILTI as of December
31, 2019 and 2018.
The Tax Act also contains a provision that allows a domestic corporation an immediate deduction for a portion of its foreign derived
intangible income (“FDII”). The Company estimated the effect of FDII and recorded a tax benefit of approximately $0.9 million and $0.6
million as of December 31, 2019 and 2018, respectively.
Income Tax Recovery
The French government had introduced a 3% tax on dividends or deemed dividends for entities subject to French corporate income
tax in 2012. In 2017, the French Constitutional Court released a decision declaring that the 3% tax on dividends or deemed dividends
is unconstitutional. As a result of that decision, the Company filed a claim for refund of approximately $3.9 million for these taxes
paid since 2015 including accrued interest of approximately $0.4 million. The Company recorded the refund claim as of December
31, 2017 and has received the entire refund in 2018.
Other Tax Matters
The French authorities are considering that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not,
in and of itself, constitute a permanent establishment and therefore Interparfums, SA should pay French taxes on all or part of
the profits of that entity. The French Tax Authority recently notified the Company that IP Suisse will be the subject of a tax audit
covering the period January 1, 2010 through December 31, 2018. No claim or assessment for any taxes or penalties has been made
at this time. The Company disagrees and is prepared to vigorously defend its position. Consequently, no provision has been made
in the accompanying financial statements as we believe it is more-likely-than-not that our position will be sustained based on its
technical merits. Although we believe that we have sufficient arguments to support our position, there exists a risk that the French
authorities may prevail. The Company’s exposure in connection with this matter is approximately $5.8 million, net of recovery
taxes already paid to the Swiss authorities, and excluding interest.
The Company is no longer subject to U.S. federal, state, and local or non-U.S. income tax examinations by tax authorities for
years before 2016.
Differences between the United States federal statutory income tax rate and the effective income tax rate were as follows:
Year Ended December 31,
Statutory rates
State and local taxes, net of Federal benefit
Benefit of Foreign Derived Intangible Income
Deferred tax effect of statutory tax rate changes
Foreign income tax recovery
Effect of foreign taxes greater than
(less than) U.S. statutory rates
Other
Effective rates
2019
21.0%
0.6
(0.9)
−
−
7.5
(0.6)
27.6%
2018
21.0%
0.4
(0.6)
-
-
7.3
(0.8)
2017
34.0%
0.2
−
1.4
(4.6]
(1.0)
[0.8]
27.3% 29.2%
notes to consolidated financial statements
(in thousands, except share and per share data)
97
(16) Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive loss consist of the following:
Year Ended December 31,
Net derivative instruments,beginning of year
Net derivative instrument gain (loss), net of tax
Net derivative instruments end of year
Cumulative translation adjustments,beginning of year
Translation adjustments
Cumulative translation adjustments, end of year
Accumulated other comprehensive loss
(17) Net Income Attributable to Inter Parfums, Inc.
and Transfers from the Noncontrolling Interest
Year Ended December 31,
Net income attributable to Inter Parfums, Inc.
Decrease in Inter Parfums, Inc.’s additional paid-in capital
2019
$136
(84)
52
(33,786)
(6,119)
(39,905)
$(39,853)
2018
$37
99
136
2017
$(17)
54
37
(17,869)
(57,965)
40,096
(15,917)
(33,786)
$(33,650)
(17,869)
$(17,832)
2019
2018
$60,249 $53,793
2017
$41,594
for subsidiary share transactions
(5,167)
(572)
-
Change from net income attributable to Inter Parfums, Inc.
and transfers from noncontrolling interest
$55,082
$53,221
$41,594
98
directors and executive officers
DIRECTORS AND EXECUTIVE OFFICERS
Directors
Jean Madar
Michel Dyens
Frédéric Garcia-Pelayo
Chairman, and Chief Executive Officer,
Director of Export Sales
Chief Executive Officer,
Michel Dyens & Co.
Interparfums SA
and Chairman of the Board of Directors
Inter Parfums, Inc.
Véronique Gabai-Pinsky
President of Startup Specialty
Corporate Information
Inter Parfums, Inc.
Philippe Benacin
Fragrance Company and Former
551 Fifth Avenue
President, and Vice Chairman of the
President, Vera Wang Group
Board of Directors, Inter Parfums, Inc.
Chief Executive Officer,
Interparfums SA
Russell Greenberg
Executive Vice President,
and Chief Financial Officer
Inter Parfums, Inc.
Philippe Santi
Executive Vice President
Director General Delegue
Interparfums SA
New York, NY 10176
Tel. (212) 983-2640
Fax: (212) 983-4197
Gilbert Harrison
Chairman, Harrison Group, Inc.
www.interparfumsinc.com
Founder and Chairman Emeritus
Financo LLC
Interparfums SA
Executive Officers
Jean Madar
Chief Executive Officer,
4 Rond Point des Champs Elysées
75008 Paris, France
Tel. (1) 53-77-00-00
Fax: (1) 40-76-08-65
and Chairman of the Board of Directors
Inter Parfums, Inc.
Auditors
Philippe Benacin
Mazars USA, LLP
135 West 50th Street
President, and Vice Chairman of the
New York, NY 10020
Francois Heilbronn
Board of Directors, Inter Parfums, Inc.
Managing Partner M.M. Friedrich,
Chief Executive Officer,
Transfer Agent
Heilbronn & Fiszer
Interparfums SA
American Stock Transfer
and Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Robert Bensoussan-Torres
Russell Greenberg
Co-founder of Sirius Equity,
Executive Vice President,
a retail and branded luxury goods
and Chief Financial Officer
investment company
Inter Parfums, Inc.
Patrick Choël
Philippe Santi
Business Consultant and Former
Executive Vice President
President and Chief Executive Officer
Director General Delegue
Parfums Christian Dior
Interparfums SA
and the LVMH Perfume and
Cosmetics Division
corporate and market information
99
the market for our common stock
Our Company’s common stock, $.001 par value per share, is
Dividends
In October 2018, our Board of Directors authorized a 31% increase
traded on The Nasdaq Global Select Market under the symbol
in the annual dividend to $1.10 per share on an annual basis. In
“IPAR”. The following table sets forth in dollars, the range of
October 2019, our Board of Directors authorized a 20% increase
high and low closing prices for the past two fiscal years for our
in the annual dividend to $1.32 per share on an annual basis.
common stock.
Third Quarter
High Closing Low Closing
Fiscal 2019 Price Price
66.65
Fourth Quarter
62.38
63.53
58.50
First Quarter
High Closing Low Closing
Fiscal 2018 Price Price
81.40
71.58
77.34
80.99
Second Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
66.48
66.25
54.75
49.15
55.88
53.75
46.25
42.00
The first quarterly cash dividend of $0.33 per share was payable
on April 15, 2020 to shareholders of record on March 31, 2020.
In April 2020, due to the effect of the Covid-19 global pandemic,
our Board of Directors authorized a temporary suspension of
our quarterly cash dividend.
Corporate Performance Graph
The following graph compares the performance for the periods
indicated in the graph of our common stock with the perfor-
mance of the Nasdaq Market Index and the average performance
of a group of the Company’s peer corporations consisting of:
Avon Products Inc., CCA Industries, Inc., Colgate-Palmolive Co.,
Estée Lauder Companies, Inc., Inter Parfums, Inc., Kimberly
Clark Corp., Natural Health Trends Corp., Procter & Gamble
Co., Revlon, Inc., Spectrum Brands Holdings, Inc., Stephan Co.,
As of February 10, 2020, the number of record holders,
Summer Infant, Inc. and United Guardian, Inc. The graph as-
which include brokers and broker nominees, etc., of our com-
sumes that the value of the investment in our common stock and
mon stock was 37. We believe there are approximately 16,100
each index was $100 at the beginning of the period indicated in
beneficial owners of our common stock.
the graph, and that all dividends were reinvested.
COMPARISON 0F 5 YEAR CUMULATIVE TOTAL RETURN*
Among Inter Parfums, Inc., The NASDAQ Composite Index, and a Peer Group
Inter Parfums, Inc.
NASDAQ Composite
Peer Group
*$100 invested on 12/31/14 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
12/14
100.00
100.00
100.00
12/15
88.41
106.96
94.92
12/16
124.00
116.45
99.10
12/17
167.48
150.96
114.27
12/18
256.80
146.67
113.19
12/19
289.48
200.49
154.63
100
2019
Abercrombie & Fitch
Anna Sui
Boucheron
Coach
Dunhill
Guess
Graff
Hollister
Jimmy Choo
Karl Lagerfeld
Kate Spade
Lanvin
Mcm
Monblanc
Paul Smith
Repetto
Rochas
S.T. Dupont
Oscar de la Renta
Van Cleef & Arpels