SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(MARK ONE)
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act |
OR
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of |
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
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Identification No.) |
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(Address of Principal Executive Offices) (Zip Code) |
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(Registrants telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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:
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
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Accelerated filer ☐ |
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Non-accelerated filer ☐ (Do not check if a smaller reporting company) |
Smaller reporting company |
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Emerging Growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
At November 8, 2021, there were shares of common stock, par value $.001 per share, outstanding.
INTER PARFUMS, INC. AND SUBSIDIARIES
INDEX
INTER PARFUMS, INC. AND SUBSIDIARIES
Part I. Financial Information
Item 1. Financial Statements
In our opinion, the accompanying unaudited consolidated 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 (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued by filing with the SEC. These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2020, included in our annual report filed on Form 10-K.
The results of operations for the nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the entire fiscal year.
Page 1
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
(Unaudited)
| ASSETS | ||||||||
| September
30, 2021 | December
31, 2020 | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Receivables, other | ||||||||
| Other current assets | ||||||||
| Income taxes receivable | ||||||||
| Total current assets | ||||||||
| Buildings, equipment and leasehold improvements, net | ||||||||
| Right-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 | ||||||||
| Total current liabilities | ||||||||
| Long–term debt, less current portion | ||||||||
| Lease liabilities, less current portion | ||||||||
| Equity: | ||||||||
| Inter Parfums, Inc. shareholders’ equity: | ||||||||
| Preferred stock, $ par; authorized shares; issued | ||||||||
| Common stock, $ par; authorized shares; outstanding and shares at September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares at September 30, 2021 and December 31, 2020 | ( | ) | ( | ) | ||||
| Total Inter Parfums, Inc. shareholders’ equity | ||||||||
| Noncontrolling interest | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
See notes to consolidated financial statements.
Page 2
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2021 |
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2020 |
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2021 |
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2020 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling, general and administrative expenses |
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Impairment loss |
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Income from operations |
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Other expenses (income): |
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Interest expense |
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(Gain) loss on foreign currency |
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( |
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( |
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( |
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Interest income |
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( |
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Other income expense |
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( |
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( |
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| Other expenses (income)
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( |
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Income before income taxes |
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Income taxes |
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Net income |
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Less: Net income attributable to the noncontrolling interest |
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Net income attributable to Inter Parfums, Inc. |
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$ |
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$ |
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$ |
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$ |
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Earnings per share: |
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Net income attributable to Inter Parfums, Inc. common shareholders: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding: |
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Basic |
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Diluted |
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Dividends declared per share |
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$ |
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$ |
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$ |
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See notes to consolidated financial statements.
Page 3
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2021 |
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2020 |
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2021 |
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2020 |
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Comprehensive income: |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income: |
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Net derivative instrument (loss), net of tax |
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( |
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( |
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( |
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Transfer from OCI into earnings |
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( |
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Translation adjustments, net of tax |
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( |
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( |
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Comprehensive income |
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Comprehensive income attributable to the noncontrolling interests: |
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Net income |
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Other comprehensive income (loss): |
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Net derivative instrument (loss), net of tax |
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( |
) |
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( |
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( |
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Translation adjustments, net of tax |
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( |
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( |
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Comprehensive income attributable to the noncontrolling interests |
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Comprehensive income attributable to Inter Parfums, Inc. |
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$ |
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$ |
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$ |
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$ |
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See notes to consolidated financial statements.
Page 4
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands)
(Unaudited)
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Nine months ended September 30, |
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2021 |
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2020 |
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Common stock, beginning and end of period |
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$ |
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$ |
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Shares issued upon exercise of stock options |
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Common stock, end of period |
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Additional paid-in capital, beginning of period |
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Shares issued upon exercise of stock options |
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Share-based compensation |
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Shares issued for license acquisition |
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Transfer of subsidiary shares purchased |
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Additional paid-in capital, end of period |
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Retained earnings, beginning of period |
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Net income |
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Dividends |
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Share-based compensation (adjustment) |
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Retained earnings, end of period |
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Accumulated other comprehensive loss, beginning of period |
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Foreign currency translation adjustment, net of tax |
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Transfer from other comprehensive income into earnings |
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Net derivative instrument loss, net of tax |
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Accumulated other comprehensive loss, end of period |
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Treasury stock, beginning and end of period |
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| Net income | ||||||||
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Noncontrolling interest, beginning of period |
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Net income |
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Foreign currency translation adjustment, net of tax |
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Net derivative instrument loss, net of tax |
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Share-based compensation (adjustment) |
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Transfer of subsidiary shares purchased |
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Dividends |
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Noncontrolling interest, end of period |
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| Total equity | ||||||||
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Total equity |
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$ |
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$ |
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See notes to consolidated financial statements.
Page 5
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Nine months ended September 30, |
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2021 |
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2020 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation and amortization |
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Provision for doubtful accounts |
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Noncash stock compensation |
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Share of income of equity investment |
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Impairment loss |
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Non-cash lease expense |
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Deferred tax provision (benefit) |
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Change in fair value of derivatives |
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Changes in: |
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Accounts receivable |
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( |
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Inventories |
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Other assets |
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Operating lease liabilities |
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( |
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Accounts payable and accrued expenses |
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Income taxes, net |
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Net cash provided by (used in) operating activities |
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( |
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|
Cash flows from investing activities: |
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|
|
Purchases of short-term investments |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sale of short-term investments |
|
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|
|
|
|
Purchase of equity investment |
|
|
|
|
|
|
( |
) |
|
Purchases of buildings, equipment and leasehold improvements |
|
|
( |
) |
|
|
( |
) |
|
Payment for intangible assets acquired |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
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|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
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|
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|
|
|
|
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|
Cash flows from financing activities: |
|
|
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|
|
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|
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from exercise of options |
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
( |
) |
|
|
( |
) |
|
Dividends paid to noncontrolling interest |
|
|
( |
) |
|
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( |
) |
|
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|
Net cash provided by (used in) financing activities |
|
|
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( |
) |
|
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|
Effect of exchange rate changes on cash |
|
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( |
) |
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|
|
|
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|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
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|
Cash and cash equivalents - beginning of period |
|
|
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|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
Cash and cash equivalents - end of period |
|
$ |
|
|
|
$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for: |
|
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|
|
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|
Interest |
|
$ |
|
|
|
$ |
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
Page 6
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
1. |
Significant Accounting Policies: |
The accounting policies we follow are set forth in the notes to our consolidated financial statements included in our Form 10-K, which was filed with the Securities and Exchange Commission for the year ended December 31, 2020.
|
2. |
Impact of COVID-19 Pandemic: |
A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States and France. In March 2020, the World Health Organization declared COVID-19 a pandemic.
In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. In all jurisdictions in which we operate we have been following guidance from authorities and health officials.
The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020.
Business significantly improved in the second half of 2020 and continued to improve in 2021, as retail stores reopened, and consumers increased online purchasing. While we expect this trend to continue, the introduction of variants of COVID-19 in various parts of the world has caused the temporary re-implementation of certain governmental restrictions in 2021, to prevent further spread of the virus. In addition, international air travel has remained curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. Lastly, the improved economy has put significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions have continued into the fourth quarter of 2021, at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of the year, by ordering well in advance of need and in larger quantities. Going forward, we aim to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We currently expect supply chain bottlenecks to begin lifting early in the new year. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic may have a material adverse effect on our results of our operations, financial position and cash flows through at least the end of 2021.
| 3. | Recent Agreements: |
Salvatore Ferragamo
In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license is effective from October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.
Page 7
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
With respect to the management and coordination of activities related to the license agreement, the Company will operate through a wholly-owned Italian subsidiary based in Florence, and all products will be produced in Italy.
Donna Karan and DKNY
In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor. In addition, a company owned by a member of our Board of Directors is to receive a fee of $0.3 million in connection with this license. The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2023.
French Tax Settlement
The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA (“IPSA”), our majority owned Paris-based subsidiary, does not, in and of itself, constitute a permanent establishment and therefore IPSA should pay French taxes on all or part of the profits of that entity.
In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby IPSA agreed to pay €
Building Acquisition - Future Headquarters in Paris
In April 2021, IPSA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.
The
$million purchase price is in line with market value and includes the complete renovation of the site. As of September 30,
2021, $131.2 million of the purchase price, including approximately $
Page 8
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The acquisition was financed by a
Anna Sui Corp.
In January 2021, we renewed our license agreement with Anna Sui Corp. for the creation, development and distribution of fragrance products through December 31, 2026, without any material changes in terms and conditions.
Rochas Fashion
Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $
|
4. |
Recent Accounting Pronouncements: |
There are no recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements.
| 5. | Inventories: |
|
Inventories consist of the following: |
|
|
|
|
|
|
|
|
(In thousands) |
|
|
September 30, |
|
|
December 31, |
|
|
|
|
|
2021 |
|
|
2020 |
|
|
Raw materials and component parts |
|
$ |
|
|
$ |
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
$ |
|
|
$ |
|
|
Page 9
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
6. |
Fair Value Measurement: |
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 September 30, 2021 |
|
|||||||
|
|
|
Total |
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Foreign currency forward exchange contracts accounted for using hedge accounting |
|
|
|
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|
Foreign currency forward exchange contracts not accounted for using hedge accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2020 |
|
|||||||
|
|
|
Total |
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Foreign currency forward exchange contracts not accounted for using hedge accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables, cash held in escrow, accounts payable and accrued expenses approximate fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value.
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.
Page 10
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
7. |
Derivative Financial Instruments: |
The Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based on the dollar offset methodology and excludes the portion of the fair value of the 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 as a gain or loss on foreign currency in the income statement. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses accumulated in other comprehensive income are reclassified to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated in other comprehensive income are reclassified to current-period earnings.
In connection with the April 2021 acquisition of the office building complex in Paris, € million (approximately million) of the purchase price was financed through a
Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial for both the nine months ended September 30, 2021 and 2020.
All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps as of September 30, 2021, resulted in a liability which is included in long-term debt on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at September 30, 2021, resulted in a liability and is included in accrued expenses on the accompanying balance sheet.
At September 30, 2021, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $
| 8. | 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 inception. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term.
Page 11
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend or terminate, depending on the lease. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date for the location in which the lease is held in determining the present value of lease payments.
As of September 30, 2021, the weighted average remaining lease term was years and the weighted average discount rate used to determine the operating lease liability was
In connection with the preparation of our consolidated financial statements for the three months ended June 30, 2021, we identified an error relating to the recognition of certain leases under ASC 842. The error impacted the lease right-of-use assets and lease liabilities, both of which were understated by approximately €
Maturities of lease liabilities subsequent to September 30, 2021, are as follows:
(In thousands)
|
2021 |
|
$ |
1,836 |
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
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|
2025 |
|
|
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|
|
Thereafter |
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Less imputed interest (based on 2.1% weighted-average discount rate) |
|
|
( |
) |
|
|
|
$ |
|
|
| 9. | Share-Based Payments: |
The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a to-year period. The fair value of shares vested during the nine months ended September 30, 2021 and 2020 aggregated $ and $, respectively. Compensation cost, net of 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 our policy to issue new shares upon exercise of stock options.
Page 12
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
|
|
Number of Shares |
|
Weighted Average Grant-Date Fair Value |
||||
|
Nonvested options – beginning of period |
|
|
|
|
$ |
|
||
|
Nonvested options granted |
|
|
|
|
$ |
|
||
|
Nonvested options vested or forfeited |
|
|
) |
|
$ |
|
||
|
Nonvested options – end of period |
|
|
|
|
$ |
|
||
Share-based payment expense decreased income before income taxes by $ and $ for the three and nine months ended September 30, 2021, respectively, as compared to $ and $ for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $ and $ for the three and nine months ended September 30, 2021, respectively, as compared to $ and $ for the corresponding periods of the prior year.
|
|
|
Shares |
|
|
Weighted Average |
|
||
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2021 |
|
|
|
|
$ |
|
||
|
Options granted |
|
|
|
|
|
|
||
|
Options forfeited |
|
|
) |
|
|
|
||
|
Options exercised |
|
|
) |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2021 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
Options exercisable |
|
|
|
|
$ |
|
||
|
Options available for future grants |
|
|
|
|
|
|
|
|
As of September 30, 2021, the weighted average remaining contractual life of options outstanding is years ( years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $ and $, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $.
|
(In thousands) |
|
September 30, 2021 |
|
September 30, 2020 | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from stock options exercised |
|
$ |
|
|
|
$ |
|
|
|
Tax benefits |
|
|
|
|
|
|
|
|
|
Intrinsic value of stock options exercised |
|
|
|
|
|
|
|
|
Page 13
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
|
|
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average expected stock-price volatility |
|
|
|
% |
|
|
|
% |
|
Weighted average expected option life |
|
|
|
|
|
|
||
|
Weighted average risk-free interest rate |
|
|
|
% |
|
|
|
% |
|
Weighted average dividend yield |
|
|
|
% |
|
|
|
% |
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 increase as the earnings of the Company and its stock price continue to increase.
In December 2018, IPSA approved a plan to grant an aggregate of shares of its stock to employees with no performance condition requirement, and an aggregate of shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2022. In order to avoid dilution of the Company’s ownership of IPSA, all shares to be distributed pursuant to the plan will be pre-existing shares of IPSA, purchased in the open market by IPSA in prior years.
The fair value of the
grant had been determined based on the quoted stock price of IPSA shares as reported by the NYSE Euronext on the date of
grant. In June 2020, the performance conditions were modified effecting 96 employees. As of September 30, 2021, the number of
shares to be distributed, after forfeited shares, increased to resulting
from the modification and stock split. The increase in shares anticipated to be distributed were transferred from treasury
shares at the IPSA level.
|
10. |
Net Income Attributable to Inter Parfums, Inc. Common Shareholders: |
Net income attributable to Inter Parfums, Inc. per common share (“basic EPS”) is computed by dividing net income attributable to Inter Parfums, Inc. by the weighted average number of shares outstanding. Net income attributable to Inter Parfums, Inc. per share assuming dilution (“diluted EPS”), is computed using the weighted average number of shares outstanding, plus the incremental shares outstanding assuming the exercise of dilutive stock options using the treasury stock method.
Page 14
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
| (In thousands) | Three
months ended September 30, | Nine
months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income attributable to Inter Parfums, Inc. | $ | $ | $ | $ | ||||||||||||
| 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 | ||||||||||||||||
Not included in the above computations are the effect of antidilutive potential common shares which consist of outstanding options to purchase and million shares of common stock for both the three and nine months ended September 30, 2021, as compared to and million shares of common stock for the three and nine months ended September 30, 2020, respectively.
Page 15
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
11. | Segment and Geographic 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 operations and United States operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows:
| (In thousands) | Three
months ended September 30, | Nine
months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net sales: | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| Europe | ||||||||||||||||
| Eliminations | ( | ) | ( | ) | ( | ) | ||||||||||
| $ | $ | $ | $ | |||||||||||||
| Net income attributable to Inter Parfums, Inc.: | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| Europe | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Total Assets: | ||||||||
| United States | $ | $ | ||||||
| Europe | ||||||||
| Eliminations | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 12. | Reconciliation of Cash and Cash Equivalents to the Statement of Cash Flows: |
The following table summarizes cash and cash equivalents as of September 30, 2021:
| September 30, 2021 | ||||
| Cash and cash equivalents per balance sheet | $ | |||
| Cash held in escrow included in other assets (see note 3) | ||||
| Cash and cash equivalents per statement of cash flows | $ | |||
| 13. | Reclassifications: |
Certain prior year’s amounts in the accompanying consolidated statements of cash flows have been reclassified to conform to current period presentation.
Page 16
INTER PARFUMS, INC. AND SUBSIDIARIES
|
Item 2: |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward Looking Information
Statements in this report which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases, you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. You should not rely on forward-looking statements because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and “Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2020, and the reports Inter Parfums files from time to time with the Securities and Exchange Commission. Inter Parfums does not intend to and undertakes no duty to update the information contained in this report.
Overview
We operate in the fragrance business, and manufacture, market and distribute a wide array of fragrances and fragrance related products. We manage our business in two segments, European based operations and United States based operations. Certain prestige fragrance products are produced and marketed by our European operations through our 73% owned subsidiary in Paris, IPSA, which is also a publicly traded company as 27% of IPSA shares trade on the NYSE Euronext.
We produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 79% and 80% of net sales for the nine months ended September 30, 2021 and 2020, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Paul Smith, S.T. Dupont, Repetto, Rochas and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world.
Through our United States operations, we also market fragrance and fragrance related products. United States operations represented 21% and 20% of net sales for the nine months ended September 30, 2021 and 2020, 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, Ferragamo, Graff, GUESS, Hollister, MCM and Oscar de la Renta brands.
Page 17
INTER PARFUMS, INC. AND SUBSIDIARIES
Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Montblanc, Coach, Jimmy Choo and GUESS brand names. As a percentage of net sales, product sales for the Company’s largest brands were as follows:
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
|
|
|
|
|
|
|
|
Montblanc |
|
|
20 |
% |
|
|
22 |
% |
|
Jimmy Choo |
|
|
19 |
% |
|
|
16 |
% |
|
Coach |
|
|
17 |
% |
|
|
18 |
% |
|
GUESS |
|
|
10 |
% |
|
|
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 retailers in France as well as through our own distribution subsidiaries in Spain and the United States.
We grow our business in two distinct ways. First, we grow by adding new brands to our portfolio, either through new licenses or other arrangements or out-right acquisitions of brands. Second, we grow through the introduction of new products and by supporting new and established products through advertising, merchandising and sampling as well as phasing out underperforming products so we can devote greater resources to those products with greater potential. The economics of developing, producing, launching and supporting products influence our sales and operating performance each year. Our introduction of new products may have some cannibalizing effect on sales of existing products, which we take into account in our business planning.
Our business is not capital intensive, and it is important to 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 distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers.
As with any global 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 behind fast-growing markets and channels to grow market share.
Our reported net sales are impacted by changes in foreign currency exchange rates. A strong U.S. dollar has a negative impact on our net sales. However, earnings are positively affected by a strong dollar, because over 50% of net sales of our European operations are denominated in U.S. dollars, while almost all costs of our European operations are incurred in euro. Conversely, a weak U.S. dollar has a favorable impact on our net sales while gross margins are negatively affected. We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments and primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.
Page 18
INTER PARFUMS, INC. AND SUBSIDIARIES
Impact of COVID-19 Pandemic
A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States and France. In March 2020, the World Health Organization declared COVID-19 a pandemic.
In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. In all jurisdictions in which we operate we have been following guidance from authorities and health officials.
The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020.
Business significantly improved in the second half of 2020 and continued to improve in 2021, as retail stores reopened, and consumers increased online purchasing. While we expect this trend to continue, the introduction of variants of COVID-19 in various parts of the world has caused the temporary re-implementation of governmental restrictions in 2021, to prevent further spread of the virus. In addition, international air travel has remained curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. Lastly, the improved economy has put significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions have continued into the fourth quarter of 2021, at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of the year, by ordering well in advance of need and in larger quantities. Going forward, we aim to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We currently expect supply chain bottlenecks to begin lifting early in the new year. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic may have a material adverse effect on our results of our operations, financial position and cash flows through at least the end of 2021.
Recent Important Events
Salvatore Ferragamo
In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license is effective from October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.
Page 19
INTER PARFUMS, INC. AND SUBSIDIARIES
With respect to the management and coordination of activities related to the license agreement, the Company will operate through a wholly-owned Italian subsidiary based in Florence, and all products will be produced in Italy.
Donna Karan and DKNY
In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor. The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2023.
French Tax Settlement
The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of IPSA, does not, in and of itself, constitute a permanent establishment and therefore IPSA should pay French taxes on all or part of the profits of that entity.
In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby IPSA agreed to pay €2.5 million (approximately $2.9 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. IPSA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to IPSA by December 31, 2025.
Building Acquisition - Future Headquarters in Paris
In April 2021, our majority owned Paris-based subsidiary, IPSA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.
The $145 million purchase price is in line with market value and includes the complete renovation of the site. As of September 30, 2021, $131.2 million of the purchase price, including approximately $2.9 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2021. Approximately $14.2 million of cash held in escrow is included in other assets on the accompanying balance sheet as of September 30, 2021. In addition, the Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.
The acquisition was financed by a 10-year €120 million (approximately $139 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for fixed interest rate debt.
Page 20
INTER PARFUMS, INC. AND SUBSIDIARIES
Anna Sui Corp.
In January 2021, we renewed our license agreement with Anna Sui Corp. for the creation, development and distribution of fragrance products through December 31, 2026, without any material changes in terms and conditions. Our initial 10-year license agreement with Anna Sui Corp. was signed in 2011. The renewal agreement also allows for an additional 5-year term through 2031 at the option of the Company.
Discussion of Critical Accounting Policies
Information regarding our critical accounting policies can be found in our 2020 Annual Report on Form 10-K filed with the SEC.
Results of Operations
Three and Nine Months Ended September 30, 2021 as Compared to the Three and Nine Months Ended September 30, 2020
Net Sales:
|
|
|
Three months ended September 30, |
|
|||||||||||||
|
(in millions) |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
21 vs 19% |
|
||||
|
European based product sales |
|
$ |
206.1 |
|
|
$ |
129.7 |
|
|
$ |
143.6 |
|
|
|
43.5 |
% |
|
United States based product sales |
|
|
56.6 |
|
|
|
30.9 |
|
|
|
47.6 |
|
|
|
18.9 |
% |
|
|
|
$ |
262.7 |
|
|
$ |
160.6 |
|
|
$ |
191.2 |
|
|
|
37.4 |
% |
Net Sales:
|
|
|
Nine months ended September 30, |
|
|||||||||||||
|
(in millions) |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
21 vs 19% |
|
||||
|
European based product sales |
|
$ |
527.0 |
|
|
$ |
283.3 |
|
|
$ |
412.9 |
|
|
|
27.6 |
% |
|
United States based product sales |
|
|
141.8 |
|
|
|
71.7 |
|
|
|
122.8 |
|
|
|
15.5 |
% |
|
|
|
$ |
668.8 |
|
|
$ |
355.0 |
|
|
$ |
535.7 |
|
|
|
24.8 |
% |
Net sales for the three months ended September 30, 2021, rose to 262.7 million, a 64% increase from the third quarter of 2020, and 37% ahead of third quarter 2019. At comparable foreign currency exchange rates, net sales increased 63% from the third quarter of 2020 and 32% compared to third quarter 2019. The average dollar/euro exchange rate for the current third quarter was 1.18 compared to 1.17 and 1.11 in the third quarter of 2020 and 2019, respectively. Net sales for the nine months ended September 31, 2021, increased to $668.8 million from $355.0 million in 2020 and $535.7 million in 2019.
Page 21
INTER PARFUMS, INC. AND SUBSIDIARIES
Our third quarter, historically our strongest, set a record with European based product sales and U.S. based product sales up 43.5% and 18.9%, respectively, as compared to the third quarter of 2019. Our largest brands outperformed our best expectations. Montblanc, Jimmy Choo, Coach, GUESS and Lanvin sales were ahead of 2019’s third quarter by 26%, 40%, 98%, 27%, and 37%, respectively. The increases came from established fragrance pillars, brand extensions and the rollout of newer scents, including I Want Choo for Jimmy Choo and Bella Vita for GUESS. Also contributing to the top line growth were sales by two of our newer brands, namely Kate Spade and MCM, both of which debuted new fragrances this year. We are similarly gratified by the meaningful upturn in sales by most of our mid-sized brands, as compared to the third quarters of the preceding two years.
We achieved record sales in the third quarter despite the near absence of travel retail business and major supply chain disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions have continued into the fourth quarter of 2021, at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of the year, by ordering well in advance of need and in larger quantities. Going forward, we aim to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We currently expect supply chain bottlenecks to begin lifting early in the new year. In addition, with the recent addition of Ferragamo fragrances and the forthcoming addition of Donna Karan and DKNY fragrances next summer, we look forward to accelerating our sales growth.
|
Net Sales to Customers by Region |
|
Nine months ended September 30, |
|
|||||
|
(In millions) |
|
2021 |
|
|
2020 |
|
||
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
273.4 |
|
|
$ |
114.0 |
|
|
Western Europe |
|
|
146.8 |
|
|
|
106.4 |
|
|
Asia |
|
|
97.8 |
|
|
|
57.0 |
|
|
Eastern Europe |
|
|
54.0 |
|
|
|
19.4 |
|
|
Middle East |
|
|
46.8 |
|
|
|
30.4 |
|
|
Central and South America |
|
|
43.8 |
|
|
|
23.4 |
|
|
Other |
|
|
6.2 |
|
|
|
4.4 |
|
|
|
|
$ |
668.8 |
|
|
$ |
355.0 |
|
Our business has been especially strong in regions where lockdowns have been lifted, stores have reopened and life has returned to near pre-pandemic standards, most notably Eastern Europe, North America, Central and South America and Asia, where our sales rose 179%, 140%, 87% and 72%, respectively. On the other hand, Western Europe and the Middle East, where sales increased 38% and 54%, respectively, have not fully recovered due to restrictions and closures earlier in the year as well as a reduction in tourist traffic in the regions.
|
Gross margin |
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
(In millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
262.7 |
|
|
$ |
160.6 |
|
|
$ |
668.8 |
|
|
$ |
355.0 |
|
|
Cost of sales |
|
|
95.3 |
|
|
|
63.4 |
|
|
|
243.8 |
|
|
|
141.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
$ |
167.4 |
|
|
$ |
97.2 |
|
|
$ |
425.0 |
|
|
$ |
213.1 |
|
|
Gross margin as a percent of net sales |
|
|
63.7 |
% |
|
|
60.5 |
% |
|
|
63.6 |
% |
|
|
60.0 |
% |
Page 22
INTER PARFUMS, INC. AND SUBSIDIARIES
Gross profit margin was 63.7% and 63.6% for the three and nine months ended September 30, 2021, respectively, as compared to 60.5% and 60.0% as for the three and nine months ended September 30, 2020, respectively. For European operations, gross profit margin was 66.6% and 66.3% for the three and nine months ended September 30, 2021, respectively, as compared to 62.4% and 62.3% for the corresponding periods of the prior year.
We carefully monitor movements in foreign currency exchange rates as almost 50% of our European based operations net sales are denominated in U.S. dollars, while most of our costs are incurred in euro. From a margin standpoint, a strong U.S. dollar has a positive effect on our gross profit margin while a weak U.S. dollar has a negative effect. For the three and nine months ended September 30, 2021, the weaker dollar, as compared to the corresponding periods of the prior year had small negative effect on gross margin. However, significantly reduced lower margin giftset sales in 2021 and new product launches with better margins drove the increase in gross margin in 2021.
For U.S. operations, gross profit margin was 53.1% and 53.2% for the three and nine months ended September 30, 2021, respectively, as compared to 52.5% and 51.2% for the corresponding periods of the prior year. Increased sales of higher margin product lines account for most of the increase in gross margin within our U.S operations. The increase in sales also allows us to better absorb certain fixed expenses, such as depreciation of tools and molds.
As mentioned above, major supply chain disruptions affecting the procurement of components, the ability to transport goods, and related cost increases have and are expected to continue to have a negative impact on sales and gross margin. While we have been addressing these issues and have implemented processes to mitigate the impact, prolonged disruption could have a material negative effect on our sales and gross margin.
Generally, we do not bill customers for shipping and handling costs, and such costs, which aggregated $3.4 million and $7.1 million for the three and nine months ended September 30, 2021, respectively, as compared to $1.6 million and $3.8 million for the corresponding periods of the prior year, are included in selling, general and administrative expenses in the consolidated statements of income. As such, our Company’s gross profit may not be comparable to other companies, which may include these expenses as a component of cost of goods sold.
|
Selling, general and administrative expenses |
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
(In millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
$ |
99.8 |
|
|
$ |
65.8 |
|
|
$ |
262.4 |
|
|
$ |
169.5 |
|
|
Selling, general and administrative expenses as a percent of net sales |
|
|
38.0 |
% |
|
|
41.0 |
% |
|
|
39.2 |
% |
|
|
47.7 |
% |
Selling, general and administrative expenses increased 51.6% and 54.8% for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods of the prior year. However, as a percentage of sales, selling, general and administrative expenses were 38.0% and 39.2% for the three and nine months ended September 30, 2021, respectively, as compared to 41.0% and 47.7% for the three and nine months ended September 30, 2020, respectively.
Page 23
INTER PARFUMS, INC. AND SUBSIDIARIES
For European operations net sales increased 58.8% and 86.0% for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods of the prior year, while selling, general and administrative expenses for our European operations increased 49.1% and 56.9% for the same periods, respectively. In addition, selling, general and administrative expenses of our European operations represented 38.8% and 39.9% of net sales for the three and nine months ended September 30, 2021, respectively, as compared to 41.3% and 47.3% for the three and nine months ended September 30, 2020, respectively.
For U.S. operations net sales increased 83.2% and 97.8% for the three and nine months ended September 30, 2021, respectively, as compared to the corresponding periods of the prior year, while selling, general and administrative expenses of our U.S. operations increased 62.2% and 47.1% for the three and nine months ended September 30, 2021, as compared to the corresponding periods of the prior year, and represented 35.1% and 36.8% of net sales for the three and nine months ended September 30, 2021, respectively, as compared to 39.7% and 49.5% for the corresponding periods of the prior year.
Throughout the first three quarters of 2021, as sales continued to rebound more quickly than anticipated, we have not kept pace with our historic levels of investment in promotion and advertising. Accordingly, as a percentage of sales, promotion and advertising included in selling, general and administrative expenses aggregated 14.2%, 14.6% and 17.3% for the nine months ended September 30, 2021, 2020 and 2019, respectively. However, many of our 2021 promotional programs are set for the final quarter of 2021 to support our recent product launches and build brand awareness. Based on those promotional programs, we expect promotion and advertising expense included in selling general and administrative expense to aggregate approximately 21% of net sales for the full year ended December 31, 2021.
Royalty expense included in selling, general and administrative expenses aggregated $20.5 million and $52.0 million for the three and nine months ended September 30, 2021, respectively, as compared to $11.7 million and $26.3 million for the corresponding periods of the prior year. Royalty expense represented 7.8% of net sales for both the three and nine months ended September 30, 2021, as compared to 7.3% and 7.4% of net sales for the corresponding periods of the prior year. As a result of the COVID-19 pandemic we reached agreements with many of our licensors to waive or significantly reduce minimum guaranteed royalties for 2020.
As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, income from operations aggregated $67.6 million for the three months ended September 30, 2021, as compared to $31.4 million for the corresponding period of the prior year. Income from operations increased to $160.3 million for the nine months ended September 30, 2021, as compared to $43.6 million for the corresponding period of the prior year. For the nine months ended September 30, 2021, our operating margin was 24.0%, as compared to 12.3% for the corresponding period of the prior year.
Page 24
INTER PARFUMS, INC. AND SUBSIDIARIES
Other Income and Expense
Interest expense aggregated $1.7 million and $3.3 million for the three and nine months ended September 30, 2021, respectively, as compared to $0.1 million and $1.5 million for the corresponding periods of the prior year. Historically, interest expense was minimal and primarily related to the financing of brand acquisitions. In 2021, interest expense includes the debt incurred in connection with the acquisition of our new European corporate headquarters in France. We also use the credit lines available to us, as needed, to finance our working capital needs as well as our financing needs for acquisitions.
Foreign currency gains aggregated $0.6 million and $2.2 million for the three and nine months ended September 30, 2021, respectively, as compared to $0.1 million and a loss of $0.9 million for the corresponding periods of the prior year. We typically enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Over 50% of net sales of our European operations are denominated in U.S. dollars.
Interest income aggregated $0.2 million and $1.4 million for the three and nine months ended September 30, 2021, respectively, as compared to $0.4 million and $2.2 million for the corresponding periods of the prior year. Cash and cash equivalents and short-term investments are primarily invested in certificates of deposit with varying maturities.
Income Taxes
Our effective tax rate was 25.4% and 28.1% for the three and nine months ended September 30, 2021, as compared to 28.9% and 27.4% for the corresponding periods of the prior year.
The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of IPSA, does not, in and of itself, constitute a permanent establishment and therefore IPSA should pay French taxes on all or part of the profits of that entity. In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby IPSA agreed to pay €2.5 million (approximately $2.9 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. IPSA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to IPSA by December 31, 2025.
Pursuant to an action plan released by the French Prime Minister, the French corporate income tax rate is to be cut from 33% to 25% over a three-year period ending 2023. Excluding the global settlement referred to above, our effective tax rate for European operations was 28% for both the nine months ended September 30, 2021, and 2020.
Our effective tax rate for U.S. operations was 17% for the nine months ended September 30, 2021, as compared to a nominal benefit for the corresponding period of the prior year. Our effective tax rate in 2021 differs from the 21% statutory rate due to benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes.
Page 25
INTER PARFUMS, INC. AND SUBSIDIARIES
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 per share data) |
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income European operations |
|
$ |
41,455 |
|
|
$ |
18,943 |
|
|
$ |
96,822 |
|
|
$ |
31,175 |
|
|
Net income U.S. operations |
|
|
8,372 |
|
|
|
2,909 |
|
|
|
18,667 |
|
|
|
993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
49,827 |
|
|
|
21,852 |
|
|
|
115,489 |
|
|
|
32,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to the noncontrolling interest |
|
|
11,511 |
|
|
|
5,314 |
|
|
|
26,854 |
|
|
|
8,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Inter Parfums, Inc. |
|
$ |
38,316 |
|
|
$ |
16,538 |
|
|
$ |
88,635 |
|
|
$ |
23,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Inter Parfums, Inc. common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.21 |
|
|
$ |
0.52 |
|
|
$ |
2.80 |
|
|
$ |
0.74 |
|
|
Diluted |
|
$ |
1.20 |
|
|
$ |
0.52 |
|
|
$ |
2.79 |
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
31,659 |
|
|
|
31,533 |
|
|
|
31,648 |
|
|
|
31,531 |
|
|
Diluted |
|
|
31,807 |
|
|
|
31,619 |
|
|
|
31,735 |
|
|
|
31,651 |
|
Net income increased to $49.8 million and $115.5 million for the three and nine months ended September 30, 2021, as compared to $21.9 million and $32.2 million for the corresponding periods of the prior year. The reasons for significant fluctuations in net income for both European operations and United States operations are directly related to the previous discussions relating to changes in sales, gross margin, and selling, general and administrative expenses, most of which was caused by the negative effects of the COVID-19 pandemic in 2020 and the recovery experienced in 2021.
The noncontrolling interest arises from our 73% owned subsidiary in Paris, IPSA, which is also a publicly traded company as 27% of Interparfums SA shares trade on the NYSE Euronext. The noncontrolling interest is also affected by the profitability of Interparfums SA’s 51% owned subsidiary in Spain. Net income attributable to the noncontrolling interest aggregated 28% of European operations net income for all periods presented.
Liquidity and Capital Resources
Our conservative financial tradition has enabled us to amass hefty cash balances and nominal long-term debt. As of September 30, 2021, we had $324 million in cash, cash equivalents and short-term investments, most of which is held in euro by our European operations and is readily convertible into U.S. dollars. We have not had any liquidity issues to date, and do not expect any liquidity issues relating to such cash and cash equivalents and short-term investments held by our European operations.
Page 26
INTER PARFUMS, INC. AND SUBSIDIARIES
As of September 30, 2021, we had a working capital ratio of 3.3 to 1. Approximately 85% of the Company’s total assets are held by European operations, and approximately $176 million of trademarks, licenses and other intangible assets are also held by European operations.
The Company hopes to continue to benefit from its strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee. As we recently reported, in September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Opportunities for external growth are regularly examined, with the priority of maintaining the quality and homogeneous nature of our portfolio. However, we cannot assure you that any new license or acquisition agreements will be consummated.
Cash provided by operating activities aggregated $101.3 million for the nine months ended September 30, 2021, as compared to cash used in operating activities of $20.2 million for the corresponding period of the prior year. For the nine months ended September 30, 2021, working capital items used $36.8 million in cash from operating activities, as compared to $66.7 million in the 2020 period. Although accounts receivable is up 64% from year end, the balance is reasonable based on third quarter 2021 record sales levels and reflects strong collection activity as day’s sales outstanding is down to 70 days, as compared to 78 and 84 days for the corresponding period in 2020 and 2019, respectively. Inventory levels as of September 30, 2021, are down 2% from year end and down 13% from September 30, 2020. Although inventories include product needed to support new product launches, the overall balance is lower than historic levels due primarily to the aforementioned supply chain disruptions.
Cash flows used in investing activities in 2021 reflect purchases and sales of short-term investments. These investments include certificates of deposit with maturities greater than three months. Approximately $46 million of such certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.
Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we typically spend approximately $4.0 million on tools and molds, depending on our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers.
In April 2021, IPSA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards and consists of approximately 40,000 total sq. ft.
The $145 million purchase price is in line with market value and includes the complete renovation of the site. As of September 30, 2021, $131.2 million of the purchase price, including approximately $2.9 million of acquisition costs is included in building, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2021. Approximately $14.2 million of cash held in escrow is included in other assets on the accompanying balance sheet as of September 30, 2021. In addition, the Company borrowed an additional $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.
Page 27
INTER PARFUMS, INC. AND SUBSIDIARIES
The acquisition was financed by a 10-year €120 million (approximately $139 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for fixed interest rate debt.
In June 2020, the Company and Divabox, owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired 25% of Divabox capital for $14 million through a capital increase. In connection with the acquisition, the Company entered into a $13.4 million term loan, which was repaid in full in February 2021.
Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025, at its then fair market value.
Our short-term financing requirements are expected to be met by available cash on hand at September 30, 2021, and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2021 consist of a $20.0 million unsecured revolving line of credit provided by a domestic commercial bank and approximately $29 million in credit lines provided by a consortium of international financial institutions. There were no short-term borrowings outstanding pursuant to these facilities as of both September 30, 2021 and September 30, 2020.
In October 2019, the Board of Directors authorized a 20% increase in the annual dividend to $1.32 per share. In April 2020, as a result of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the quarterly cash dividend. In February 2021, our Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly. The next quarterly cash dividend of $0.25 per share is payable on December 31, 2021, to shareholders of record on December 15, 2021.
We believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facilities, 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 nine months ended September 30, 2021.
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INTER PARFUMS, INC. AND SUBSIDIARIES
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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 currency other than our functional 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 IPSA, 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, then 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.
At September 30, 2021, we had foreign currency contracts in the form of forward exchange contracts of approximately U.S. $60.5 million and GB £6.3 million and JPY ¥50 million with maturities of less than one year. We believe that our risk of loss as the result of nonperformance by any of such financial institutions is remote.
Interest Rate Risk Management
We mitigate interest rate risk by monitoring interest rates, and then determining whether fixed interest rates should be swapped for floating rate debt, or if floating rate debt should be swapped for fixed rate debt.
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INTER PARFUMS, INC. AND SUBSIDIARIES
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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-15(e)) 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 effective.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the quarterly period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Items 1. Legal Proceedings, 1A. Risk Factors, 2. Unregistered Sales of Equity Securities and Use of Proceeds, 3. Defaults Upon Senior Securities, 4. Mine Safety Disclosures and 5. Other Information, are omitted as they are either not applicable or have been included in Part I.
Item 6. Exhibits.
The following documents are filed herewith:
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Exhibit No. |
Description |
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Certifications required by Rule 13a-14(a) of Chief Executive Officer |
35 |
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36 |
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Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Executive Officer |
37 |
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38 |
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101 |
Interactive data files |
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Page 30
INTER PARFUMS, INC. AND SUBSIDIARIES
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 8th day of November 2021.
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INTER PARFUMS, INC. |
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By: |
/s/ Russell Greenberg |
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Executive Vice President and Chief Financial Officer |
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Page 31
INTER PARFUMS, INC. AND SUBSIDIARIES
Exhibit 31.1
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 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;
b) Designed such internal control over financial reporting, or caused such control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) 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 upon such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; 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 functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls 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 8, 2021
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/s/ Jean Madar |
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Jean Madar,
Chief Executive Officer
35
INTER PARFUMS, INC. AND SUBSIDIARIES
Exhibit 31.2
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 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;
b) Designed such internal control over financial reporting, or caused such control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) 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 upon such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; 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 functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls 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 8, 2021
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/s/ Russell Greenberg |
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Russell Greenberg
Chief Financial Officer
and Principal Accounting Officer
36
INTER PARFUMS, INC. AND SUBSIDIARIES
Exhibit 32.1
CERTIFICATION
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, 2021, 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.
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Date: November 8, 2021 |
By: |
/s/ Jean Madar |
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Jean Madar, |
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Chief Executive 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.
37
INTER PARFUMS, INC. AND SUBSIDIARIES
Exhibit 32.2
CERTIFICATION
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, 2021, 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.
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Date: November 8, 2021 |
By: |
/s/ Russell Greenberg |
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Russell Greenberg |
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Chief Executive 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.
38
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
| Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 |
| Preferred Stock, Shares Issued | 0 | 0 |
| Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
| Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
| Common Stock, Shares, Outstanding | 31,722,300 | 31,608,588 |
| Treasury Stock, Shares | 9,864,805 | 9,864,805 |
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
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| Income Statement [Abstract] | ||||
| Net sales | $ 262,696 | $ 160,637 | $ 668,797 | $ 354,967 |
| Cost of sales | 95,269 | 63,439 | 243,772 | 141,883 |
| Gross margin | 167,427 | 97,198 | 425,025 | 213,084 |
| Selling, general and administrative expenses | 99,788 | 65,841 | 262,379 | 169,471 |
| Impairment loss | 2,393 | |||
| Income from operations | 67,639 | 31,357 | 160,253 | 43,613 |
| Other expenses (income): | ||||
| Interest expense | 1,697 | 148 | 3,344 | 1,510 |
| (Gain) loss on foreign currency | (613) | 891 | (2,169) | (76) |
| Interest income | (233) | (393) | (1,388) | (2,154) |
| Other income expense | (36) | (135) | ||
| Other expenses (income) | 815 | 646 | (348) | (720) |
| Income before income taxes | 66,824 | 30,711 | 160,601 | 44,333 |
| Income taxes | 16,997 | 8,859 | 45,112 | 12,165 |
| Net income | 49,827 | 21,852 | 115,489 | 32,168 |
| Less: Net income attributable to the noncontrolling interest | 11,511 | 5,314 | 26,854 | 8,688 |
| Net income attributable to Inter Parfums, Inc. | $ 38,316 | $ 16,538 | $ 88,635 | $ 23,480 |
| Net income attributable to Inter Parfums, Inc. common shareholders: | ||||
| Basic | $ 1.21 | $ 0.52 | $ 2.80 | $ 0.74 |
| Diluted | $ 1.20 | $ 0.52 | $ 2.79 | $ 0.74 |
| Weighted average number of shares outstanding: | ||||
| Basic | 31,659 | 31,533 | 31,648 | 31,531 |
| Diluted | 31,807 | 31,619 | 31,793 | 31,651 |
| Dividends declared per share | $ 0.25 | $ 0.75 | $ 0.33 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
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| Comprehensive income: | ||||
| Net income | $ 49,827 | $ 21,852 | $ 115,489 | $ 32,168 |
| Other comprehensive income: | ||||
| Net derivative instrument (loss), net of tax | (609) | (703) | (19) | |
| Transfer from OCI into earnings | (52) | |||
| Translation adjustments, net of tax | (15,396) | 22,604 | (33,203) | 21,770 |
| Comprehensive income | 33,822 | 44,456 | 81,583 | 53,867 |
| Comprehensive income attributable to the noncontrolling interests: | ||||
| Net income | 11,511 | 5,314 | 26,854 | 8,688 |
| Other comprehensive income (loss): | ||||
| Net derivative instrument (loss), net of tax | (166) | (192) | (19) | |
| Translation adjustments, net of tax | (3,974) | 6,596 | (10,389) | 6,423 |
| Comprehensive income attributable to the noncontrolling interests | 7,371 | 11,910 | 16,273 | 15,092 |
| Comprehensive income attributable to Inter Parfums, Inc. | $ 26,451 | $ 32,546 | $ 65,310 | $ 38,775 |
Significant Accounting Policies: |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 | |||
| Accounting Policies [Abstract] | |||
| Significant Accounting Policies: |
The accounting policies we follow are set forth in the notes to our consolidated financial statements included in our Form 10-K, which was filed with the Securities and Exchange Commission for the year ended December 31, 2020. |
Impact of COVID-19 Pandemic: |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 | |||
| Unusual or Infrequent Items, or Both [Abstract] | |||
| Impact of COVID-19 Pandemic: |
A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States and France. In March 2020, the World Health Organization declared COVID-19 a pandemic.
In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. In all jurisdictions in which we operate we have been following guidance from authorities and health officials.
The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020.
Business significantly improved in the second half of 2020 and continued to improve in 2021, as retail stores reopened, and consumers increased online purchasing. While we expect this trend to continue, the introduction of variants of COVID-19 in various parts of the world has caused the temporary re-implementation of certain governmental restrictions in 2021, to prevent further spread of the virus. In addition, international air travel has remained curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. Lastly, the improved economy has put significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions have continued into the fourth quarter of 2021, at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of the year, by ordering well in advance of need and in larger quantities. Going forward, we aim to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We currently expect supply chain bottlenecks to begin lifting early in the new year. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic may have a material adverse effect on our results of our operations, financial position and cash flows through at least the end of 2021. |
Recent Agreements |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2021 | ||||
| Recent Agreements | ||||
| Recent Agreements |
Salvatore Ferragamo
In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license is effective from October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
With respect to the management and coordination of activities related to the license agreement, the Company will operate through a wholly-owned Italian subsidiary based in Florence, and all products will be produced in Italy.
Donna Karan and DKNY
In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor. In addition, a company owned by a member of our Board of Directors is to receive a fee of $0.3 million in connection with this license. The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2023.
French Tax Settlement
The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA (“IPSA”), our majority owned Paris-based subsidiary, does not, in and of itself, constitute a permanent establishment and therefore IPSA should pay French taxes on all or part of the profits of that entity.
In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby IPSA agreed to pay €2.5 million (approximately $2.9 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. IPSA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to IPSA by December 31, 2025.
Building Acquisition - Future Headquarters in Paris
In April 2021, IPSA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.
The $million purchase price is in line with market value and includes the complete renovation of the site. As of September 30, 2021, $131.2 million of the purchase price, including approximately $2.9 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2021. Approximately $14.2 million of cash held in escrow is included in other assets on the accompanying balance sheet as of September 30, 2021. In addition, the Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.
The acquisition was financed by a 10-year € million (approximately $ million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately € million of the variable rate debt was swapped for fixed interest rate debt.
Anna Sui Corp.
In January 2021, we renewed our license agreement with Anna Sui Corp. for the creation, development and distribution of fragrance products through December 31, 2026, without any material changes in terms and conditions. Our initial 10-year license agreement with Anna Sui Corp. was signed in 2011. The renewal agreement also allows for an additional 5-year term through 2031 at the option of the Company.
Rochas Fashion
Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value. |
Recent Accounting Pronouncements: |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 | |||
| Accounting Changes and Error Corrections [Abstract] | |||
| Recent Accounting Pronouncements: |
There are no recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements. |
Inventories: |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories: |
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Fair Value Measurement: |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurement: |
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.
The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables, cash held in escrow, accounts payable and accrued expenses approximate fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value.
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. |
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Derivative Financial Instruments: |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2021 | |||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||
| Derivative Financial Instruments: |
The Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based on the dollar offset methodology and excludes the portion of the fair value of the 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 as a gain or loss on foreign currency in the income statement. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses accumulated in other comprehensive income are reclassified to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated in other comprehensive income are reclassified to current-period earnings.
In connection with the April 2021 acquisition of the office building complex in Paris, € million (approximately million) of the purchase price was financed through a 10-year term loan. The Company entered into interest rate swap contracts related to € million of the loan, effectively exchanging the variable interest rate to a fixed rate of approximately 1.1%. This derivative instrument is recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income.
Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial for both the nine months ended September 30, 2021 and 2020.
All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps as of September 30, 2021, resulted in a liability which is included in long-term debt on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at September 30, 2021, resulted in a liability and is included in accrued expenses on the accompanying balance sheet.
At September 30, 2021, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $60.5 million, GB £6.3 million and JPY ¥50.0 million, which all have maturities of less than one year. |
Leases: |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 inception. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term.
In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend or terminate, depending on the lease. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date for the location in which the lease is held in determining the present value of lease payments.
As of September 30, 2021, the weighted average remaining lease term was years and the weighted average discount rate used to determine the operating lease liability was 2.1%. Rental expense related to operating leases was $1.9 million and $6.8 million for the three and nine months ended September 30, 2021, respectively, as compared to $1.4 million and $4.7 million for the corresponding periods of the prior year. Operating lease payments included in operating cash flows totaled $6.2 million and $4.3 million for the nine months ended September 30, 2021 and 2020, respectively, and noncash additions to operating lease assets totaled $14.0 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively.
In connection with the preparation of our consolidated financial statements for the three months ended June 30, 2021, we identified an error relating to the recognition of certain leases under ASC 842. The error impacted the lease right-of-use assets and lease liabilities, both of which were understated by approximately €14.0 million ($16.6 million) as of June 30, 2020. There was no income statement impact resulting from this correction. We concluded the impact on the interim financial statements was immaterial and corrected the balances as of June 30, 2021.
Maturities of lease liabilities subsequent to September 30, 2021, are as follows:
(In thousands)
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Share-Based Payments: |
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| Equity: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payments: |
The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a to-year period. The fair value of shares vested during the nine months ended September 30, 2021 and 2020 aggregated $ and $, respectively. Compensation cost, net of 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 our policy to issue new shares upon exercise of stock options.
Share-based payment expense decreased income before income taxes by $ and $ for the three and nine months ended September 30, 2021, respectively, as compared to $ and $ for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $ and $ for the three and nine months ended September 30, 2021, respectively, as compared to $ and $ for the corresponding periods of the prior year.
As of September 30, 2021, the weighted average remaining contractual life of options outstanding is years ( years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $ and $, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $.
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 increase as the earnings of the Company and its stock price continue to increase.
In December 2018, IPSA approved a plan to grant an aggregate of shares of its stock to employees with no performance condition requirement, and an aggregate of shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2022. In order to avoid dilution of the Company’s ownership of IPSA, all shares to be distributed pursuant to the plan will be pre-existing shares of IPSA, purchased in the open market by IPSA in prior years.
The fair value of the grant had been determined based on the quoted stock price of IPSA shares as reported by the NYSE Euronext on the date of grant. In June 2020, the performance conditions were modified effecting 96 employees. As of September 30, 2021, the number of shares to be distributed, after forfeited shares, increased to resulting from the modification and stock split. The increase in shares anticipated to be distributed were transferred from treasury shares at the IPSA level. The original cost of the grant was approximately $, and the modification resulted in a revised cost of approximately $. |
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Net Income Attributable to Inter Parfums, Inc. Common Shareholders: |
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| Earnings per share: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income Attributable to Inter Parfums, Inc. Common Shareholders: |
Net income attributable to Inter Parfums, Inc. per common share (“basic EPS”) is computed by dividing net income attributable to Inter Parfums, Inc. by the weighted average number of shares outstanding. Net income attributable to Inter Parfums, Inc. per share assuming dilution (“diluted EPS”), is computed using the weighted average number of shares outstanding, plus the incremental shares outstanding assuming the exercise of dilutive stock options using the treasury stock method.
Not included in the above computations are the effect of antidilutive potential common shares which consist of outstanding options to purchase and million shares of common stock for both the three and nine months ended September 30, 2021, as compared to and million shares of common stock for the three and nine months ended September 30, 2020, respectively. |
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Segment and Geographic Areas: |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment and Geographic 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 operations and United States operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows:
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Reconciliation of Cash and Cash Equivalents to the Statement of Cash Flows: |
9 Months Ended | |||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||
| Reconciliation Of Cash And Cash Equivalents To Statement Of Cash Flows | ||||||||||||||||||||||||||||||||||
| Reconciliation of Cash and Cash Equivalents to the Statement of Cash Flows: |
The following table summarizes cash and cash equivalents as of September 30, 2021:
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Reclassifications: |
9 Months Ended | |||
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Sep. 30, 2021 | ||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Reclassifications: |
Certain prior year’s amounts in the accompanying consolidated statements of cash flows have been reclassified to conform to current period presentation. |
Inventories: (Tables) |
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories consist of the following: |
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Fair Value Measurement: (Tables) |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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. | 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.
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Leases: (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Maturities of lease liabilities subsequent to September 30, 2021, are as follows: | Maturities of lease liabilities subsequent to September 30, 2021, are as follows:
(In thousands)
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Share-Based Payments: (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The following table sets forth information with respect to nonvested options for the nine months ended September 30, 2021: |
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| The following table summarizes stock option information as of September 30, 2021 |
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| Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2021 and September 30, 2020 were as follows |
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| The assumptions used in the Black-Scholes pricing model for the periods ended September 30, 2021 and 2020 are set forth in the following table: |
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Net Income Attributable to Inter Parfums, Inc. Common Shareholders: (Tables) |
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| Earnings per share: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows |
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Segment and Geographic Areas: (Tables) |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 operations and United States operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows | 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 operations and United States operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows:
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Reconciliation of Cash and Cash Equivalents to the Statement of Cash Flows: (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||
| Reconciliation Of Cash And Cash Equivalents To Statement Of Cash Flows | |||||||||||||||||||||||||||||||
| The following table summarizes cash and cash equivalents as of September 30, 2021: | The following table summarizes cash and cash equivalents as of September 30, 2021:
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Inventories consist of the following: (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials and component parts | $ 78,762 | $ 66,492 |
| Finished goods | 77,263 | 92,330 |
| Inventories | $ 156,025 | $ 158,822 |
Maturities of lease liabilities subsequent to September 30, 2021, are as follows: (Details) $ in Thousands |
Sep. 30, 2021
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2022 | $ 5,956 |
| 2023 | 5,353 |
| 2024 | 5,245 |
| 2025 | 4,169 |
| Thereafter | 13,197 |
| Total | 35,756 |
| Less imputed interest (based on 2.1% weighted-average discount rate) | (1,857) |
| Net lease liabilities | $ 33,899 |
Leases: (Details Narrative) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Jun. 30, 2020
EUR (€)
|
|
| Operating Lease, Weighted Average Remaining Lease Term | 5 years 18 days | 5 years 18 days | |||
| Operating Lease, Weighted Average Discount Rate, Percent | 2.10% | 2.10% | |||
| Operating Leases, Rent Expense, Net | $ 1,900,000 | $ 1,400,000 | $ 6,800,000 | $ 4,700,000 | |
| Operating Lease, Payments | 6,200,000 | 4,300,000 | |||
| Operating Lease, Cost | $ 14,000,000.0 | $ 1,000,000.0 | |||
| Euro Member Countries, Euro | |||||
| Operating lease right of use | € | € 14,000.0 | ||||
Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2021 and September 30, 2020 were as follows (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Equity: | ||
| Cash proceeds from stock options exercised | $ 1,727 | $ 796 |
| Tax benefits | 240 | |
| Intrinsic value of stock options exercised | $ 1,562 | $ 788 |
The assumptions used in the Black-Scholes pricing model for the periods ended September 30, 2021 and 2020 are set forth in the following table: (Details) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Equity: | ||
| Weighted average expected stock-price volatility | 25.00% | 25.00% |
| Weighted average expected option life | 5 years | 5 years |
| Weighted average risk-free interest rate | 0.40% | 1.40% |
| Weighted average dividend yield | 1.60% | 2.50% |
The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Numerator: | ||||
| Net income attributable to Inter Parfums, Inc. | $ 38,316 | $ 16,538 | $ 88,635 | $ 23,480 |
| Denominator: | ||||
| Weighted average shares Effect of dilutive securities: | 31,659 | 31,533 | 31,648 | 31,531 |
| Stock options | 148 | 86 | 145 | 120 |
| Denominator for diluted earnings per share | 31,807 | 31,619 | 31,793 | 31,651 |
| Net income attributable to Inter Parfums, Inc. common shareholders: | ||||
| Basic | $ 1.21 | $ 0.52 | $ 2.80 | $ 0.74 |
| Diluted | $ 1.20 | $ 0.52 | $ 2.79 | $ 0.74 |
Net Income Attributable to Inter Parfums, Inc. Common Shareholders: (Details Narrative) - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Earnings per share: | ||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0.17 | 0.52 | 0.23 | 0.47 |
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 oper (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
| Revenue from Contract with Customer, Including Assessed Tax | $ 262,696 | $ 160,637 | $ 668,797 | $ 354,967 | |
| Net Income (Loss) Attributable to Parent | 38,316 | 16,538 | 88,635 | 23,480 | |
| Assets | 1,126,551 | 1,126,551 | $ 890,145 | ||
| UNITED STATES | |||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
| Revenue from Contract with Customer, Including Assessed Tax | 56,382 | 31,126 | 142,089 | 72,970 | |
| Net Income (Loss) Attributable to Parent | 8,391 | 2,909 | 18,368 | 993 | |
| Assets | 206,017 | 206,017 | 141,316 | ||
| Europe [Member] | |||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
| Revenue from Contract with Customer, Including Assessed Tax | 206,087 | 129,741 | 527,004 | 283,288 | |
| Net Income (Loss) Attributable to Parent | 29,925 | 13,629 | 69,967 | 22,487 | |
| Assets | 957,686 | 957,686 | 758,812 | ||
| Eliminations [Member] | |||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
| Revenue from Contract with Customer, Including Assessed Tax | 227 | $ (230) | (296) | $ (1,291) | |
| Assets | $ (37,152) | $ (37,152) | $ (9,983) | ||
The following table summarizes cash and cash equivalents as of September 30, 2021: (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Reconciliation Of Cash And Cash Equivalents To Statement Of Cash Flows | ||
| Cash and cash equivalents per balance sheet | $ 174,848 | $ 169,681 |
| Cash held in escrow included in other assets (see note 3) | 14,242 | |
| Cash and cash equivalents per statement of cash flows | $ 189,090 |
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