-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
RETdZ8P7Ple49ZLGiPGkhjvkkBiRhcZdlvl3bYwe4zSIFqwPcpA3rxDn3iMEJ58Z
Af8z+y9JTb7wDyjFRHNhtw==
UNITED STATES FORM 10-Q ( MARK ONE ) /X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act OR / / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of Commission File No. 0-16469 INTER PARFUMS, INC. Delaware 13-3275609 551 Fifth Avenue, New York, New York 10176
(212) 983-2640 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes _X_ No ___ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes
___ No _X_ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable
date. At November 7, 2003 there were 19,152,186 shares of common stock, par value $.001 per share, outstanding. INDEX Item 1. Financial Statements Consolidated Balance Sheets as of Consolidated Statements of Income for Consolidated Statements of Cash Flows Notes to Unaudited Financial Statements Item 2. Management's Discussion and Analysis of Item 3. Quantitative and Qualitative Disclosures Item 4. Controls and Procedures Part II. Other Information Item 2. Changes in Securities and Use of Proceeds Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures Certifications 1 5 15 16 16 16 16 17 18
Part I. Financial Information Item 1. Financial Statements In our opinion, the accompanying unaudited consolidated condensed financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations
and cash flows for the interim periods presented. We have condensed such financial statements in accordance with the
rules and regulations of the Securities and Exchange Commission. Therefore, such financial statements do not include
all disclosures required by accounting principles generally accepted in the United States of America. These financial
statements should be read in conjunction with our audited financial statements for the year ended December 31, 2002
included in our annual report filed on Form 10-K. The results of operations for the nine months ended September 30, 2003 are not necessarily indicative of the
results to be expected for the entire fiscal year. CONSOLIDATED BALANCE SHEETS ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY See notes to financial statements. CONSOLIDATED STATEMENTS OF INCOME See notes to financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS See notes to financial statements . Notes to Unaudited Financial Statements 1. Significant Accounting Policies: The accounting policies we follow are set forth in the notes to our financial statements included in our Form 10-K which
was filed with the Securities and Exchange Commission for the year ended December 31, 2002. We also discuss such
policies in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations,
included in this Form 10-Q. 2. Comprehensive Income: 3. Geographic Areas: Segment information related to domestic and foreign operations is as follows: 4. Earnings Per Share: We computed basic earnings per share using the weighted average number of shares outstanding during each period. We
computed diluted earnings per share using the weighted average number of shares outstanding during each period, plus
the incremental shares outstanding assuming the exercise of dilutive stock options. 5. Inventories: Inventories consist of the following: 6. Stock- based Compensation: The Company accounts for stock-based employee compensation under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations ("APB 25"). The Company has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure", which was released in December 2002 as an
amendment of SFAS No. 123. The Company applies APB No. 25 and related interpretations in accounting for its stock option incentive plans. The
following table illustrates the effect on net income and earnings per share if the fair value based method had been applied
to all awards. 6. Stock-based Compensation (continued): The weighted average fair values of the options granted during 2003 and 2002 are estimated as $2.07 and $2.30 per share,
respectively, on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend
yield 1.0% in 2003 and 0.8% in 2002; volatility of 50% in both 2003 and 2002; risk-free interest rates at the date of grant,
1.70% in 2003 and 3.11% in 2002; and an expected life of the option of two years. 7. Shareholders Equity: In April 2003, the Chief Executive Officer exercised 67,500 outstanding stock options of the Company's common stock.
The aggregate exercise price of $232,475 was paid by him tendering to the Company 33,692 shares of the Company's
common stock, previously owned by him, valued at $6.90 per share, the fair market value on the date of exercise. All
shares issued pursuant to the option exercises were issued from treasury stock of the Company. In addition, the Chief
Executive Officer tendered an additional 9,298 shares for payment of withholding taxes resulting from the option
exercises. As a result of this transaction, the Company expects to receive a tax benefit of approximately $80,000, which
has been reflected as an increase to additional paid-in capital in the Company's financial statements. In October 2003, each of the Chief Executive Officer and the President exercised 42,000 and 94,300 outstanding stock
options, respectively, of the Company's common stock. The exercise prices of $107,352 for the Chief Executive Officer
and $241,031 for the President were paid by each of them tendering to the Company 8,158 and 18,316 shares, respectively,
of the Company's common stock, previously owned by them, valued at $13.16 per share, the fair market value on the date
of exercise. All shares issued pursuant to these option exercises were issued from our treasury stock. In addition, the
Chief Executive Officer tendered an additional 9,307 shares for payment of withholding taxes resulting from his option
exercise. As a result of this transaction, the Company expects to receive a tax benefit of approximately $460,000, which
will be reflected as an increase to additional paid-in capital in the accompanying financial statements. Item 2: MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction We are a leading manufacturer and distributor of fragrances, cosmetics and health and beauty aids. We combine
innovation and creativity to produce quality products for our customers around the world. We operate in the fragrance and cosmetic industry, specializing in prestige perfumes and cosmetics and mass market
perfumes, cosmetics and health and beauty aids: Forward Looking Information Statements in this document, which are not historical in nature, are forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be
materially different from projected results. Given these risks, uncertainties and other factors, persons are cautioned not
to place undue reliance on the forward-looking statements. Such factors include effectiveness of sales and marketing efforts and product acceptance by consumers, dependence upon
management, competition, currency fluctuation and international tariff and trade barriers, governmental regulation and
possible liability for improper comparative advertising or "Trade Dress". Related Party Transactions We operate under various license agreements, including two licenses that are with affiliates of our strategic partner, LV
Capital USA, Inc. ("LV Capital"), a wholly owned subsidiary of LVMH Moët Hennessy Louis Vuitton S.A. In May 2000
we entered into an exclusive worldwide license for prestige fragrances for the Celine brand, and in March 1999 we
entered into an exclusive worldwide license for Christian Lacroix fragrances. Both licenses are subject to certain
minimum sales requirements, advertising expenditures and royalty payments as are customary in our industry. Three and Nine Months Ended September 30, 2003 as Compared to the Three and Nine Months
Ended September 30, 2002 Net sales for the three months ended September 30, 2003 increased 54% to a record $57.4 million, as compared to $37.4
million for the corresponding period of the prior year. At comparable foreign currency exchange rates, net sales
increased 44% for the period. Net sales for the nine months ended September 30, 2003 increased 46% to a record $136.4 million, as compared to $93.2
million for the corresponding period of the prior year. At comparable foreign currency exchange rates, net sales
increased 34% for the period. Prestige product sales were up 83% (68% in constant dollars) for the three months ended September 30, 2003 and 63%
(45% in constant dollars) for the nine months ended September 30, 2003, as compared to the 2002 period. The strong
growth achieved in the latter half of 2002 continued into 2003. For the three months ended September 30, 2003 our
growth is primarily attributable to the initial launches of the women's fragrance line Burberry Brit into a number of major
markets including the United Kingdom, the United States, Spain, France and Italy. Launches of Burberry Brit are
continuing in the coming months in the rest of Europe, Asia, South America and the Middle East. We have high
expectations for this new women's line which should play a strategic role in the future development of the Burberry
fragrance business. In addition, during the three months ended September 30, 2003 we unveiled our completely new beauty line, consisting
of both fragrance and cosmetics, under the Diane von Furstenberg label. In terms of fashion industry recognition, Diane
is a rising star, who has been instrumental in the early success we are enjoying in the reception of her beauty line. The
official launch, which occurred in mid-September at Henri Bendel in New York City, was followed by the addition of
certain Saks Fifth Avenue, Nordstrom and Fred Segal locations. Total United States distribution is to be initially limited
to 35 of the finest specialty stores in the country. Our mass-market product sales were off 5% for the three months ended September 30, 2003, but were up 10% for the
nine months ended September 30, 2003 as compared to the corresponding periods in 2002. Through June 2003 we
continued to see growth in our fragrances lines as a result of our May 2002 acquisition of certain fragrance brands from
Tristar Corporation ("Tristar"). Tristar was one of our most significant competitors in mass-market fragrances and the
brands acquired are being sold in the same distribution channels as that of our other mass-market fragrance lines. As
we have passed the one-year anniversary of this acquisition, we are consolidating certain fragrance lines to reduce
duplication and improve overall efficiency. New product line extensions and an expanding distribution network continue
to benefit sales volume in our Intimate health and beauty aids and our Aziza cosmetics lines. We have put together our calendar of 2004 prestige launches, which includes new fragrance lines for ST Dupont,
Christian Lacroix, Paul Smith and Celine; and we are also actively pursuing other new business opportunities. However,
we cannot assure you that any new license or acquisitions will be consummated. Gross profit margins were 49% for both the three and nine-month periods ended September 30, 2003, as compared to
44% and 46% for the three and nine-month periods ended September 30, 2002. Throughout 2003 prestige product sales
growth out paced mass market sales growth and in the current third quarter, prestige product sales represented 75% of
net sales, which is the primary reason for the gains in gross margin. Selling, general and administrative expenses aggregated $19.9 million for the three months ended September 30, 2003,
as compared to $11.4 million for the corresponding period of the prior year. Selling, general and administrative expenses
aggregated $47.9 million for the nine months ended September 30, 2003, as compared to $30.5 million for the
corresponding period of the prior year. As a percentage of sales, selling, general and administrative expenses were 35% for both the three and nine month periods ended September 30, 2003, as compared to 31% and 33%, respectively, for
the 2002 periods. Promotion and advertising are prerequisites for sales of prestige products, which account for over 75% of our net sales.
Accordingly, we develop a comprehensive marketing and promotional program to support our growing portfolio of
prestige fragrance and cosmetic brands and to build upon each brand's awareness. In addition, recent increases in certain
fixed costs, such as insurance, rent and wages, are expected to cause a slight rise in selling, general and administrative
expenses as a percentage of sales throughout 2003. Interest expense was $56,000 and $223,000 for the three and nine months ended September 30, 2003, as compared to
$90,000 and $340,000 for the corresponding periods of the prior year. We use the credit lines available to us, as needed,
to finance our working capital needs. We reported a gain on foreign currency of $489,000 and $344,000, for the three and nine months ended September 30,
2003, as compared to a loss of $16,000 and $74,000 for the corresponding periods of the prior year. Occasionally, we
enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency
commitments. Our effective income tax rate was 35% for both the three months ended September 30, 2003 and September 30, 2002.
Our effective income tax rate was 35% for the nine months ended September 30, 2003, as compared to 36% for the
corresponding period of the prior year. The small decline in our effective tax rate is the result of slightly lower foreign
tax rates. Net income increased 74% to $4.7 million for the three months ended September 30, 2003, as compared to $2.7 million
for the corresponding period of the prior year. Net income increased 53% to $10.1 million for the nine months ended
September 30, 2003, as compared to $6.6 million for the corresponding period of the prior year. Diluted earnings per share increased 64% to $0.23 for the three months ended September 30, 2003, as compared to $0.14
for the corresponding period of the prior year. Diluted earnings per share increased 55% to $0.51 for the nine months
ended September 30, 2003, as compared to $0.33 for the corresponding period of the prior year. Weighted average shares outstanding aggregated 19.0 million for both the three and nine-month periods ended September
30, 2003, as compared to 18.8 million for both the three and nine-month periods ended September 30, 2002. On a diluted
basis, average shares outstanding were 20.2 million and 20.0 million for the three and nine-month periods ended
September 30, 2003, respectively, as compared to 19.9 million and 20.0 million for the three and nine-month periods
ended September 30, 2002, respectively. Liquidity and Capital Resources Profitable operating results continue to strengthen our financial position. At September 30, 2003, working capital
aggregated $103 million and we had a working capital ratio of almost 3 to 1. Cash and cash equivalents aggregated $42
million and our net book value was $5.03 per outstanding share as of September 30, 2003. Furthermore, we had no long-term debt. Our short-term financing requirements are expected to be met by available cash at September 30, 2003, cash generated
by operations and short-term credit lines provided by domestic and foreign banks. Since December 2002, we have
increased our short-term borrowings by approximately $4.5 million in order to finance our sales growth. The principal
credit facilities for 2003 are a $12.0 million unsecured revolving line of credit provided by a domestic commercial bank
and approximately $12.0 million in credit lines provided by a consortium of international financial institutions. Cash used in operating activities aggregated $0.7 million for the nine months ended September 30, 2003 as compared
to cash provided by operating activities of $2.0 million for the corresponding period of the prior year. Accounts
receivable and inventories were up 52% and 16%, respectively, as compared to December 31, 2002. These increases
are very reasonable considering the 54% sales increase for the three months ended September 30, 2003 and the inventory
buildup needed to support our higher sales base. Cash provided by operating activities continues to be the primary source
of funds to finance operating needs and investments in new ventures. Commencing in March 2002, our Board of Directors authorized our first cash dividend of $.06 per share, approximately
$1.1 million per annum, payable $.015 per share quarterly. In March 2003, our Board of Directors increased the cash
dividend to $.08 per share, approximately $1.5 million per annum, payable $.02 per share on a quarterly basis. This
increased cash dividend represents a small part of our cash position and is not expected to have any significant impact
on our financial position. We believe that funds generated from operations, supplemented by our present cash position and available credit
facilities, 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 have not had a significant impact on operating results
for the three months ended September 30, 2003. Discussion of Critical Accounting Policies We make estimates and assumptions in the preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results could differ significantly from those
estimates under different assumptions and conditions. We believe that the following discussion addresses our most
critical accounting policies, which are those that are most important to the portrayal of our financial condition and results
of operations and which require our management's most difficult and subjective judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain. The following is a brief discussion of the more
critical accounting policies that we employ. Revenue Recognition We sell our products to department stores, perfumeries, mass market retailers, supermarkets and domestic and
international wholesalers and distributors. Sales of such products by domestic subsidiaries are denominated in U.S.
dollars and sales of such products by foreign subsidiaries are primarily denominated in either Euros or U.S. dollars. Accounts receivable reflect the granting of credit to these
customers. We generally grant credit based upon analysis of the customer's financial position and previously established buying patterns. We do not generally bill customers for shipping
and handling costs and, accordingly, classify such costs as selling and administrative expenses. Revenues are recognized
when merchandise is shipped and the risk of loss passes to the customer. Net sales are comprised of gross revenues less
returns and trade discounts and allowances. We do not generally allow customers to return their unsold products. However, on a case-by-case basis we occasionally
allow customer returns. We regularly review and revise, as deemed necessary, our estimate of reserves for future sales
returns based primarily upon historic trends and relevant current data. We record estimated reserves for sales returns as
a reduction of sales, cost of sales and accounts receivable. Returned products are recorded as inventories and are valued
based on estimated realizable value. The physical condition and marketability of returned products are the major factors
we consider in estimating realizable value. Actual returns, as well as estimated realizable values of returned products,
may differ significantly, either favorably or unfavorably, from estimates if factors such as economic conditions, inventory
levels or competitive conditions differ from expectations. Promotional Allowances We have various performance-based arrangements with retailers to reimburse them for all or a portion of their
promotional activities related to our products. These arrangements primarily allow customers to take deductions against
amounts owed to us for product purchases. Estimated accruals for promotions and co-operative advertising programs are recorded in the period in which the related
revenue is recognized. We review and revise the estimated accruals for the projected costs for these promotions. Actual
costs incurred may differ significantly, either favorably or unfavorably, from estimates if factors such as the level and
success of the retailers' programs or other conditions differ from our expectations. Inventories Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first-out method.
We record adjustments to the cost of inventories based upon our sales forecast and the physical condition of the
inventories. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual
requirements if future economic conditions or competitive conditions differ from our expectations. Equipment Equipment, which includes tools and molds, is recorded at cost and is depreciated on a straight-line basis over the
estimated useful lives of such assets. Changes in circumstances such as technological advances, changes to our business
model or changes in our capital spending strategy can result in the actual useful lives differing from our estimates. In
those cases where we determine that the useful life of equipment should be shortened, we would depreciate the net book
value in excess of the salvage value, over its revised remaining useful life, thereby increasing depreciation expense.
Factors such as changes in the planned use of equipment could result in shortened useful lives. Other Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of any such asset may not be recoverable. If the sum of the undiscounted cash flows (excluding interest) is less
than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds
the fair value of the asset. The estimate of undiscounted cash flow is based upon, among other things, certain assumptions
about expected future operating performance. Our estimates of undiscounted cash flow may differ from actual cash flow
due to, among other things, economic conditions, changes to our business model or changes in consumer acceptance of
our products. In those cases where we determine that the useful life of other long-lived assets should be shortened, we
would depreciate the net book value in excess of the salvage value (after testing for impairment as described above), over
the revised remaining useful life of such asset thereby increasing amortization expense. Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK General We address certain financial exposures through a controlled program of risk management that primarily consists of the
use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts in order
to reduce the effects of fluctuating foreign currency exchange rates. We do not engage in the trading of foreign currency
forward exchange contracts or interest rate swaps. Foreign Exchange Risk Management We periodically enter into foreign currency forward exchange contracts to hedge exposure related to receivables
denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a foreign
currency. We enter into these exchange contracts for periods consistent with our identified exposures. The purpose of
the hedging activities is to minimize the effect of foreign exchange rate movements on the receivables and cash flows
of Inter Parfums, S.A., our French subsidiary, whose functional currency is the Euro. All foreign currency contracts are
denominated in currencies of major industrial countries and are with large financial institutions, which are rated as strong
investment grade. All derivative instruments are required to be reflected as either assets or liabilities in the balance sheet measured at fair
value. Generally, increases or decreases in fair value of derivative instruments will be recognized as gains or losses in
earnings in the period of change. If the derivative is designated and qualifies as a cash flow hedge, the changes in fair
value of the derivative instrument will be recorded in other comprehensive income. Before entering into a derivative transaction for hedging purposes, we determine that the change in the value of the
derivative will effectively offset the change in the fair value of the hedged item from a movement in foreign currency
rates. Then, we measure the effectiveness of each hedge throughout the hedged period. Any hedge ineffectiveness is
recognized in the income statement. We believe that our risk of loss as the result of nonperformance by any of such financial institutions is remote and in any
event would not be material. The contracts have varying maturities with none exceeding one year. Costs associated with
entering into such contracts have not been material to our financial results. At September 30, 2003, we had foreign
currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $20.0 million and GB
Pounds 8.0 million. Item 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-14(c)) as of the end of the period
covered by this quarterly report on Form 10-Q (the "Evaluation Date"). Based on their review and evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, our Company's disclosure
controls and procedures were adequate and effective to ensure that material information relating to our Company and
its consolidated subsidiaries would be made known to them by others within those entities, so that such material
information is recorded, processed and reported in a timely manner, particularly during the period in which this quarterly
report on Form 10-Q was being prepared, and that no changes were required at this time. Changes in Internal Controls There were no significant changes in our Company's internal controls or in other factors that could significantly affect
our internal controls after the Evaluation Date, or any significant deficiencies or material weaknesses in such internal
controls requiring corrective actions. As a result, no corrective actions were taken. Part II. Other Information Items 1, 3 and 4 are omitted as they are either not applicable or have been included in Part I. Item 2. Changes in Securities and Use of Proceeds The information contained in note 7 at page 7 relating to the exercise of outstanding stock options is incorporated by
reference herein. The transactions were exempt from the registration requirements of Section 5 of the Securities Act
under Sections 4(2) and 4(6) of the Securities Act. The option holders agreed to purchase the common stock for
investment and not for resale to the public. Item 5. Other Information In accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002, our Company is responsible for disclosing the "non-audit services" to be performed by our auditors
that were approved by our Company's Audit Committee during the quarterly period covered by this report. Non-audit
services are defined in the law as services other than those provided in connection with an audit or a review of the
financial statements of the Company. During the quarterly period covered by this report, the Audit Committee did not authorize any non-audit services to be
performed by our auditors. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: The following documents are filed herewith:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
of 1934 for the quarterly period ended September 30, 2003.
1934 for the transition period from ___________to ________.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization) Identification No.)
(Address of Principal Executive Offices) (Zip Code)
(Registrants telephone number, including area code)
Part I. Financial Information
September 30, 2003 (unaudited)
and December 31, 2002 (audited)
the Three and Nine Months Ended
September 30, 2003 (unaudited)
and September 30, 2002 (unaudited)
for the Nine Months Ended
September 30, 2003 (unaudited) and
September 30, 2002 (unaudited)
Financial Condition and Results of Operations
About Market Risk
Page Number
2
3
4
8
14
2003
December 31,
2002
Current assets:
Cash and cash equivalents
$ 41,922,984
$ 38,289,774 Account receivable, net
67,564,072
41,232,233 Inventories
39,945,446
32,197,654 Receivables, other
2,152,147
1,211,010 Other current assets
1,648,652
2,122,181 Income tax receivable
1,231,299
2,014,274 Deferred tax asset
Total current assets
155,173,000
118,165,540
Equipment and leasehold improvements, net
4,811,048
4,212,706
Intangible assets, net
6,300,058
6,745,090
Other assets
Current liabilities:
Loans payable, banks
$ 6,289,044
$ 1,794,218 Accounts payable
24,255,748
20,008,011 Accrued expenses
18,662,344
10,733,407 Income taxes payable
2,736,385
1,518,484 Dividends payable
Total current liabilities
Deferred tax liability
Minority interest
Shareholders' equity:
Common stock, $.001 par; authorized
30,000,000 share; outstanding 19,028,042
and 18,976,207 shares at September 30, 2003 and
December 31, 2002, respectively
19,028
18,976Additional paid-in capital
33,666,598
33,440,670 Retained earnings
84,045,997
75,062,624 Accumulated other comprehensive income
4,227,511
(1,394,444) Treasury stock, at cost, 7,281,098 and
7,305,609 shares at September 30, 2003 and
December 31, 2002, respectively
(26,269,211)
(26,212,797)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Net sales
$ 57,401,472
$ 37,373,822
$ 136,357,796
$ 93,234,277
Cost of sales
Gross margin
28,296,848
16,459,967
66,811,250
42,973,678
Selling, general and administrative
Income from operations
Other charges (income):
Interest
55,814
90,417
223,138
339,858 Loss on foreign currency:
(489,073)
16,165
(344,226)
73,574 Interest and dividend (income)
(182,508)
(107,323)
(639,494)
(437,244) Loss on subsidiary's issuance of
stock
154,798
5,382
Income before income taxes
9,037,109
5,012,938
19,468,959
12,446,526
Income taxes
Net income before minority interest
5,860,286
3,246,129
12,649,916
8,025,512
Minority interest in net income
of consolidated subsidiary
1,176,488
554,802
2,526,370
1,397,995
Net income
Net income per common share:
Basic
$0.25
$0.14
$0.53
$0.35 Diluted
Number of common shares
outstanding:
Basic
19,024,081
18,780,558
19,000,376
18,763,817 Diluted
Nine months ended
September 30,
Operating activities:
Net income
$ 10,123,546
$ 6,627,517 Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization
2,087,873
1,498,095 Minority interest in net income of consolidated subsidiary
2,526,370
1,397,995 Deferred tax provision
390,014
560,000 (Gain) on sale of trademark
(85,459) Loss on subsidiary's issuance of stock
155,960
5,382 Increase (decrease) in cash from changes in:
Accounts receivable, net
(21,571,827)
(10,084,361) Inventories
(5,143,712)
(4,132,837) Other assets
(92,114)
(1,077,556) Accounts payable and accrued expenses
8,813,703
4,977,182 Income taxes payable
Net cash provided by (used in) operating activities
Investing activities:
Purchase of equipment and leasehold improvements
(1,599,434)
(986,443) Trademark acquisitions
(3,225,199) Proceeds from the sale of trademark
155,126
Net cash (used in) investing activities
Financing activities:
Increase in loan payable, bank
4,180,100
3,384,542 Proceeds from sale of stock of subsidiary
356,480
5,573 Proceeds from exercise of options
93,718
268,579 Dividends paid
(1,047,326)
(572,200) Dividends paid to minority interest
(409,109)
(263,718) Purchases of treasury stock
(64,152)
Net cash provided by financing activities
Effect of exchange rate changes on cash
Increase in cash and cash equivalents
3,633,210
2,434,448
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest
$ 561,000
$ 274,000 Income taxes
4,905,000
591,000
Nine months ended
September 30,
Comprehensive Income:
Net income
$ 10,123,546
$ 6,627,517 Other comprehensive income, net of tax:
Foreign currency translation adjustment
5,504,758
3,951,812 loss on derivatives reclassified
Into earnings
96,268
55,797 Change in fair value of derivatives
Comprehensive income
Nine months ended
September 30,
Net Sales:
United States
$ 32,212,208
$ 29,301,840 Europe
104,428,588
64,037,437 Eliminations
Net Income:
United States
$ 1,835,605
$ 1,913,350 Europe
8,295,958
4,714,167 Eliminations
2003
2002
Raw materials and component parts
$ 13,951,468
$ 11,080,046 Finished goods
Nine months ended
September 30,
Reported net income
$ 10,123,546
$ 6,627,517 Stock-based employee compensation expense included in
reported net income, net of related tax effect
0
0Stock-based employee compensation determined under the
fair value based method, net of tax effect
(21,691)
(12,399)
Pro forma net income
$ 10,101,855
$ 6,615,118
Income per share, as reported:
Basic
$ 0.53
$ 0.35 Diluted
$ 0.51
$ 0.33
Pro forma net income per share:
Basic
$ 0.53
$ 0.35 Diluted
$ 0.51
$ 0.33
Exhibit No.
Description
10.97
Agreement dated August 8, 2003 between HSBC USA Bank and Jean
Philippe Fragrances, LLC
10.98
Burberry Licence Amendment dated 23 June 2003
31
Certifications required by Rule 13a-14(a)
32
Certification Required by Section 906 of the Sarbanes-Oxley Act
(b) We furnished the following Current Reports on Form 8-K:
(1) Date of event - October 9, 2003, reporting Items 7 and 12, and
(2) Date of event - November 5, 2003, reporting Items 7 and 12.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the 12 day of November 2003.
INTER PARFUMS,INC.
By: /s/Russell Greenberg
Executive Vice President and
Chief Financial Officer
Exhibit 31
CERTIFICATIONS
I, Jean Madar, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Inter Parfums, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 12, 2003
/s/ Jean Madar
Jean Madar
Chief Executive Officer
CERTIFICATIONS
I, Russell Greenberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Inter Parfums, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 12, 2003
/s/ Russell Greenberg
Russell Greenberg
Chief Financial Officer
Exhibit 32
CERTIFICATION
Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Inter Parfums, Inc., that the Quarterly Report of Inter Parfums, Inc. on Form 10-Q for the period ended September 30, 2003, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of Inter Parfums, Inc.
Date: November 12, 2003 By: /s/Jean Madar
Jean Madar
Chief Executive Officer
Date: November 12, 2003 By: /s/Russell Greenberg
Russell Greenberg
Executive Vice President,
Chief Financial Officer and
Principal Accounting Officer
A signed original of this written statement required by Section 906 has been provided to Inter Parfums, Inc. and will be retained by Inter Parfums, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 10.97
HSBC
August 8, 2003
Jean Philippe Fragrances, LLC.
551 Fifth Avenue
New York, N.Y. 10176
Attention Russell Greenberg, Chief Financial Officer/Executive Vice President
Ladies and Gentlemen:
We are pleased to confirm that we are extending to you a line of credit of up to an aggregate amount of $12,000,000 outstanding at any one time, which line may be used by your company for direct borrowings and acceptance and sight letters of credit exposure for working capital purposes provided, however, the outstanding amount as to which our Bank is liable, directly or contingently, on behalf of your company in respect of letter of credit and acceptance financings cannot in the aggregate at any one time exceed $2,500,000 and $2,500,000 respectively. This line is subject to the provisions set forth herein and in the other documents entered into in connection with this facility.
Borrowings under this line of credit shall be evidenced by a Demand Grid Note, a copy of which is enclosed. Under this facility borrowings may be made from time to time and shall be repayable on demand, but may be prepaid in whole or in part with accrued interest to the date of prepayment. Any amounts outstanding shall bear interest, payable monthly in arrears, at a variable rate per annum equal to 0% above our Bank's Reference Rate established from time to time, all as more fully set forth in the Demand Grid Note.
Or, at your option, you may borrow under a LIBOR Pricing Revolving Note up to the maximum amount of $12,000,000 in $100,000 increments, provided however, the amount outstanding under LIBOR Pricing Revolving Notes is no less than $500,000, with advances priced at your option of one month, two months, three months or six months LIBOR plus 1.75% for each LIBOR rate advance and subject to the terms of the LIBOR Pricing Revolving Note; a copy of the LIBOR Pricing Revolving Note is attached herewith. Please note that the advances under the LIBOR Pricing Revolving Note may be prepaid, but only subject to the terms and conditions set forth in that note.
Each letter of credit issued for your account shall be issued only pursuant to our standard form of application for commercial letter of credit (the "Application"), as executed by you from time to time. You shall pay a fee of 1/8 of 1% when we issue any letter of credit for your account and each time we amend any such letter of credit. In addition, you shall pay a fee of l/8 of 1% of the face amount of any sight draft presented to us in accordance with the terms of any letter of credit we issue for your account. Such fee shall be payable when such draft is presented to us and honored by us, all as more fully set forth in the Application. Any amounts due to us from you under the Application shall bear interest payable on demand at a variable rate per annum equal to the rate from time to time in effect under the Demand Grid Note. At our option such amounts may be deemed additional advances evidenced by and repayable in accordance with the Demand Grid Note.] In place of the foregoing demand reimbursement obligation, we may from time to time accept your time drafts of up to 180 days presented to us by you. When such time draft is accepted by us it will be discounted from its date of maturity at a rate per annum equal to 2% plus our acceptance rate for commercial drafts or bills of exchange of comparable amounts and maturities.
Your obligations under this line of credit shall be guaranteed by your Parent, Inter Parfums, Inc.
This facility may be utilized by you for the period ending July 31, 2004; provided, however, THE CONTINUING AVAILABILITY OF THIS FACILITY IS AT ALL TIMES SUBJECT TO OUR CONTINUING SATISFACTION, AS DETERMINED BY OUR BANK IN ITS SOLE AND ABSOLUTE DISCRETION, WITH THE BUSINESS, AFFAIRS AND FINANCIAL CONDITION OF YOUR COMPANIES AND OF EACH GUARANTOR AND TO YOUR COMPLIANCE, AND THAT OF EACH OTHER PARTY EXECUTING AND DELIVERING DOCUMENTS TO US HEREUNDER OR OTHERWISE IN CONNECTION WITH THIS FACILITY, WITH THE TERMS AND PROVISIONS OF THIS LETTER AND EACH OF THE DOCUMENTS REFERRED TO HEREIN. In addition, the continuing availability of this facility is subject to your furnishing us, (i) within 120 days after the close of your fiscal year, with your audited financial statements certified by your independent certified public accountants as of the end of such period, including a balance sheet and related income statements; and (ii) such other information, including interim financial statements, concerning your business, affairs or financial condition as we may from time to time request.
All payments of principal, interest and fees payable by you under this facility shall be made in immediately available funds at our office at 452 Fifth Avenue, New York, New York 10018 and may be charged to any account you maintain with us.
Our agreement to extend to you this facility, on the terms set forth herein, is further subject to our receipt in form satisfactory to us of (a) a certified copy of resolutions of your Board of Directors authorizing your execution, delivery and performance of this agreement (and the documents hereinafter referred to; (b) signature cards for your authorized signatories; (c) an executed copy of our Demand Grid Note signed by your duly authorized officer on your behalf; (d) executed copy of our standard form of Guarantee signed by Inter Parfums, Inc.
NO AMENDMENT, MODIFICATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT NOR CONSENT TO ANY DEPARTURE BY OUR BANK THEREFROM SHALL BE EFFECTIVE, IRRESPECTIVE OF ANY COURSE OF DEALING, UNLESS THE SAME SHALL BE IN WRITING AND SIGNED BY OUR BANK AND THEN SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH GIVEN.
This agreement shall be governed by and construed in accordance with the laws of the State of New York. Please note that to the extent any of the terms or provisions of this agreement conflict with those contained in the Demand Grid Note or any of the above-mentioned documents, the terms and provisions of such Note and of such other documents shall govern.
YOU AND OUR BANK AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY MAY BE INITIATED AND PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN NEW YORK COUNTY, NEW YORK.
YOU FURTHER AGREE THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM OR CONTROVERSY BETWEEN OR AMONG YOU AND US WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL, AT OUR ELECTION, WHICH ELECTION MAY BE MADE AT ANY TIME PRIOR TO THE COMMENCEMENT OF A JUDICIAL PROCEEDING BY OUR BANK, OR IN THE EVENT OF A JUDICIAL PROCEEDING INSTITUTED BY YOU AT ANY TIME PRIOR TO THE LAST DAY TO ANSWER AND/OR RESPOND TO A SUMMONS AND/OR COMPLAINT MADE BY YOU, BE RESOLVED BY ARBITRATION IN NEW YORK, NEW YORK IN ACCORDANCE WITH THE PROVISIONS OF THIS PARAGRAPH AND SHALL, AT THE ELECTION OF OUR BANK, INCLUDE ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH (I) THIS AGREEMENT, THE DEMAND GRID NOTE, OR ANY OTHER RELATED AGREEMENTS OR INSTRUMENTS, (II) ALL PAST, PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES, (III) ANY TRANSACTION CONTEMPLATED HEREBY AND ALL PAST, PRESENT AND FUTURE TRANSACTIONS INVOLVING THE PARTIES AND (IV) ANY ASPECT OF THE PAST, PRESENT OR FUTURE RELATIONSHIP OF THE PARTIES. We may elect to require arbitration of any Dispute with us without thereby being required to arbitrate all Disputes between you and us. Any such Dispute shall be resolved by binding arbitration in accordance with Article 75 of the New York Civil Practice Law and Rules and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). In the event of any inconsistency between such Rules and these arbitration provisions, these provisions shall supersede such Rules. All statutes of limitations which would otherwise be applicable shall apply to any arbitration proceeding under this paragraph. In any arbitration proceeding subject to these provisions, the arbitration panel (the "arbitrator") is specifically empowered to decide (by documents only, or with a hearing, at the arbitrator's sole discretion) pre-hearing motions which are substantially similar to pre-hearing motions to dismiss and motions for summary adjudication. In any such arbitration proceeding, the arbitrator shall not have the power or authority to award punitive damages to any party.
Judgment upon the award rendered may be entered in any court having jurisdiction. Whenever an arbitration is required, the parties shall select an arbitrator in the manner provided in this paragraph. No provision of, nor the exercise of any rights under, this paragraph shall limit the right of any party (i) to foreclose against any real or personal property collateral through judicial foreclosure, by the exercise of a power of sale under a deed of trust, mortgage or other security agreement or instrument, pursuant to applicable provisions of the Uniform Commercial Code, or otherwise pursuant to applicable law, (ii) to exercise self help remedies including but not limited to setoff and repossession, or (iii) to request and obtain from a court having jurisdiction before, during or after the pendency of any arbitration, provisional or ancillary remedies and relief including but not limited to injunctive or mandatory relief or the appointment of a receiver. The institution and maintenance of an action or judicial proceeding for, or pursuit of, provisional or ancillary remedies or exercise of self help remedies shall not constitute a waiver of our right, even if we are the plaintiff, to submit the Dispute to arbitration if we would otherwise have such right. We may require arbitration of any Dispute(s) concerning the lawfulness, unconscionableness, propriety, or reasonableness of any exercise by us of our right to
take or dispose of any collateral or our exercise of any other right in connection with collateral including, without limitation, judicial foreclosure, exercising a power of sale under a deed of trust or mortgage, obtaining or executing a writ of attachment, taking or disposing of property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code or otherwise as permitted by applicable law, notwithstanding any such exercise by us. Whenever an arbitration is required under this paragraph, the arbitrator shall be selected, except as otherwise herein provided, in accordance with the Commercial Arbitration Rules of the AAA. A single arbitrator shall decide any claim of $100,000 or less and he or she shall be an attorney with at least five years' experience. Where the claim of any party exceeds $100,000, the Dispute shall be decided by a majority vote of three arbitrators, at least two of whom shall be attorneys (at least one of whom shall have not less than five years' experience representing commercial banks). In the event of any Dispute governed by this paragraph, each of the parties shall, subject to the award of the arbitrator, pay an equal share of the arbitrator's fees. The arbitrator shall have the power to award recovery of all costs and fees (including attorneys' fees, administrative fees, arbitrator's fees, and court costs) to the prevailing party.
ANYTHING IN THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY TO THE CONTRARY NOTWITHSTANDING, THE ENUMERATION IN THIS AGREEMENT, THE NOTE OR IN SUCH OTHER DOCUMENTS OF SPECIFIC OBLIGATIONS TO OUR BANK AND/OR CONDITIONS TO THE AVAILABILITY OF THIS FACILITY AND THE NOTE SHALL NOT BE CONSTRUED TO QUALIFY, DEFINE OR OTHERWISE LIMIT OUR RIGHT, POWER OR ABILITY, AT ANY TIME, UNDER APPLICABLE LAW, TO MAKE DEMAND FOR PAYMENT OF THE ENTIRE OUTSTANDING PRINCIPAL OF AND INTEREST DUE UNDER THIS FACILITY AND THE NOTE OR OUR RIGHT NOT TO MAKE ANY EXTENSION OF CREDIT UNDER THIS FACILITY AND YOU AGREE THAT YOUR BREACH OF OR DEFAULT UNDER ANY SUCH ENUMERATED OBLIGATIONS OR CONDITIONS IS NOT THE ONLY BASIS FOR DEMAND TO BE MADE OR FOR A REQUEST FOR AN EXTENSION OF CREDIT TO BE DENIED, AS YOUR OBLIGATION TO MAKE PAYMENT SHALL AT ALL TIMES REMAIN A DEMAND OBLIGATION. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, THIS AGREEMENT DOES NOT CREATE A COMMITMENT OR OBLIGATION TO LEND BY THE BANK AND YOU ACKNOWLEDGE THAT THE BANK HAS NO OBLIGATION TO LEND.
EACH OF YOU AND WE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY. YOU ALSO HEREBY WAIVE THE RIGHT TO INTERPOSE ANY DEFENSE BASED UPON ANY CLAIM OF LACHES OR SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, ANY OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE, AND ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.
If this agreement is acceptable to you, please sign and return to us one copy each of the enclosed copy of this letter and the other documents referred to above on or before September 2, 2003.
Very truly yours,
HSBC USA Bank
By: /s/ Andrew Ross
Title: First Vice President
Agreed to and accepted:
Jean Philippe Fragrances, LLC.
By: /s/ Russell Greenberg
Title: Executive Vice President
Exhibit 10.98
BURBERRY
Our Ref:
Date: 23.6.03
Inter Parfums S.A.
4-6 Rond Point Des Champs-Elysées
75008 Paris
France
For the attention of Philippe Benacin
Inter Parfums, S.A.
551 Fifth Avenue
New York
NY 10176 - 0198
USA
For the attention of Jean Madar
Dear Sirs
Licence Agreement between (1) Burberry Limited (formerly Burberrys Limited) ("Burberry") (2) Inter Parfums S.A. and (3) Inter Parfums, Inc (formerly Jean Philippe Fragrances, Inc.) (the "Licensee") dated 15 July 1993 (as amended) ("the Agreement")
We refer to the above Agreement which shall be amended as set out below.
The following clauses shall be included in the Agreement with immediate effect:
"The Licensee shall conform and comply with, and shall use all reasonable commercial efforts to procure that all its Approved Contractors agree to conform and comply with in all material respects, all relevant international and national conventions and all relevant laws, rules and regulations relating to the employment of labour (in particular without limitation child and forced labour) and employees' terms and conditions of employment and comply with and procure that all Approved Contractors agree to comply with general environmental responsibilities and best practices.
The Licensee warrants that it has conformed and complied with all relevant international and national conventions and all relevant laws, rules and regulations relating to the employment of labour (in particular without limitation child and forced labour) and employees' terms and conditions of employment. The Licensee further warrants that it has no actual knowledge that any of its Approved Contractors have not complied in all material respects with such conventions, laws, rules and regulations relating to the employment of labour (in particular without limitation child and forced labour) and employees' terms and conditions of employment.
Breach by the Licensee
In the event that the Licensee :
(a) commits a breach (which is not a material breach) of any of the above clauses which is capable of remedy and fails to remedy such breach within 30 days of being given notice by Burberry to do so; or
(b) commits a material breach of any of the above clauses, and fails to remedy such breach within 30 days of being given notice by Burberry to do so,
Burberry shall be entitled to terminate the Agreement forthwith on written notice.
Breach by an Approved Contractor
In the event that an Approved Contractor :
(a) commits a breach (which is not a material breach) of any of the above clauses which is capable of remedy, the Licensee shall use all reasonable commercial efforts to procure a remedy. If the Approved Contractor fails to remedy such breach within 30 days of the Licensee being given notice by Burberry to effect a remedy, the Licensee shall terminate its relationship with the Approved Contractor as it relates to Licensed Products after the Approved Contractor has completed any work in progress, or
(b) commits a material breach of any of the above clauses whether or not such breach is remediable, the Licensee shall forthwith terminate its relationship with the Approved Contractor as it relates to Licensed Products, and the Approved Contractor shall cease any work in progress. Notwithstanding anything to the contrary contained in this Agreement, in the event that an Approved Contractor commits a material breach as hereinabove provided, then in any such event, the Licensee's termination of such Approved Contractor shall be the sole remedy of Burberry for such material breach. For the avoidance of doubt, it is clearly understood that any such material breach by an Approved Contractor shall not constitute a breach on behalf of the Licensee, or provide any right to Burberry to terminate the Agreement."
In this letter all defined terms, where applicable, shall have the same meanings as in the Agreement unless otherwise defined in this letter. For the avoidance of doubt this letter shall take effect as an amendment to the Agreement but in all other respects the Agreement shall continue in full force and effect for its current term and this letter and the Agreement shall constitute the entire Agreement between the parties in respect of its subject matter.
Please acknowledge your acceptance of the terms of this letter by signing and returning all three copies of this letter. The terms of this letter shall not take effect until this letter has been signed by Burberry.
Yours faithfully
/s/ [unintelligible]
For and on behalf of
BURBERRY LIMITED
I for an on behalf of Inter Parfums S.A. acknowledge receipt of your letter and accept and agree to its terms as set out above.
/s/ Philippe Benacin
For and on behalf of
INTER PARFUMS S.A.
I for an on behalf of Inter Parfums, Inc acknowledge receipt of your letter and accept and agree to its terms as set out above.
/s/ Philippe Benacin
For and on behalf of
INTER PARFUMS, INC