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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT ON FORM 10-K
(Mark one)
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended 31 December 2002 or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to.
Commission File No. 0-16469
INTER PARFUMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3275609
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
551 Fifth Avenue, New York, New York 10176
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 212.983.2640.
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Securities registered pursuant to Section 12(b) of the Act: None.
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Securities registered pursuant to Section 12(g) of the Act: Common
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Stock, $.001 par value per share.
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Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes /X/ No / /
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation SK is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any other
amendment to this Form 10K. / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ___ No _X_
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently completed
second fiscal quarter. $25,794,431 of voting equity and $-0- of non-voting
equity.
Indicate the number of shares outstanding of the registrant's $.001 par
value common stock as of the close of business on the latest practicable date
(26 March 2003): 18,978,007.
Documents Incorporated By Reference: None.
Table of Contents
Page
PART I
Item 1. Business........................................................1
Item 2. Properties.....................................................16
Item 3. Legal Proceedings..............................................17
Item 4. Submission of Matters to a Vote of Security Holders............17
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................18
Item 6. Selected Financial Data........................................20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.............................21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.....28
Item 8. Financial Statements and Supplementary Data....................29
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure............................30
PART III
Item 10. Directors and Executive Officers of the Registrant..............31
Item 11. Executive Compensation..........................................35
Item 12. Security Ownership of Certain Beneficial Owners and Management..39
Item 13. Certain Relationships and Related Transactions..................42
Item 14. Controls and Procedures.........................................44
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ....................................................45
FINANCIAL STATEMENTS.......................................................F-1
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
PART I
Item 1. Business
INTRODUCTION
We are Inter Parfums, Inc., a world-wide provider of prestige perfumes and
mass market perfumes, cosmetics and health and beauty aids. Organized under the
laws of the State of Delaware in May 1985 as Jean Philippe Fragrances, Inc., we
changed our name to Inter Parfums, Inc. on July 14, 1999, to better reflect our
image as a provider of prestige perfumes. We have also retained the brand name,
Jean Philippe Fragrances, for our mass market products.
Our worldwide headquarters and the office of our two (2), wholly-owned,
New York limited liability companies, Jean Philippe Fragrances, LLC and Inter
Parfums USA, LLC, are located at 551 Fifth Avenue, New York, New York 10176, and
our telephone number is 212.983.2640. Our consolidated wholly-owned subsidiary,
Inter Parfums Holdings, S.A., its majority-owned subsidiary, Inter Parfums,
S.A., and its two wholly-owned subsidiaries, Inter Parfums Grand Public, S.A.,
and Inter Parfums Trademark, S.A., maintain executive offices at 4, Rond Point
des Champs Elysees, 75008 Paris, France. Our telephone number in Paris is
331.5377.0000.
Our common stock is listed on The Nasdaq Stock Market (National Market
System) and its trading symbol is "IPAR". The common shares of our subsidiary,
Inter Parfums S.A., are traded on the Paris Stock Exchange.
We operate in the fragrance and cosmetic industry, specializing in
prestige perfumes, mass market perfumes, cosmetics and health and beauty aids:
o Prestige products - For each prestige brand, owned or licensed by us, we
develop an original concept for the perfume consistent with world market
trends.
o Mass market products - We design, market and distribute inexpensive
fragrances and personal care products including alternative designer
fragrances, mass market cosmetics and health and beauty aids.
PRODUCTION AND SUPPLY
The stages of the development and production process for all fragrances
are as follows:
o Simultaneous briefing with perfume designers and creators (includes
analysis of esthetic and olfactory trends, target clientele and market
communication approach);
o Concept choice;
o Produce mock-ups for final acceptance of bottles and packaging;
o Receive bids from component suppliers (glass makers, plastic processors,
printers, etc.) and packaging companies;
o Choose our suppliers;
o Schedule production and packaging;
o Issue component purchase orders;
o Follow quality control procedures for incoming components; and
o Follow packaging and inventory control procedures.
Suppliers who assist us with product development include:
o Independent perfumery design companies (Federico Restrepo, Fabien Baron,
Aesthete, Ateliers Dinand);
o Perfumers (IFF, Firmenich, Creations Aromatiques, Robertet, Quest,
Givaudan,Wessel Fragrances) which create a fragrance consistent with our
expectations and, that of the fragrance designers and creators;
o Contract manufacturers of components such as glassware (Saint Gobain,
Saverglass, Pochet, Nouvelles Verreries de Momignie), caps (MT Packaging,
Codiplas, Risdon, Newburgh) or boxes (Printor Packaging, Draeger, Dannex
Manufacturing);
o Production specialists who carry out packaging (MF Production, Brand, CCI,
IKI Manufacturing) or logistics (SAGA for storage, order preparation and
shipment).
For our prestige product lines, 80% of component and production needs
are purchased from approximately 20 suppliers out of a total of over 120
active suppliers. The suppliers' accounts for our French operations are
primarily settled in Euros, and for our United States operations, suppliers'
accounts are primarily settled in U.S. dollars.
MARKETING AND DISTRIBUTION
PRESTIGE PRODUCTS
For our international distribution of prestige products, we contract with
independent distribution companies specializing in luxury goods. In each
country, we designate anywhere from one to three distributors with the status of
"exclusive representative" for one or more of our name brands. We also
distribute our prestige products through a variety of duty-free operators, such
as airports and airlines and select vacation destinations.
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Approximately 23% of our prestige fragrance net sales are denominated in
U.S. dollars. In an effort to reduce our exposure to foreign currency exchange
fluctuations, we engage in a program of cautious hedging of foreign currencies
to minimize the risk arising from operations. Our sales are not subject to
material seasonal fluctuations.
Distribution in France of our prestige products is carried out by a sales
team who oversee some 1,200 points of sale including, retail perfumers (chain
stores) such as
o Sephora
o Marionnaud
o Nocibe
o Galeries Lafayette
or specialized independent points of sale. Approximately 80% of prestige product
sales in France are made to approximately 200 customers out of a total of over
1,200 active accounts.
Our distributors vary in size depending on the number of competing brands
they represent. This extensive and diverse network provides us with a
significant presence in over 100 countries around the world. Approximately 50
distributors out of a total of over 250 active accounts represent 80% of
international prestige fragrance sales. No one customer represents more than 10%
of sales.
International distribution of our FUBU fragrance products is handled in
the same manner as that of our other prestige fragrance lines. United States
distribution is the responsibility of our in house sales force who market FUBU
fragrance products to specialty retail stores, retail stores which sell FUBU
apparel and mid tier department stores.
MASS MARKET PRODUCTS
In the United States, mass merchandisers and supermarket chains, are
the target customers for our mass market products. Our current customer list
includes
o Walmart
o Albertson's
o Family Dollar
o Dollar General
o Dollar Tree Distributors
o Consolidated Stores (Big Lot Stores)
o 99 Cent Only
o Pathmark
o Fred's
In addition, our mass market products are sold to wholesale distributors,
such as Variety Wholesalers, specialty store chains, and to multiple locations
of accessory, jewelry and clothing outlets, such as Charming Shoppes (Fashion
Bug).
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These products are sold through a highly efficient and dedicated in-house
sales team and reach approximately 15,000 retail outlets throughout the United
States. Our 140,000 square foot distribution center has provided us with the
opportunity and resources to meet our customers' delivery requirements. The
entrepreneurial spirit of our management enables us, and challenges us, to seek
out and master new technologies to better serve our customers.
International distribution of our mass market product lines operate
through the use of exclusive and nonexclusive distribution agreements in such
major territories such as
o Brazil
o Mexico
o Argentina
o Chile
o Columbia
o Canada
o Russia
o Eastern Europe
THE MARKET
The fragrance and cosmetic market can be broken down into two types of
retail distribution:
o Selective distribution - perfumeries and specialty sections of department
stores, who sell brand name products with a luxury image, and
o Mass distribution - Mass merchandisers, discount stores and supermarkets,
who sell low to moderately-priced mass market products for a broad
customer base with limited purchasing power.
SELECTIVE DISTRIBUTION
During 2002, the French perfume industry, which accounts for about
approximately 30% of the world market, reported a 4.5% growth rate, as compared
to a 7% growth rate in 2001. (Source: Federation des Industries de la
Parfumerie).
Net sales in 2002 for the French domestic market for selective distribution
increased by 3.2% as compared to 5.9% in 2001. During 2002 the French export
market increased by 7.8%.
o The European Union: Sales increased overall by 6.5%. Sales were strong in
the United Kingdom (15% increase) and Italy (11% increase). Sales in
Germany were stable.
o Europe (excluding the European Union countries): Net sales increased 6.2%.
Net sales to Turkey rebounded after the 2001 financial crisis with a 27%
increase; net sales also increased in Poland (+17%) and Russia (+10%).
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o Asia: Net sales increased by 7.8%. Asia is becoming one of the biggest
markets for French cosmetics and perfumes, with strong increases in China
(+27%) and South Korea (+13%). Net sales to Japan also increased 3%.
o North America: Net sales to North America declined 1%, predominantly due
to lackluster sales in the United States (-2%), which is still recovering
from the events of September 11.
o South America: Net sales to South America suffered a large decline (-17%),
as the result of the financial crises in Argentina and Brazil, where sales
declined 74% and 15%, respectively.
(Source: Federation des Industries de la Parfumerie)
While our market share is less than 1% in France, in other countries such
as the United Kingdom, United States, Italy, Portugal, Saudi Arabia and South
Korea, we estimate that our market share is between 1% and 4% of French
perfumery imports (internal source).
MASS DISTRIBUTION
Our mass market products, which consist of low to moderately-priced
fragrances, cosmetics and health and beauty aids are designed for a broad
customer base with limited purchasing power. We sell our products both in the
United States and abroad. Mass merchandisers, discount stores and supermarkets
continued to perform very well during the slowdown of the economy. Our Aziza
line of cosmetics has achieved widespread acceptance with distribution in over
15,000 doors and growing. Our new line of health and beauty aids, which consist
of shampoos, conditioners and lotions, under our Intimate brand, is currently
distributed in over 10,000 doors. We expect sales to continue to grow as our
high volume, discount store customers open more stores, and we continue to
develop new products for them.
COMPETITION
The market for fragrances and beauty related products is highly
competitive and sensitive to changing mass market preferences and demands. The
prestige fragrance industry is highly concentrated around certain major players
with resources far greater than ours. We compete with an original strategy--
regular and methodical development of quality fragrances for a growing portfolio
of internationally renowned brand names.
Our closest competitors in the prestige market typically do not have mass
market products departments. However, they may develop, market and sell prestige
cosmetics. We intend to enter the prestige cosmetic market in late 2003 with the
launch of our Diane von Furstenberg cosmetic line.
At the present time, we are aware of approximately four established
companies which market similar alternative designer fragrances. This market is
characterized by competition
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primarily based upon price. We feel the quality of our fragrance products,
competitive pricing, and our ability to quickly and efficiently develop and
distribute new products, will enable us to continue to effectively compete with
these companies.
The market for name brand and mass market color cosmetics is highly
competitive, with several major cosmetic companies marketing similar products.
Many of these companies have substantial financial resources and national
marketing campaigns. However, we believe that brand recognition of the Aziza
name, together with the quality and competitive pricing of our products, enables
us to compete with these companies in the mass market.
The market for health and beauty aids is also highly competitive, and is
dominated by large multi-national companies such as Unilever and Proctor and
Gamble. We compete primarily with a low price point coupled with the recognition
of our brand name, Intimate.
FRAGRANCE AND COSMETIC PRODUCTS
PRESTIGE PERFUMES
Since 1988 we have sought to build a portfolio of luxury brand names
through licensing agreements or through direct acquisition of existing brand
names. Under license agreements we obtain the right to use the brand name,
create new fragrances and packaging, determine positioning and distribution, and
market and sell the licensed products, in exchange for the payment of royalties.
Our rights under license agreements are also generally subject to certain
minimum sales requirements and advertising expenditures.
The creation and marketing of each product line are intimately linked with
the brand's name, its past and present positioning, customer base and, more
generally, the prevailing market atmosphere. Accordingly, we generally conduct a
market study for each proposed product line for almost a full year before we
introduce any new product into the market. This market study is intended to
define the general position of the line and more particularly its fragrance,
bottle, packaging and appeal to the buyer. In our opinion, the unity of these
four elements of the marketing mix makes for a successful product.
Overall spending on marketing and point of sale support aggregated
approximately $ 17.8 million in 2002 with approximately $ 5.6 million in point
of sale support, which is included in cost of sales and $ 12.2 million in other
marketing costs, included in selling expenses. Distributors of our product lines
contribute a similar amount for additional marketing support. The cost of
launching a new product (molds and tools, start-up costs and communication
costs, media, etc.) generally varies from $0.2 million to $2.0 million.
The smooth and consistent operation of our prestige perfume operations
requires a thorough knowledge of the market, detailed analysis of the image and
potential of each brand name, a "good dose" of creativity, as well as a highly
professional approach to international distribution channels. Our prestige
fragrances have an average life expectancy of five to ten years, and retail at
prices of $30 to $80.
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Our brand name portfolio, which has been steadily increasing since 1988,
is now made up essentially of seven brand names, each of which has a variety of
product lines. Net sales of Burberry products accounted for 40.6%, 40.8% and
37.8% of net sales for the years ended December 31, 2002, 2001 and 2000,
respectively.
During Fiscal 2002, in accordance with our business plan to maximize the
value of our licenses, we launched several new name brand lines, including
Christian Lacroix Bazar, S.T. Dupont Essence Pure, Paul Smith Extreme and FUBU
Plush, which are discussed in more detail below.
In addition, we have planned several new product launches for 2003,
including for the first time, special, limited edition, seasonal fragrances.
The following is a description of our major, prestige fragrance brands.
BURBERRY
(BURBERRY LONDON, BURBERRY WEEK END, BURBERRY TOUCH)
Burberry is our leading selective brand name and we are operating under
the terms of an exclusive worldwide license agreement entered into in 1993. In
February 2000, we extended the license agreement until December 31, 2006, and in
2001 we expanded the license to include baby fragrance and toiletry products.
In August 2000, we launched two new Burberry perfume lines, Burberry Touch
for men and Burberry Touch for women, and in 2001, we extended the Burberry
Touch line to bath products.
We have scheduled the launch of a new Burberry fragrance in the second
quarter 2003, and we also expect to launch a new line for Burberry in the third
quarter of 2003.
S.T. DUPONT
(S.T. DUPONT PARIS, S.T. DUPONT ESSENCE PURE)
In June 1997 we signed an exclusive license agreement with S.T. Dupont for
the creation, manufacture and worldwide distribution of S.T. Dupont perfumes.
Based on a strong international luxury image, two lines launched in September
1998 made a promising start with a strong sell through. A line of bath products
introduced during the first half of 1999 further enhanced the image of the
brand.
In March 2000 we launched a new S.T. Dupont Signature line of two new
highly selective perfumes. The Signature line did not meet our overall
expectations and it was discontinued in 2002. In late 2002, we launched S.T.
Dupont Essence Pure, a new line for men and women under our S.T. Dupont license.
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PAUL SMITH
(PAUL SMITH, PAUL SMITH EXTREME)
We signed an exclusive license agreement with Paul Smith in December 1998
for the creation, manufacture and worldwide distribution of Paul Smith perfumes
and cosmetics, our first designer fragrance.
Paul Smith is an internationally renowned British designer who creates
fashion with a clear identity. Paul Smith has a modern style which combines
elegance, inventiveness and a sense of humor. These images, in conjunction with
a growing audience, provide the justification for the creation of a perfume and
cosmetics line. We launched our first line of Paul Smith perfumes in certain
international markets beginning in July 2000.
In October 2002, we commenced the initial launch of our new Paul Smith
Extreme line and we are creating a new Paul Smith fragrance line for men and
women which we have tentatively scheduled to launch in the Spring of 2004.
CHRISTIAN LACROIX
(EAU FLORALE, BAZAR, SUMMER FRAGRANCE)
In March 1999, we entered into an exclusive license agreement with the
Christian Lacroix Company, a division of LVMH Moet Hennessy Louis Vuitton S.A.
("LVMH"), for the worldwide development, manufacture and distribution of
perfumes. For us, this association with a prestigious fashion label is another
key area for growth which we expect will further strengthen our position in the
prestige fragrance market. Our first Christian Lacroix line, Eau de Parfum, was
launched in 1999 and in 2001, we launched a lighter eau de toilette fragrance,
Eau de Florale.
During 2002, we developed and launched two completely new lines for
Christian Lacroix: Bazar pour femme and Bazar pour homme. The Bazar pour femme
comes in an eau de parfum spray as well as an Eau Deodorante Natural Spray,
Perfumed Body Lotion and Perfumed bath and shower gel. The Bazar pour homme
comes in an eau de toilette spray a Deodorant Stick, All Over Shampoo,
After-Shave balm and After-Shave.
We have scheduled the debut of a limited edition, Christian Lacroix
seasonal fragrance for April 2003.
CELINE
(CELINE, ORIENTAL SUMMER)
In May 2000 we entered into an exclusive worldwide license agreement for
the development, manufacturing and distribution of fragrance lines under the
Celine brand name with Celine, a division of LVMH Moet Hennessy Louis Vuitton
S.A. We launched two new fragrance lines the fourth quarter of 2001. We also
introduced a Celine bath line in the third quarter of 2002.
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Celine, a French luxury fashion and accessory company, and part of LVMH,
is known throughout the world for its luxury and quality products, as well as
the unique designs of Michael Kors. This agreement is an important part of
Celine's strategy to develop dynamic brand recognition and to offer a varied
range of luxury items to an international clientele. Association with this
prestigious fashion label is an important step in the development and expansion
of our prestige business. This relationship is expected to add strength to all
of our prestige brands and contribute to our continued growth.
We have scheduled the debut of a limited edition, Celine seasonal
fragrance called Oriental Summer, for March 2003.
DIANE VON FURSTENBERG
In May 2002 we entered into an exclusive worldwide license agreement with
Diane Von Furstenberg Studio, L.P. for the development, manufacturing and
distribution of fragrance, cosmetics, skin care and related beauty products, to
be sold under the Diane Von Furstenberg, DVF, Diane Von Furstenberg The Color
Authority, and Tatiana brand names. Our rights under such license agreement are
subject to certain minimum sales requirements, advertising expenditures and
royalty payments.
Designer and entrepreneur, Diane von Furstenberg has been on the American
fashion scene since the mid 1970's when she launched her first fashion coup, the
wrap dress. Some five million were sold globally, attesting to the designer's
ability to innovate. Throughout her career, she embarked on many other ventures,
including home fashion products, fragrances and cosmetics, retail shops, and
book publishing. Today, Diane von Furstenberg has reestablished her name in the
fashion arena. Her collection is distributed worldwide through the finest
specialty and department stores.
We have begun working on a new prestige fragrance and cosmetic line, which
we expect to launch with very selective distribution in late 2003.
FUBU
(FUBU PLUSH)
In June 2000 we signed an exclusive worldwide agreement with FUBU The
Collection to produce and sell men's and women's fragrances. Our agreement with
FUBU allows us to offer a new, contemporary fragrance to consumers. Everything
about the FUBU fragrance lines, from scent to packaging, advertising and
marketing, complements the lifestyle image of the FUBU collections.
Founded by four young men in 1992, FUBU exploded onto the young men's
fashion scene. Music, movie, television and sport stars have worn the designs
all recognizable by the FUBU logos. Today, FUBU product sales exceed $400
million, and encompass men's sportswear-formalwear, ladies, and children's
apparel, as well as footwear and accessory items. The exposure FUBU has received
has helped to create a loyal brand following from ages 5-55 in both the U.S. and
abroad. Today's FUBU customers are both men and women, living in big cities and
small towns, and encompass many diverse ethnic, racial and cultural backgrounds.
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During 2002, we launched our FUBU Plush line for men and women, our first
two lines under our FUBU license agreement. The FUBU Plush line for men consists
of an eau de toilette spray, Soothing After Shave Spray, Cooling After Shave
Balm and Moisturizer, and Foaming Hair and Body Wash. The FUBU Plush line for
women consists of an eau de parfum spray and three bath and body products: Silky
Fresh Mist, Posh Body Lotion and Lavish Shower Gel.
MOLYNEUX
(QUARTZ, QUARTZ POUR HOMME, MODERN QUARTZ)
The Molyneux brand name, which we purchased in March 1994, was originally
created at the turn of the century by the fashion designer Edouard Molyneux, and
ranks among the institutional brand names of French perfumery. Molyneux enjoys a
very prominent market position in South America, especially through the "Quartz"
line for women, which was launched in 1978. The Molyneux brand provides
synergies with the Burberry brand name among duty-free operators (joint sales
areas, use of the same demonstrators, and enhanced positioning for negotiating
with duty-free operators and other customers). The Molyneux name is also well
established in France and other Western European countries. In January 2000 we
launched a totally new line, called Modern Quartz, by Molyneux, in a modernistic
package and in 2001 we launched a men's version, Modern Quartz for Men.
The following is a summary of the prestige brand names owned or licensed
by us:
Brand Name Licensed Date Purchase
or Owned Acquired Term Price
(in
millions)
Burberry Licensed July 93 13 years $0.0
S.T. Dupont Licensed July 97 11 years 1.0
Paul Smith Licensed Dec. 98 12 years 0.0
Celine Licensed May 00 11 years from January 0.0
2001, with an additional
5-year option term
Molyneux Owned Mar. 94 N/A 4.2
Christian Lacroix Licensed Mar. 99 11 years 0.0
FUBU Licensed June 00 61/2years with three 0.0
additional 2-year option
terms.
Diane Von Furstenberg Licensed May 02 8 year 7 month term with 0.0
three additional 2-year
option terms.
MASS MARKET PRODUCTS
MASS MARKET FRAGRANCES
We produce and market a complete line of alternative designer fragrances
and personal care products which sell at a substantial discount from their high
profile, high retail cost, brand name counterparts. Our alternative designer
fragrances, which are produced in the United States, are similar in scent to
highly advertised designer fragrances that are marketed at a high retail price.
These products are intended to have an upscale image without a high retail
price, and typically sell at a price below $5.00 at the mass market retail
level, substantially discounted from
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the high cost of designer fragrances which typically range from $30.00 to
$200.00 at prestige retail locations.
Our alternative designer fragrances encompass a complete and increasing
array of fragrances, body sprays, deodorants and perfumed creams. Product line
extensions into additional personal care products are ongoing and development of
new and innovative product lines is a continuous process.
New designer fragrances are constantly being launched in the marketplace.
Substantial expenditure of advertising dollars, selective distribution and a
high retail price create a perfect candidate for an alternative designer
fragrance. We react to demand by creating a similar scent which, when combined
with an innovative packaging design, is ready for sale to mass market
merchandisers, chain drug stores, wholesalers and international trading
companies. To this end, our strategy is to be among the first to release these
new introductions into the market.
In May 2002 we, through our wholly-owned subsidiary, Jean Philippe
Fragrances, LLC, acquired certain mass market fragrance brands, intellectual
property, trademarks and inventory from Tristar Corporation, a
Debtor-in-Possession in the Chapter 11 proceeding, Case no. 01-53706, U.S.
Bankruptcy Court, Western District of Texas, San Antonio Division, paying $3.2
million for the intellectual property and $3.7 million for inventory.
In connection with such transaction, Fragrance Impressions Corporation, a
newly formed company owned by Tristar's existing management and certain Tristar
creditors, purchased most of the remaining assets of Tristar and assumed certain
Tristar debt. As part of the transaction, Jean Philippe Fragrances entered into
a manufacturing agreement with Fragrance Impressions to produce goods under the
newly acquired Tristar brands. In addition, Tristar and Fragrances Impressions
have entered into a non-competition agreement with Jean Philippe Fragrances
relating to alternative designer fragrances and certain mass market cosmetics.
Subsequently, Fragrance Impressions Corporation advised us that it would not be
able to continue in business as our contract manufacturer. We have commenced
working with alternate sources of manufacturing for our Tristar brand of
fragrances, and we do not believe that use of such alternate source of
manufacturing for our Tristar brand of fragrances will have a material, adverse
impact on our operations.
Tristar had been one of our most significant competitors over the years,
and we believe this acquisition will benefit our mass market business on many
fronts. We now have greater market share; the additional brands will open new
retail accounts for us; and, we are adding sales volume.
Under the terms of a license agreement signed in 1990 with Jordache
Enterprises, we have capitalized on the strength and awareness of the Jordache
trademark. Our rights under this license agreement, which terminate on 30 June
2005 unless further renewed, are subject to certain minimum sales requirements
and the payment of royalties. Recent new introductions in the fragrance category
are directed at and focused on the younger, trendy mass market consumer who is
the core of the Jordache franchise. New packaging, which utilizes the latest in
graphic
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technology, is both innovative and attractive. We expect to continue this trend
with additional line extensions under the Jordache brand name.
MASS MARKET COSMETICS
We purchased the trademark, Aziza from Unilever N.V. in 1995. After
extensive market research and product development, we launched an Aziza product
line in February 1996. The recognition of the Aziza trade name provided us with
the opportunity to introduce a new cosmetic line with an existing loyal customer
base.
During August 1999 we introduced an Aziza line of low priced eyeshadow
kits, mascara, and pencils, which is geared towards the young teen market. This
product line, with its low suggested retail prices, is being distributed to mass
market retailers and discount chains, including the 99 Cent and Dollar Store
markets.
Recent line extensions to Aziza include foundation, lipstick, nail polish
and related accessories. Aziza is presently distributed in approximately 15,000
mass market outlets throughout the United States.
MASS MARKET HEALTH AND BEAUTY AIDS
During 2001, we introduced a new line of mass market health and beauty
aids under our Intimate brand, consisting of shampoo, conditioner, hand lotion
and baby oil. We distribute this line to the same mass market retailers and
discount chains as our Aziza cosmetic line. Intimate health and beauty aids are
presently distributed in approximately 10,000 mass market outlets throughout the
United States.
INVENTORY
We purchase raw materials and component parts from suppliers based on
internal estimates of anticipated need for finished goods, which enables us to
meet production requirements for finished goods. We generally deliver product to
customers within 72 hours of the receipt of their orders.
PRODUCT LIABILITY
We maintain product liability coverage in an amount of $3,000,000. Based
upon our experience, we believe this coverage is adequate and covers
substantially all of the exposure we may have with respect to our products. We
have never been the subject of any material product liability claims.
GOVERNMENT REGULATION
A fragrance is defined as a "cosmetic" under the Federal Food, Drug and
Cosmetics Act. A fragrance must comply with the labeling requirements of this
FDC Act as well as the Fair
12
Packaging and Labeling Act and its regulations. Some of our color cosmetic
products may contain menthol and are also classified as a "drug". Under U.S.
law, a product may be classified as both a cosmetic and a drug. Additional
regulatory requirements for products which are "drugs" include additional
labeling requirements, registration of the manufacturer and the semi-annual
update of a drug list.
Our fragrances are subject to the approval of the Bureau of Alcohol,
Tobacco and Firearms as a result of the use of specially denatured alcohol. So
far we have not experienced any difficulties in obtaining the required
approvals.
TRADEMARKS
Under various license agreements we have the right to use certain
registered trademarks throughout the world. These registered trademarks include:
o Burberry
o S.T. Dupont
o Paul Smith
o Christian Lacroix
o Celine
o Jordache
o FUBU
o Diane von Furstenberg, DVF, Diane von Furstenberg The Color
Authority, and Tatiana.
In addition, we are the registered trademark owner of:
o Intimate
o Aziza
o Regal Collections, Royal Selections
o Parfums Molyneux, Captain, Quartz and Lord
EMPLOYEES
As of March 1, 2003 we had 103 full-time employees world-wide. Of these,
46 are engaged in sales activities and 30 in administrative and marketing
activities.
As of March 1, 2003 we had 40 full-time United States employees. Of these,
13 were engaged in sales activities and 27 in administrative and marketing
activities.
We believe that our relationship with our employees is good.
FORWARD LOOKING INFORMATION AND RISK FACTORS
Statements in this document which are not historical in nature are
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and
13
other factors that may cause the actual results to be materially different from
projected results. Given these risks, uncertainties and other factors, persons
are cautioned not to place undue reliance on the forward-looking statements.
The following is a discussion of some of the material risk factors
relating to our business:
THE SUCCESS OF OUR PRODUCTS IS DEPENDENT ON PUBLIC TASTE.
Although we believe we have the ability and experience to recognize
valuable fragrances and cosmetic products and gauge trends in the cosmetic and
fragrance market, our revenues are substantially dependent on the success of our
products, which depends upon, among other matters, pronounced and rapidly
changing public tastes, factors which are difficult to predict and over which we
have little, if any, control. In addition, we have to develop successful
marketing, promotional and sales programs in order to sell our fragrances and
cosmetics. If we are not able to develop successful marketing, promotional and
sales programs, then such failure will have a material adverse effect on our
business, financial condition and operating results.
WE ARE DEPENDENT UPON MESSRS. JEAN MADAR AND PHILIPPE BENACIN, AND THE LOSS OF
THEIR SERVICES COULD HARM OUR BUSINESS.
Jean Madar, our Chief Executive Officer, and Philippe Benacin, our
President, are responsible for day-to-day operations as well as major decisions.
Termination of their relationships with us, whether through death, incapacity or
otherwise, could have a material adverse effect on our operations, and we cannot
assure you that qualified replacements can be found. We maintain key man
insurance on the lives of both Mr. Madar ($1 million) and Mr. Benacin ($2.8
million), however, we cannot assure you that we would be able to retain suitable
replacements for either Mr. Madar or Mr. Benacin.
WE ARE SUBJECT TO EXTREME COMPETITION IN BOTH THE PRESTIGE AND MASS MARKETS.
The market for fragrances and beauty related products is highly
competitive and sensitive to changing market preferences and demands. Many of
these companies have substantial financial resources and national marketing
campaigns.
The prestige fragrance and cosmetic industry is highly concentrated around
certain major players with resources far greater than ours. We compete with an
original strategy-- regular and methodical development of quality products for a
growing portfolio of internationally renowned brand names.
Mass market fragrances are characterized by competition primarily based
upon price. We feel the quality of our fragrance products, competitive pricing,
and our ability to quickly and efficiently develop and distribute new products,
will enable us to continue to effectively compete with these companies.
The market for name brand and mass market color cosmetics, as well as
health and beauty aids, is highly competitive, with several major cosmetic
companies marketing similar
14
products. However, we believe that brand recognition of the Aziza and Intimate
brand names, together with the quality and competitive pricing of our products,
enables us to compete with these companies in the mass market.
We cannot assure you that sufficient demand for our existing fragrances,
cosmetics and health and beauty aids will continue or that we will develop
future products that will withstand competition.
OUR RELIANCE ON THIRD PARTY MANUFACTURERS COULD HAVE A MATERIAL ADVERSE EFFECT
ON US.
We rely on outside sources to manufacture our fragrances and cosmetics.
The failure of such third party manufacturers to deliver either components or
finished goods on a timely basis could have a material adverse effect on our
business. Although we believe there are alternate manufactures available to
supply our requirements, we cannot assure you that current or alternative
sources will be able to supply all of our demands on a timely basis. We do not
intend to develop our own manufacturing capacity. As these are third parties
over which we have little or no control, the failure of such third parties to
provide components or finished goods on a timely basis could have a material
adverse effect on our business, financial condition and operating results.
THE INTERNATIONAL CHARACTER OF OUR BUSINESS RENDERS US SUBJECT TO FLUCTUATION IN
FOREIGN CURRENCY EXCHANGE RATES AND INTERNATIONAL TRADE TARIFFS, BARRIERS AND
OTHER RESTRICTIONS.
Approximately 23% of our Paris subsidiary's net sales are sold in US
dollars. In an effort to reduce our exposure to foreign currency exchange
fluctuations, we engage in a program of cautious hedging of foreign currencies
to minimize the risk arising from operations. Despite such actions, fluctuations
in foreign currency exchange rates for the U.S. dollar, particularly with
respect to the Euro, could have a material adverse effect on our operating
results. Possible import, export, tariff and other trade barriers, which could
be imposed by the United States, France, Canada or other countries might also
have a material adverse effect on our business.
OUR BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATION, WHICH COULD IMPACT OUR
OPERATIONS.
Fragrances and other cosmetics must comply with the labeling requirements
of the Federal Food, Drug and Cosmetics Act as well as the Fair Packaging and
Labeling Act and their regulations. Some of our color cosmetic products may also
be classified as a "drug". Additional regulatory requirements for products which
are "drugs" include additional labeling requirements, registration of the
manufacturer and the semi-annual update of a drug list.
Our fragrances are subject to the approval of the Bureau of Alcohol,
Tobacco and Firearms as a result of the use of specially denatured alcohol. So
far we have not experienced any difficulties in obtaining the required
approvals.
However, we cannot assure you that, should we develop or market fragrances
and cosmetics with different ingredients, or should existing regulations be
revised, we would not in the future experience difficulty in obtaining such
approvals.
15
WE MAY BECOME SUBJECT TO POSSIBLE LIABILITY FOR IMPROPER COMPARATIVE ADVERTISING
OR "TRADE DRESS".
Brand name manufacturers and sellers of brand name products may make
claims of improper comparative advertising or trade dress (packaging) with
respect to the likelihood of confusion between some of our mass market
fragrances, cosmetics and health and beauty aids, and those of brand name
manufacturers and sellers. They may seek damages for loss of business or
injunctive relief to seek to have the use of the improper comparative
advertising or trade dress halted. However, we believe that our displays and
packaging constitute fair competitive advertising and are not likely to cause
confusion between our products and others. Further, we have not experienced to
any material degree, any of such problems to date.
ITEM 2. PROPERTIES
Our corporate headquarters and United States operations are located in
approximately 9,000 square feet of office space at 551 Fifth Avenue, New York,
New York. These premises are leased for a term ending February 28, 2013. Our
monthly rental is approximately $27,000, which is subject to escalations.
Our Paris based subsidiary maintains offices located at 4 Rond Point Des
Champs Elysees, Paris, France, in approximately 6,000 square feet of leased
office space pursuant to three leases. The first lease is for approximately
4,000 square feet. The second lease is for approximately 2,000 square feet. Both
of these leases expire in July 2005, unless terminated earlier by either party
on six months written notice at three year specified intervals. The annual
rentals are 127,000 Euros for the first lease and 71,000 Euros for the second
lease. Rent is subject to escalations each July 1. The third lease is for the
fifth floor (approximately 1700 square feet for a term ending June 2007, at an
annual rent of approximately 52,000 Euros, which is subject to escalations.
In addition, we have a lease for approximately 2500 square feet of
additional office space at 18 avenue Franklin Roosevelt, Paris, France, for a
term ending April 2009, at an annual rental of approximately 90,000 Euros per
year, which is subject to escalations. We have the right to terminate earlier at
three year specified intervals.
We also occupy a 140,000 square foot distribution center at 60 Stults Road
in Dayton, New Jersey. We are leasing these premises for an eight year term
which expires October 2003 and requires monthly rental payments of approximately
$57,000. We are presently negotiating an extension of this lease.
Our French subsidiary has entered into an agreement with Sagatrans, S.A.
for warehousing and distribution services through July 2005 with an option to
extend until July 2008. Fees are calculated based upon a percentage of sales,
which are customary in the industry.
We believe our office and warehouse facilities are satisfactory for our
present needs and those for the foreseeable future.
16
ITEM 3. LEGAL PROCEEDINGS
BROSSEAU LAWSUIT
As previously reported, our French subsidiary, Inter Parfums, S.A., is a
party to litigation with Jean Charles Brosseau, S.A. ("Brosseau"), the licensor
of the Ombre Rose trademark. In October 1999, Inter Parfums, S.A. received
notice of a judgment in favor of Brosseau, which awarded damages of
approximately $600,000 and which directed Inter Parfums, S.A. to turn over its
license to Brosseau within six months.
Inter Parfums, S.A. is appealing the judgment as it vigorously and
categorically denies the claims of Brosseau. However, in June 2000, as a result
of certain developments, Inter Parfums, S.A. and its special litigation counsel
considered it likely that the judgment would be sustained and therefore took a
charge against earnings for $600,000, the full amount of the judgment.
In February 2001, the Court of Appeal confirmed the Brosseau claim with
respect to turning over the license. In addition, the Court named an expert to
proceed with additional investigations and required Inter Parfums, S.A. to pay
$142,000 as an advance for damages claimed by Brosseau.
Inter Parfums, S.A. is continuing its appeal as it still denies the claims
of Brosseau. Management does not believe that such litigation will have any
further material adverse effect on the financial condition or operations of the
Company.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our company's common stock, $.001 par value per share, is traded on The
Nasdaq Stock Market (National Market System) under the symbol "IPAR". The
following table sets forth in dollars, the range of high and low closing prices
for the past two fiscal years for our common stock.
-----------------------------------------------------------------
Fiscal 2002 High Closing Low Closing
Price Price
-----------------------------------------------------------------
Fourth Quarter $ 8.25 $ 5.18
-----------------------------------------------------------------
Third Quarter $ 7.98 $ 5.75
-----------------------------------------------------------------
Second Quarter $ 8.99 $ 6.94
-----------------------------------------------------------------
First Quarter $ 10.25 $ 6.60
-----------------------------------------------------------------
-----------------------------------------------------------------
Fiscal 2001 High Closing Low Closing
Price Price
-----------------------------------------------------------------
Fourth Quarter $ 8.85 $ 7.05
-----------------------------------------------------------------
Third Quarter $ 13.50 $ 7.50
-----------------------------------------------------------------
Second Quarter $ 9.60 $ 6.31
-----------------------------------------------------------------
First Quarter $ 7.41 $ 5.71
-----------------------------------------------------------------
As of 1 March 2003, the number of record holders, which include
brokers and broker's nominees, etc., of the company's common stock was 68.
We believe there are in excess of 600 beneficial owners of the company's
common stock.
DIVIDENDS
Commencing in March 2002, our Board of Directors authorized our first
cash dividend of $.06 per share per annum, payable $.015 per share
quarterly. The first cash dividend of $.015 per share was paid on 15 April
2002 to shareholders of record on 31 March 2002.
In March 2003, our board of directors increased the cash dividend to
$.08 per share per annum, payable $.02 per share on a quarterly basis. The
first cash dividend of $.02 per share is to be paid on 15 April 2003 to
shareholders of record on 31 March 2003.
18
Our Certificate of Incorporation provides for the requirement of
unanimous approval of the members of our board of directors for the
declaration or payment of dividends, if the aggregate amount of dividends to
be paid by us and our subsidiaries in any fiscal year is more than thirty
percent (30%) of our annual net income for the last completed fiscal year,
as indicated by our consolidated financial statements.
SALES OF UNREGISTERED SECURITIES
For the period consisting of the last quarter of the fiscal year ended
December 31, 2002, through the date of this report the following
unregistered equity securities were issued by us.
In December 2002, the Chief Executive Officer exercised an outstanding
stock option to purchase 132,000 shares of common stock, and the President
exercised two outstanding stock options to purchase an aggregate of 199,500
shares of common stock. The exercise prices of $381,348 for the Chief
Executive Officer and $613,818 for the President, respectively, were paid by
each of them tendering to us 46,419 and 74,721 shares of our common stock,
previously owned by the Chief Executive Officer and the President,
respectively, valued at $8.215 per share, the fair market value on the date
of exercise. All shares issued pursuant to these option exercises were
issued from our treasury stock. In addition, the Chief Executive Officer
tendered an additional 23,535 shares for payment of withholding taxes
resulting from the option exercises. As a result of this transaction, we
expect to receive a tax benefit of approximately $600,000, which has been
reflected as an increase to additional paid-in capital in the accompanying
financial statements. Each of the Chief Executive Officer and the President
agreed to hold their shares for investment and not with a view towards
distribution. The above transactions were exempt from the registration
requirements of Section 5 of the Securities Act under Sections 4(2) and 4(6)
of the Securities Act.
The following sets forth certain information as to all options granted
to purchase our common stock during the last quarter of the last fiscal year
and through the date of this report, which were not registered under the
Securities Act. In each of the transactions, we granted options to
affiliates (executive officers and directors) and employees. The
transactions were exempt from the registration requirements of Section 5 of
the Securities Act under Sections 4(2) and 4(6) of the Securities Act. Each
option holder agreed that, if the option is exercised, the option holder
would purchase his common stock for investment and not for resale to the
public.
On 20 December 2002, we granted options to purchase an aggregate of
191,950 shares for a five year period at the exercise price of $8.025 per
share, the fair market value at the time of grant, to 34 employees, 1
consultant and 5 executive officers under our 1999 Stock Option Plan.
On 24 January 2003, we granted options to purchase an aggregate of
7,500 shares for a five year period at the exercise price of $7.85 per
share, the fair market value at the time of grant, to 1 executive officer
under our 1999 Stock Option Plan.
On 3 February 2003, we granted options to purchase an aggregate of
10,000 shares for a five year period at the exercise price of $7.22 per
share, the fair market value at the time of grant, to 7 directors under our
2000 Non-Employee Director Stock Option Plan.
19
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data have been derived from our
financial statements, and should be read in conjunction with those financial
statements, including the related footnotes.
YEARS ENDED DECEMBER 31
(In Thousands Except Share and Per Share Data)
- ---------------------------------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
Income Statement Data:
- ---------------------------------------------------------------------------------------------------------------------
Net Sales $ 130,352 $ 112,233 $ 101,582 $ 87,140 $ 89,388
- ---------------------------------------------------------------------------------------------------------------------
Cost of Sales 69,760 57,887 51,873 45,325 47,417
- ---------------------------------------------------------------------------------------------------------------------
Selling, General and Administrative 43,072 39,624 37,509 31,965 32,944
- ---------------------------------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interest 17,581 15,456 13,539 9,868 9,164
- ---------------------------------------------------------------------------------------------------------------------
Net Income 9,405 8,119 6,589(1) 4,828 4,613
- ---------------------------------------------------------------------------------------------------------------------
Net Income per Share(2):
Basic $ .50 $ .46 $ .37 $ .28 $ .24
Diluted $ .47 $ .41 $ .34 $ .26 $ .23
- ---------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding(2):
Basic 18,776,988 17,834,945 17,590,106 17,081,828 19,591,402
Diluted 19,948,305 19,935,534 19,500,648 18,232,839 20,022,310
- ---------------------------------------------------------------------------------------------------------------------
- --------------
(1) Includes nonrecurring charges aggregating $0.6 million and a gain of
$0.6 million, all after taxes and minority interest. The charges represent an
accrual for exposure relating to pending litigation of $0.2 million and a
potential tax assessment of $0.4 million. The gain represents a realized gain on
the sale of marketable securities.
(2) Adjusted for 3:2 stock splits (50% stock dividends) paid in June 2000
and September 2001.
AS AT DECEMBER 31
(In Thousands Except Share and Per Share Data)
2002 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
- ---------------------------------------------------------------------------------------------------------------------
Working Capital $ 83,828 $ 68,204 $ 57,688 $ 53,390 $ 49,599
- ---------------------------------------------------------------------------------------------------------------------
Total Assets 129,370 102,539 94,571 87,223 87,739
- ---------------------------------------------------------------------------------------------------------------------
Long-Term Debt -0- 1,366 1,417 1,531 200
- ---------------------------------------------------------------------------------------------------------------------
Shareholders' Equity 80,916 65,091 55,061 52,361 53,680
- ---------------------------------------------------------------------------------------------------------------------
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
INTRODUCTION
We are a leading manufacturer and distributor of fragrances, cosmetics and
health and beauty aids. We combine innovation and creativity to produce quality
products for our customers around the world.
We operate in the fragrance and cosmetic industry, specializing in
prestige perfumes and mass market perfumes, cosmetics and health and beauty
aids:
o Prestige products - For each prestige brand, owned or licensed by us, we
develop an original concept for the perfume consistent with world market
trends.
o Mass market products - We design, market and distribute inexpensive
fragrances and personal care products, including alternative designer
fragrances, mass market cosmetics and health and beauty aids.
FORWARD LOOKING STATEMENTS
Statements in this document, which are not historical in nature, are
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to be
materially different from projected results. Given these risks, uncertainties
and other factors, persons are cautioned not to place undue reliance on the
forward-looking statements.
Such factors include effectiveness of sales and marketing efforts and
product acceptance by consumers, dependence upon management, competition,
currency fluctuation and international tariff and trade barriers, governmental
regulation and possible liability for improper comparative advertising or "Trade
Dress". For a discussion of important factors, please SEE FORWARD LOOKING
INFORMATION AND RISK FACTORS contained in Part I of this report.
RELATED PARTY TRANSACTIONS
We have entered into two (2) licenses with affiliates of our strategic
partner, LV Capital, USA Inc. ("LV Capital"), a wholly-owned subsidiary of
LVMH Moet Hennessy Louis Vuitton S.A. In May 2000 we entered into an
exclusive worldwide license for prestige fragrances for the Celine brand, and
in March 1999 we entered into an exclusive worldwide license for Christian
Lacroix fragrances. Both licenses are subject to certain minimum sales
requirements, advertising expenditures and royalty payments as are customary
in our industry.
21
RESULTS OF OPERATIONS
Net sales for the year ended December 31, 2002 increased 16% to a record
$130 million. For the year ended December 31, 2001, net sales were up 10%. At
comparable foreign currency exchange rates, net sales rose 12% in both 2002 and
2001. The increases in net sales are attributable to increases in both our
prestige and mass market product lines.
Prestige product sales, which were up approximately 13% in 2001, grew
another 12% in 2002. The growth in 2001 was the result of the continued global
roll-out of our Burberry Touch fragrance line. During 2001, we also continued
the geographic expansion of our Paul Smith fragrance line. In addition, in
October 2001, our Celine fragrance line debuted in the United States and France.
Our Celine fragrance launch began slowly in the weeks following September 11th
and prestige fragrance sales in general were slow for the first six months of
2002. However, we began to see a significant turnaround in July 2002, which
continued for the remainder of the year.
Prestige product sales growth in 2002 was spurred by increased global
distribution of our Celine brand, which has a strong following throughout
Western Europe and Japan. We also launched a new Christian Lacroix fragrance
line, Bazar, for men and women as well as two fragrance line extensions, Essence
Pure by S.T. Dupont and Paul Smith Extreme.
We have a strong line-up of new brands and brand extensions in our 2003
new product pipeline. In the spring of 2003 we plan to debut summer seasonal
fragrances for both our Celine and Christian Lacroix fragrance lines. During the
fourth quarter of 2003, we plan to unveil a completely new Burberry fragrance
line and in October 2003 we plan to launch a fragrance and cosmetic line under
the Diane von Furstenberg label.
With respect to our mass market product lines, sales gains were achieved
in all three of our principal product groups: mass market fragrances, Intimate
health and beauty aids and Aziza cosmetics, for an overall improvement of 27% in
2002. Sales growth in mass market fragrances stems from our acquisition of
certain fragrance brands from Tristar Corporation ("Tristar"), a
Debtor-in-possession in a Chapter 11 proceeding. In May 2002, we purchased
trademarks and related intellectual property of certain brands for $3.2 million,
and acquired certain existing inventory for approximately $3.7 million. Tristar
was one of our most significant competitors in mass market fragrances and the
brands acquired are being sold in the same distribution channels as that of our
other mass market fragrance lines. New product line extensions were the primary
reasons for the increased sales volume from our Intimate health and beauty aids
and Aziza cosmetic lines in 2002. We anticipate that there will be additional
mass market sales growth in 2003 as we will be selling Tristar brands for a full
year.
22
For 2001, our mass market product sales were up 5% as a result of the
initial launch of our Intimate health and beauty aid line, as well as the
continuing success of our Aziza line of cosmetics.
Our new product development program for all three of our principal mass
market product groups is well under way, and we expect to roll out new mass
market products throughout 2003. In addition, we are actively pursuing other new
business opportunities. However, we cannot assure you that any new license or
acquisitions will be consummated.
Gross profit margins were 46.5% in 2002, 48.4% in 2001 and 48.9% in 2000.
In 2001 and 2000, gross profit margins were ahead of our target rates of 45% to
46% primarily as a result of the strong dollar in relation to the Euro. This
results from the fact that certain European sales are denominated in US dollars.
In 2002, the weak US dollar reversed that trend. In addition, our prestige
fragrance lines, which in 2001 and 2000 grew at a faster rate than our mass
market lines, generate a higher gross profit margin than our mass market product
lines. In 2002, our mass market lines grew at a higher rate. If the dollar
remains weak throughout 2003, then gross margins are expected to hover around
our target rates of 45% to 46%.
Selling, general and administrative expenses aggregated $43.1 million in
2002, $39.6 million in 2001 and $37.5 million in 2000. As a percentage of sales,
selling, general and administrative expenses were 33%, 35% and 37% in 2002, 2001
and 2000, respectively. Our mass market sales do not require extensive
advertising and therefore, more of our selling, general and administrative
expenses are fixed rather than variable. As a result, the increase in mass
market sales enables us to spread our fixed costs over a larger net sales base.
On the other hand, promotion and advertising are prerequisites for sales of
designer products. We develop a complete marketing and promotional plan to
support our growing portfolio of prestige fragrance brands and to build upon
each brand's awareness. Promotion and advertising expense was approximately 14%
of prestige fragrance sales in 2002 and 2001, and 15% in 2000. In addition,
recent increases in certain fixed costs, including insurance, rent and wages, is
expected to cause a slight rise in selling, general and administrative expenses
going into 2003.
As previously reported, our French subsidiary, Inter Parfums, S.A., is a
party to litigation with Jean Charles Brosseau, S.A. ("Brosseau"), the licensor
of the Ombre Rose trademark. In October 1999, Inter Parfums, S.A. received
notice of a judgment in favor of Brosseau, which awarded damages of
approximately $600,000 and which directed Inter Parfums, S.A. to turn over its
license to Brosseau within six months.
Inter Parfums, S.A. is appealing the judgment as it vigorously and
categorically denies the claims of Brosseau. In June 2000, as a result of
certain developments, Inter Parfums, S.A. and its special litigation counsel
considered it likely that the judgment would be sustained and therefore took a
charge against earnings for $600,000, the full amount of the judgment. In
February 2001, the Court of Appeal confirmed the Brosseau claim with respect to
turning over the license. In addition, the Court named an expert to proceed with
additional investigations and required Inter Parfums, S.A. to pay $142,000 as an
advance for damages claimed by Brosseau.
23
Inter Parfums, S.A. is continuing its appeal as it still denies the claims
of Brosseau. We do not believe that such litigation will have any further
material adverse effect on our financial condition or operations.
During the year ended December 31, 2000 we sold marketable securities
and realized a gain of $1.4 million ($645,000 after taxes and minority
interest). On occasion, we invest excess cash in marketable securities,
which are classified as available-for-sale. These funds are available to
support current operations or to take advantage of other investment
opportunities. At December 31, 2000, we had no remaining marketable security
positions and there were no marketable security transactions in 2001 and 2002.
Interest expense aggregated $400,000, $300,000 and $400,000 for the years
ended December 31, 2002, 2001 and 2000, respectively. We use the credit lines
available to us, as needed, to finance our working capital needs.
Foreign currency gains or (losses) aggregated $(106,120), $100,000 and
$(200,000) for the years ended December 31, 2002, 2001 and 2000, respectively.
Occasionally, we enter into foreign currency forward exchange contracts to
manage exposure related to certain foreign currency commitments.
Our effective income tax rate was 36%, 37% and 42% for the years ended
December 31, 2002, 2001 and 2000, respectively. Tax rates in France declined
slightly in 2002 and the effective tax rate for the year ended December 31, 2000
included a $480,000 accrual to cover the potential exposure related to tax
audits of Inter Parfums, S.A. commenced by the French Tax Authorities. Excluding
such charge our effective tax rate for 2000 was 38%.
Net income increased 16% to $9.4 million in 2002 after increasing 23%
to $8.1 million in 2001. Net income for the year ended December 31, 2000
included charges of $630,000 and a gain of $645,000, all after taxes and
minority interest. The charges represent an accrual for exposure relating to
the Brosseau litigation of $260,000 and a potential tax assessment of
$370,000. The gain represents a realized gain on sale of marketable
securities.
Diluted earnings per share increased 15% to $0.47 in 2002 after
increasing 20% to $0.41 in 2001. Weighted average shares outstanding
aggregated 18.8 million, 17.8 million and 17.6 million for the years ended
December 31, 2002, 2001 and 2000, respectively. On a diluted basis, average
shares outstanding were 19.9 million, for both years ended December 31, 2002
and 2001 and 19.5 million in 2000.
LIQUIDITY AND FINANCED RESOURCES
Profitable operating results continue to strengthen our financial
position. At December 31, 2002, working capital aggregated $83.8 million and we
had a working capital ratio of 3.4 to 1. Cash and cash equivalents aggregated
$38.3 million and our net book value was $4.26 per outstanding share as of
December 31, 2002. Furthermore, we had no long-term debt.
24
On occasion we use a portion of our cash to make investments in marketable
equity securities classified as available-for-sale. These funds are available to
support current operations or to take advantage of other investment
opportunities. These investments are made to maximize our return on cash. As of
December 31, 2002 we had no marketable security positions.
Our short-term financing requirements are expected to be met by available
cash at December 31, 2002, cash generated by operations and short-term credit
lines provided by domestic and foreign banks. The principal credit facilities
for 2003 are a $12.0 million unsecured revolving line of credit provided by a
domestic commercial bank and approximately $12.0 million in credit lines
provided by a consortium of international financial institutions.
Cash provided by operating activities aggregated $12.7 million for the
year ended December 31, 2002 as compared to $7.0 million in 2001. At December
31, 2002, excluding the effect of foreign currency exchange rates, accounts
receivable and inventories were up 17% and 4%, respectively, from December 31,
2001. The 17% increase in accounts receivable is not unusual considering that
net sales for the three months and year ended December 31, 2002, in constant
dollars, were up 27% and 12%, respectively. The increase in inventories is
primarily attributable to the Tristar inventory purchased in connection with the
intellectual property acquisition in May 2002. In addition, we anticipate an
inventory buildup throughout 2003 to support our schedule of new product
launches.
Commencing in March 2002, our Board of Directors authorized our first cash
dividend of $.06 per share, approximately $1.1 million per annum, payable $.015
per share quarterly. The first cash dividend of $.015 per share was paid on 15
April 2002 to shareholders of record on 31 March 2002.
In March 2003, our board of directors increased the cash dividend to $.08
per share, approximately $1.5 million per annum, payable $.02 per share on a
quarterly basis. The first cash dividend of $.02 per share is to be paid on 15
April 2003 to shareholders of record on 31 March 2003. This increased cash
dividend represents a small part of our cash position and is not expected to
have any significant impact on our financial position.
In December 2002, the Chief Executive Officer exercised an outstanding
stock option to purchase 132,000 shares of common stock, and the President
exercised two outstanding stock options to purchase an aggregate of 199,500
shares of common stock. The exercise prices of $381,348 for the Chief Executive
Officer and $613,818 for the President, respectively, were paid by each of them
tendering to us 46,419 and 74,721 shares of our common stock, previously owned
by the Chief Executive Officer and the President, respectively, valued at $8.215
per share, the fair market value on the date of exercise. All shares issued
pursuant to these option exercises were issued from our treasury stock. In
addition, the Chief Executive Officer tendered an additional 23,535 shares for
payment of withholding taxes resulting from the option exercises. As a result of
this transaction, we expect to receive a tax benefit of approximately $600,000,
which has been reflected as an increase to additional paid-in capital in the
accompanying financial statements.
We believe that funds generated from operations, supplemented by our
present cash
25
position and available credit facilities, will provide us with sufficient
resources to meet all present and reasonably foreseeable future operating needs.
In January 1999, certain member countries of the European Union
established permanent fixed rates between their existing currencies and the
European Union's common currency, the Euro. The transition period for the
introduction of the Euro was completed on January 1, 2002. The introduction of
the Euro and the phasing out of other currencies have not had any material
impact on our consolidated financial statements.
Inflation rates in the U.S. and foreign countries in which we operate did
not have a significant impact on operating results for the year ended December
31, 2002.
CONTRACTUAL OBLIGATIONS
The following table sets for a schedule of our contractual obligations
over the periods indicated in the table, as well as our total contractual
obligations ($ in thousands).
- ---------------------------------------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD
- ---------------------------------------------------------------------------------------------------------
LESS THAN YEARS YEARS MORE THAN
TOTAL 1 YEAR 2-3 4-5 5 YEARS
-------------------------------------------------------------------
Long-Term Debt $ 0 $ 0 $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------
Capital Lease Obligations $ 0 $ 0 $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------
Operating Leases $ 9,530 $ 2,670 $ 3,816 $ 1,378 $ 1,666
- ---------------------------------------------------------------------------------------------------------
Purchase Obligations $ 0 $ 0 $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------
Other Long-Term Liabilities
Reflected on the Registrant's
Balance Sheet under GAAP $ 0 $ 0 $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------
Minimum Royalty Obligations $28,423 $ 3,251 $ 9,391 $ 7,688 $ 8,093
- ---------------------------------------------------------------------------------------------------------
Total $37,953 $ 5,921 $13,207 $ 9,066 $ 9,759
- ---------------------------------------------------------------------------------------------------------
DISCUSSION OF CRITICAL ACCOUNTING POLICIES
We make estimates and assumptions in the preparation of our financial
statements in conformity with accounting principles generally accepted in the
United States of America. Actual results could differ significantly from
those estimates under different assumptions and conditions. We believe that
the following discussion addresses our most critical accounting policies,
which are those that are most important to the portrayal of our financial
condition and results of operations and which require our management's most
difficult and subjective judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. The
following is a brief discussion of the more critical accounting policies that
we employ.
26
REVENUE RECOGNITION
We sell our products to department stores, perfumeries, mass market
retailers, supermarkets and domestic and international wholesalers and
distributors. Sales of such products by domestic subsidiaries are denominated in
U.S. dollars and sales of such products by foreign subsidiaries are primarily
denominated in either Euros or U.S. dollars. Accounts receivable reflect the
granting of credit to these customers. We generally grant credit based upon
analysis of the customer's financial position and previously established buying
patterns. We do not generally bill customers for shipping and handling costs
and, accordingly, classify such costs as selling and administrative expenses.
Revenues are recognized when merchandise is shipped and the risk of loss passes
to the customer. Net sales are comprised of gross revenues less returns and
trade discounts and allowances.
We do not generally allow customers to return their unsold products.
However, on a case-by-case basis we occasionally allow customer returns. We
regularly review and revise, as deemed necessary, our estimate of reserves for
future sales returns based primarily upon historic trends and relevant current
data. We record estimated reserves for sales returns as a reduction of sales,
cost of sales and accounts receivable. Returned products are recorded as
inventories and are valued based on estimated realizable value. The physical
condition and marketability of returned products are the major factors we
consider in estimating realizable value. Actual returns, as well as estimated
realizable values of returned products, may differ significantly, either
favorably or unfavorably, from estimates if factors such as economic conditions,
inventory levels or competitive conditions differ from expectations.
PROMOTIONAL ALLOWANCES
We have various performance-based arrangements with retailers to
reimburse them for all or a portion of their promotional activities related
to our products. These arrangements primarily allow customers to take
deductions against amounts owed to us for product purchases. Estimated
accruals for promotions and co-operative advertising programs are recorded in
the period in which the related revenue is recognized. We review and revise
the estimated accruals for the projected costs for these promotions. Actual
costs incurred may differ significantly, either favorably or unfavorably,
from estimates if factors such as the level and success of the retailers'
programs or other conditions differ from our expectations.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
principally determined by the first-in, first-out method. We record adjustments
to the cost of inventories based upon our sales forecast and the physical
condition of the inventories. These adjustments are estimates, which could vary
significantly, either favorably or unfavorably, from actual requirements if
future economic conditions or competitive conditions differ from our
expectations.
27
EQUIPMENT AND OTHER LONG-LIVED ASSETS
Equipment, which includes tools and molds, is recorded at cost and is
depreciated on a straight-line basis over the estimated useful lives of such
assets. Changes in circumstances such as technological advances, changes to our
business model or changes in our capital spending strategy can result in the
actual useful lives differing from our estimates. In those cases where we
determine that the useful life of equipment should be shortened, we would
depreciate the net book value in excess of the salvage value, over its revised
remaining useful life, thereby increasing depreciation expense. Factors such as
changes in the planned use of equipment could result in shortened useful lives.
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of any such asset may not be
recoverable. If the sum of the undiscounted cash flows (excluding interest) is
less than the carrying value, we recognize an impairment loss, measured as the
amount by which the carrying value exceeds the fair value of the asset. The
estimate of undiscounted cash flow is based upon, among other things, certain
assumptions about expected future operating performance. Our estimates of
undiscounted cash flow may differ from actual cash flow due to, among other
things, economic conditions, changes to our business model or changes in
consumer acceptance of our products. In those cases where we determine that the
useful life of other long-lived assets should be shortened, we would depreciate
the net book value in excess of the salvage value (after testing for impairment
as described above), over the revised remaining useful life of such asset
thereby increasing amortization expense.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
GENERAL
We address certain financial exposures through a controlled program of
risk management that primarily consists of the use of derivative financial
instruments. We primarily enter into foreign currency forward exchange contracts
in order to reduce the effects of fluctuating foreign currency exchange rates.
We do not engage in the trading of foreign currency forward exchange contracts
or interest rate swaps.
FOREIGN EXCHANGE RISK MANAGEMENT
We periodically enter into foreign currency forward exchange contracts to
hedge exposure related to receivables denominated in a foreign currency and to
manage risks related to future sales expected to be denominated in a foreign
currency. We enter into these exchange contracts for periods consistent with our
identified exposures. The purpose of the hedging activities is to minimize the
effect of foreign exchange rate movements on the receivables and cash flows of
Inter Parfums, S.A., our French subsidiary, whose functional currency is the
Euro. All foreign currency contracts are denominated in currencies of major
industrial countries and are with large financial institutions, which are rated
as strong investment grade.
28
All derivative instruments are required to be reflected as either assets
or liabilities in the balance sheet measured at fair value. Generally, increases
or decreases in fair value of derivative instruments will be recognized as gains
or losses in earnings in the period of change. If the derivative is designated
and qualifies as a cash flow hedge, the changes in fair value of the derivative
instrument will be recorded in other comprehensive income.
Before entering into a derivative transaction for hedging purposes, we
determine that the change in the value of the derivative will effectively offset
the change in the fair value of the hedged item from a movement in foreign
currency rates. Then, we measure the effectiveness of each hedge throughout the
hedged period. Any hedge ineffectiveness is recognized in the income statement.
We believe that our risk of loss as the result of nonperformance by any of
such financial institutions is remote and in any event would not be material.
The contracts have varying maturities with none exceeding one year. Costs
associated with entering into such contracts have not been material to our
financial results. At 31 December 2002, we had foreign currency contracts in the
form of forward exchange contracts in the amount of approximately U.S. $10.3
million and GB Pounds 2.3 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements commence on page F-1.
SUPPLEMENTARY DATA
QUARTERLY DATA (UNAUDITED)
FOR THE YEAR ENDED 31 DECEMBER 2002
(In Thousands Except Share and Per Share Data)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year
- ---------------------------------------------------------------------------------------------------------------------
Net Sales $ 28,418 $ 27,443 $ 37,374 $ 37,117 $ 130,352
- ---------------------------------------------------------------------------------------------------------------------
Cost of Sales 14,712 14,635 20,914 19,499 69,760
- ---------------------------------------------------------------------------------------------------------------------
Net Income 2,010 1,926 2,691 2,778 9,405
- ---------------------------------------------------------------------------------------------------------------------
Net Income per Share(1):
Basic $ .11 $ .10 $ .14 $ .15 $ .50
Diluted $ .10 $ .10 $ .14 $ .14 $ .47
- ---------------------------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding(1):
Basic 18,750,327 18,760,558 18,780,558 18,816,503 18,776,988
Diluted 19,961,367 20,022,039 19,877,170 19,935,392 19,948,305
- ---------------------------------------------------------------------------------------------------------------------
29
QUARTERLY DATA (UNAUDITED)
FOR THE YEAR ENDED 31 DECEMBER 2001
(In Thousands Except Share and Per Share Data)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Full Year
- ---------------------------------------------------------------------------------------------------------------------
Net Sales $ 31,043 $ 26,260 $ 27,628 $ 27,302 $ 112,233
- ---------------------------------------------------------------------------------------------------------------------
Cost of Sales 15,429 13,701 14,347 14,410 57,887
- ---------------------------------------------------------------------------------------------------------------------
Net Income 2,031 1,941 1,922 2,225 8,119
- ---------------------------------------------------------------------------------------------------------------------
Net Income per Share(1):
Basic $ .12 $ .11 $ .11 $ .12 $ .46
Diluted $ .10 $ .10 $ .10 $ .11 $ .41
- ---------------------------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding(1):
Basic 17,448,015 17,446,165 17,788,416 18,657,183 17,834,945
Diluted 19,639,935 19,985,022 20,166,681 19,950,482 19,935,534
- ---------------------------------------------------------------------------------------------------------------------
(1) Adjusted for 3:2 stock split (50% stock dividend) paid in September 2001.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
30
PART III
Item 10. Executive Officers And Directors Of Registrant
As of the date of this report, our executive officers and directors were
as follows:
- --------------------------------------------------------------------------
Name Position
- --------------------------------------------------------------------------
Jean Madar Chairman of the Board, Chief Executive Officer of
Inter Parfums, Inc. and Director General of
Inter Parfums, S.A.
- --------------------------------------------------------------------------
Philippe Benacin Vice Chairman of the Board, President of Inter
Parfums, Inc. and
President of Inter Parfums, S.A.
- --------------------------------------------------------------------------
Russell Greenberg Director, Executive Vice President and Chief
Financial Officer
- --------------------------------------------------------------------------
Francois Heilbronn Director
- --------------------------------------------------------------------------
Joseph A. Caccamo Director
- --------------------------------------------------------------------------
Jean Levy Director
- --------------------------------------------------------------------------
Robert Director
Bensoussan-Torres
- --------------------------------------------------------------------------
Daniel Piette Director
- --------------------------------------------------------------------------
Jean Cailliau Director
- --------------------------------------------------------------------------
Philippe Santi Director and Director of Finance, Inter Parfums, S.A.
- --------------------------------------------------------------------------
Serge Rosinoer Director
- --------------------------------------------------------------------------
Bruce Elbilia Executive Vice President
- --------------------------------------------------------------------------
Wayne Hamerling Executive Vice President
- --------------------------------------------------------------------------
Eric de Labouchere Director of Operations, Inter Parfums, S.A.
- --------------------------------------------------------------------------
Frederic Director of Export Sales, Inter Parfums, S.A.
Garcia-Pelayo
- --------------------------------------------------------------------------
The directors will serve until the next annual meeting of stockholders and
thereafter until their successors shall have been elected and qualified. LV
Capital USA, Inc. and Messrs. Jean Madar and Philippe Benacin have entered into
a Shareholders' Agreement relating to certain corporate governance issues,
including granting two seats on the Board of directors to designees of LV
Capital USA, Inc. LV Capital USA, Inc. and Messrs. Jean Madar and Philippe
Benacin have each agreed to vote for each others nominees for directors. The
number of members of our Board of Directors was increased to 11 by the addition
of Serge Rosinoer in December 2000 by the unanimous vote of our board.
With the exception of Mr. Benacin, the officers are elected annually by
the directors and serve at the discretion of the board of directors. There are
no family relationships between executive officers or directors of our company.
The following sets forth biographical information as to the business
experience of each executive officer and director of our company for at least
the past five years.
JEAN MADAR
Jean Madar, age 42, a Director, has been the Chairman of the Board of
Directors since the Company's inception, and is a co-founder of the Company with
Mr. Benacin. From inception until December 1993 he was the President of the
Company; in January 1994 he became Director General of Inter Parfums, S.A., the
Company's subsidiary; and in January 1997 he became Chief Executive Officer of
the Company. Mr. Madar was previously the managing director of Inter Parfums,
S.A., from September 1983 until June 1985. At such subsidiary, he had the
31
responsibility of overseeing the marketing operations of its foreign
distribution, including market research analysis and actual marketing campaigns.
Mr. Madar graduated from The French Higher School of Economic and Commercial
Sciences (ESSEC) in 1983.
PHILIPPE BENACIN
Mr. Benacin, age 44, a Director, has been the Vice Chairman of the Board
since September 1991, and is a co-founder of the Company with Mr. Madar. He was
elected the Executive Vice President in September 1991, Senior Vice President in
April 1993, and President of the Company in January 1994. In addition, he has
been the President of Inter Parfums, S.A. for more than the past five years. Mr.
Benacin graduated from The French Higher School of Economic and Commercial
Sciences (ESSEC) in 1983.
RUSSELL GREENBERG
Mr. Greenberg, age 46, the Chief Financial Officer, was Vice-President,
Finance when he joined the Company in June 1992; became Executive Vice President
in April 1993; and was appointed to the Board of Directors in February 1995. He
is a certified public accountant licensed in the State of New York, and is a
member of the American Institute of Certified Public Accountants and the New
York State Society of Certified Public Accountants. After graduating from The
Ohio State University in 1980, he was employed in public accounting until he
joined the Company in June 1992.
FRANCOIS HEILBRONN
Mr. Heilbronn, age 42, a Director since 1988 and a member of the audit,
stock option and executive compensation committees, is a graduate of Harvard
Business School with a Master of Business Administration degree and is currently
the managing partner of the consulting firm of M.M. Friedrich, Heilbronn &
Fiszer. He was formerly employed by The Boston Consulting Group, Inc. from 1988
through 1992 as a manager. Mr. Heilbronn graduated from Institut D' Etudes
Politiques De Paris in June 1983. From 1984 to 1986, he worked as a financial
analyst for Lazard Freres & Co.
JOSEPH A. CACCAMO
Mr. Caccamo, age 47, a Director since 1992, is an attorney with the law
firm of Becker & Poliakoff, P.A., our general counsel. A member of both the New
York and Florida bars, Mr. Caccamo has been a practicing attorney since 1981,
concentrating in the areas of corporate and securities law, and in September
1991 he became counsel to us. From August 1992 through September 1997, he was a
director of and general counsel to, Hydron Technologies, Inc., a publicly traded
company primarily engaged in the development of cosmetic and personal care
products.
32
JEAN LEVY
Jean Levy, age 70, a Director since August 1996 and a member of the audit,
stock option and executive compensation committees, worked for twenty-seven
years at L'Oreal, and was the President and Chief Executive Officer of Cosmair,
the exclusive United States licensee of L'Oreal, from 1983 through June 1987. In
addition, he is the former President and Chief Executive Officer of Sanofi
Beaute (France). For the more than the past five years, Mr. Levy has been an
independent advisor as well as a consultant for economic development to local
governments in France. A graduate of "l'Institut d'Etudes Politiques de Paris,"
he also attended Yale Graduate School and was a recipient of a Fulbright
Scholarship. He was also a Professor at "l'Institut d'Etudes Politiques de
Paris". Mr. Levy is also a director of Rallye, S.A. He was formerly a director
of Zannier Group and Escada Beaute Worldwide. In addition, Mr. Levy is also a
director (Chairman of the Board until he resigned in October 2001) of Financiere
d'Or, and its subsidiary, Histoire d'Or which is in the retail jewelry business.
Mr. Levy is also a consultant to Ernst & Young, Paris.
ROBERT BENSOUSSAN-TORRES
Robert Bensoussan-Torres, age 45, has been a Director since March 1997. In
November 2001, he became the Chief Executive Officer of Jimmy Choo Ltd., a
luxury shoe and ready to wear accessory company. From 1999 to December 2000, he
was the Managing Director of Gianfranco Ferre fashion group, based in Milano,
Italy. Mr. Bensoussan-Torres is a Director of Towers Consulting Europe, Ltd.
Towers Consulting Europe, Ltd. is a consulting company based in London, which
specializes in strategic advise in connection with mergers and acquisitions in
the luxury goods business. Mr. Bensoussan-Torres was the Chief Executive Officer
of Christian Lacroix, Paris, a subsidiary of LVMH Group, from February 1993
until May 1998. Christian Lacroix is a French Haute Couture House and has
activities in the field of apparel, accessories and fragrances. From December
1990 through January 1993 he was based in Munich, Germany, as the International
Sales Director of The Escada Group.
DANIEL PIETTE
Mr. Piette, age 57 and a director since December 1999, is also a member of
the executive compensation committee of the Board of Directors. Mr. Piette is
the President of L Capital Management, a private equity fund sponsored by LVMH
Moet Hennessy Louis Vuitton S.A. ("LVMH"), the world's largest luxury goods
conglomerate. For the past 12 years, he has been a Group Executive Vice
President of LVMH. Mr. Piette is also a non-executive director of D.S. Smith
Holdings PLC (London) as well as a member of the Board of Overseers of ESSEC
(Paris) and Columbia Business School (New York).
JEAN CAILLIAU
Mr. Cailliau, age 40 and a director since December 1999, is also a member
of the audit and the stock option committees of the Board of Directors. Through
June 2001, Mr. Cailliau was the Deputy General Manager of LV Capital SA, the
investment arm of LVMH. He is the CEO of LV Capital USA Inc., its United States
vehicle. In January 2001 he became a Directeur of L
33
Capital Management, a private equity fund sponsored by LVMH. For the past 10
years, Mr. Cailliau has held executive positions at LVMH. He is also a Director
of various European companies. Mr. Cailliau is an Engineer in Agronomics and has
an MBA (1988) from Insead.
SERGE ROSINOER
Mr. Rosinoer, age 70, was appointed to the Board of Directors in December
2000. Mr. Rosinoer has devoted most of his career to the personal care,
cosmetics and fragrance industry. In 1978, Mr. Rosinoer joined the Clarins Group
as Vice President and Chief Operating Officer where he was largely responsible
for its rapid international expansion. As COO, then CEO since 1978, Mr. Rosinoer
oversaw the transformation of Clarins into a major force in cosmetics, skin care
and fragrance, with annual sales of approximately 600 million Euro and more than
4,000 employees. He retired from active duty in June of 2000, but continues to
serve on the board of directors of Clarins. Earlier in his career he was
President of Parfums Corday. He also held senior level executive positions at
Max Factor, where he had full supervision of that cosmetics company's European
production and sales. Mr. Rosinoer has served several terms as President of the
French Prestige Cosmetics Association and currently serves as Conseiller du
Commerce Exterieur de la France.
BRUCE ELBILIA
Mr. Elbilia, age 44, Executive Vice President, joined the Company in June
1986 as the National Sales Director, and from that time until 1994, he was in
charge of the Company's marketing efforts. From 1994 to 2001, Mr. Elbilia was
head of international sales and marketing for United States operations, and had
expanded export sales to South America, the Middle East and Eastern Europe. In
2001, Mr. Elbilia became head of our US prestige fragrance and cosmetic
marketing team. Mr. Elbilia received a Bachelor of Business Administration
degree, with a major in International Business/Marketing from George Washington
University in Washington, D.C.
WAYNE C. HAMERLING
Mr. Hamerling, age 46, was Vice President, Sales, from May 1987 through
April 1993, when he became Executive Vice President. Mr. Hamerling has over
twenty (20) years experience in the fragrance and cosmetic business. Mr.
Hamerling, who attended Rutgers University, has also been actively involved in
marketing of our United States mass market business for the past three (3)
years, and helped develop our Aziza line and our new health and beauty aid line.
PHILIPPE SANTI
Philippe Santi, age 41 and a Director since December 1999, has been the
Director of Finance and the Chief Financial Officer of Inter Parfums, S.A. since
February 1995. Mr. Santi is a Certified Accountant and Statutory Auditor in
France.
34
ERIC DE LABOUCHERE
Eric de Labouchere, age 48, is the Director of Operations of Inter
Parfums, S.A. He has been employed by Inter Parfums, S.A. since October 1986 in
product development, purchasing and marketing.
FREDERIC GARCIA-PELAYO
Frederic Garcia-Pelayo, age 44, has been the Director of Export Sales of
Inter Parfums, S.A. since September 1994. Prior to September 1994, Mr.
Garcia-Pelayo was the Export Manager for Benetton Perfumes for seven (7) years.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and any amendments to such
forms furnished to us, and written representations from various reporting
persons furnished to us, except as set forth below, we are not aware of any
reporting person who has failed to file the reports required to be filed under
Section 16(a) of the Securities Exchange Act of 1934 on a timely basis.
Serge Rosinoer failed to file Forms 4 disclosing eight (8) purchases
aggregating 11,800 of common stock that were made from 15 March 2001 through 3
April 2001. In addition, he failed to timely file a Form 5 for 2001 indicating
his failure to file the required Forms 4. In March 2003, Mr. Rosinoer filed a
Form 5 for 2001 disclosing such sales as well as an amendment to a Form 4 filed
in February 2003 disclosing the grant of a stock option.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded to,
earned by or paid to, our Chief Executive Officer and each of the four most
highly compensated executive officers of our company whose compensation exceeded
$100,000 per annum for services rendered in all capacities to our company and
its subsidiaries during fiscal years ended 31 December 2002, 31 December 2001
and 31 December 2000:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Awards
- ----------------------------------------------------------------------------------------------------------------------------------
Securities
Other Annual Underlying
Compensation Options All Other
Name and Principal Position Year Salary($) Bonus ($) ($) (#)(1) Compensation
- ----------------------------------------------------------------------------------------------------------------------------------
Jean Madar, Chairman of the Board, Chief 2002 330,000 200,000 703,032(2) 50,000(5) -0-
Executive Officer of Inter Parfums, Inc. and 2001 330,000 150,000 6,709,215(3) 50,000 -0-
Director General of Inter Parfums, S.A 2000 280,000 100,000 273,000(4) -0-(6) -0-
- ----------------------------------------------------------------------------------------------------------------------------------
35
- ----------------------------------------------------------------------------------------------------------------------------------
Philippe Benacin(7), President of Inter Parfums, 2002 128,250 78,850 1,075,075(8) 50,000(5) -0-
Inc. and President of Inter Parfums, S.A 2001 117,872 67,804 6,712,215(9) 50,000 -0-
2000 117,318 65,642 278,000(10) -0-(6) -0-
- ----------------------------------------------------------------------------------------------------------------------------------
Russell Greenberg, Executive Vice President 2002 275,000 58,000 135,268(11) 18,000 -0-
and Chief Financial Officer 2001 260,000 18,000 70,315(12) 18,000 -0-
2000 245,000 13,000 69,174(13) 18,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------------
Bruce Elbilia, Executive Vice President 2002 198,000 -0- 33,472(14) 18,000 -0-
2001 198,000 -0- 40,365(15) 18,000 -0-
2000 178,000 10,000 24,752(16) 18,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------------
Wayne C. Hamerling, Executive Vice President 2002 196,120 15,000 256,389(17) 18,000 -0-
2001 186,120 15,000 65,563(18) 18,000 -0-
2000 176,120 10,000 111,438(19) 18,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------------
[Footnotes to Table]
- ------------------------------------
(1) Adjusted to reflect 3:2 stock splits (50% stock dividends) paid in June
2000 and September 2001.
(2) Consists of $703,032 realized upon exercise of options.
(3) Consists of lodging expenses of $48,000 and $6,661,215 realized upon
exercise of options.
(4) Consists of lodging expenses of $48,000 and $225,000 realized upon
exercise of options.
(5) Options to purchase 6,500 shares of Inter Parfums, S.A. were granted.
(6) Options to purchase 5,334 shares of Inter Parfums, S.A. were granted.
(7) Compensation figures for Mr. Benacin are approximate, as he was paid in
Euros, and conversion into U.S. dollars was made at the average exchange
rates prevailing during the respective periods.
(8) Consists of lodging expenses of $35,000, $15,000 for automobile expenses
and $1,025,075 realized upon exercise of options.
(9) Consists of lodging expenses of $38,000, $15,000 for automobile expenses
and $6,661,215 realized upon exercise of options.
(10) Consists of lodging expenses of $38,000, $15,000 for automobile expenses
and $225,000 realized upon exercise of options.
(11) Consists of $2,214 for automobile expenses and $133,054 realized upon the
exercise of options.
(12) Consists of $2,214 for automobile expenses and $68,161 realized upon
exercise of options.
(13) Consists of $2,214 for automobile expenses and $67,500 realized upon
exercise of options.
(14) Consists of selling commissions.
(15) Consists of selling commissions.
(16) Consists of selling commissions.
(17) Consists of selling commissions of $75,950; non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile;
and $175,949 realized upon the exercise of options.
(18) Consists of selling commissions of $61,063; non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile;
and $9,954 realized upon the exercise of options.
(19) Consists of selling commissions of $54,438; non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile;
and $52,500 realized upon the exercise of options.
The following table sets forth certain information relating to stock
option grants during Fiscal 2002 to our Chief Executive Officer and each of the
four most highly compensated executive officers of the company whose
compensation exceeded $100,000 per annum for services rendered in all capacities
to our company and its subsidiaries during Fiscal 2002:
36
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized Value at
Assumed Annual Rates of Stock
Individualized Grants
Price Appreciation for Option Term
- ----------------------------------------------------------------------------------------------------------------------------
Name Number of % of Total Exercise or Expiration Five (5%) Ten (10%)
Securities Options/SARs Base Price Date Percent($) Percent ($)
Underlying Granted to ($/Sh)
Options Employees in
Granted (#) Fiscal Year
- ----------------------------------------------------------------------------------------------------------------------------
Jean Madar 50,000 27.5 8.025 19 Dec 07 110,858 244,967
- ----------------------------------------------------------------------------------------------------------------------------
Philippe Benacin 50,000 27.5 8.025 19 Dec 07 110,858 244,967
- ----------------------------------------------------------------------------------------------------------------------------
Russell Greenberg 18,000 9.9 8.025 19 Dec 07 39,909 88,188
- ----------------------------------------------------------------------------------------------------------------------------
Bruce Elbilia 18,000 9.9 8.025 19 Dec 07 39,909 88,188
- ----------------------------------------------------------------------------------------------------------------------------
Wayne Hamerling 18,000 9.9 8.025 19 Dec 07 39,909 88,188
- ----------------------------------------------------------------------------------------------------------------------------
The following table sets forth certain information relating to option
exercises effected during Fiscal 2002, and the value of options held as of
December 31, 2002 by each of our Chief Executive Officer and the four most
highly compensated executive officers of our company whose compensation exceeded
$100,000 per annum for services rendered in all capacities to our company and
its subsidiaries during Fiscal 2002:
AGGREGATE OPTION EXERCISES FOR FISCAL 2002
AND YEAR END OPTION VALUES
Number of Value(1) of
Unexercised Options Unexercised
at December 31, In-the-Money Options
2002(#) at December 31,
2002($)
- -------------------------------------------------------------------------------------------------------------------------
Shares Acquired Value ($) Exercisable/ Exercisable/
Name on Exercise Realized(2) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
Jean Madar(3) 132,000 703,032 786,250/ 0 3,497,825/ 0
- -------------------------------------------------------------------------------------------------------------------------
Philippe Benacin(3) 195,500 1,025,075 718,750/ 0 3,207,875/ 0
- -------------------------------------------------------------------------------------------------------------------------
Russell Greenberg 30,250 133,054 95,750/ 0 264,271/ 0
- -------------------------------------------------------------------------------------------------------------------------
Bruce Elbilia 0 N.A. 54,000/ 0 47,820/ 0
- -------------------------------------------------------------------------------------------------------------------------
Wayne C. Hamerling 38,025 175,949 85,750/ 0 212,426/ 0
- -------------------------------------------------------------------------------------------------------------------------
37
(1) Total value of unexercised options is based upon the fair market value of
the common stock as reported by the Nasdaq Stock Market of $7.74 on 31
December 2002.
(2) Value realized in dollars is based upon the difference between the fair
market value of the common stock on the date of exercise, and the exercise
price of the option, or the fair market value of the net amount of shares
received upon exercise of options.
(3) In December 2002, the Chief Executive Officer exercised an outstanding
stock option to purchase 132,000 shares of common stock, and the President
exercised two outstanding stock options to purchase an aggregate of
199,500 shares of common stock. The exercise prices of $381,348 for the
Chief Executive Officer and $613,886 for the President, respectively, were
paid by each of them tendering to us 46,421 and 74,721 shares of our
common stock, previously owned by the Chief Executive Officer and the
President, respectively, valued at $8.215 per share, the fair market value
on the date of exercise. In addition, the Chief Executive Officer tendered
an additional 23,535 shares for payment of withholding taxes resulting
from the option exercises.
EMPLOYMENT AGREEMENTS
As part of our acquisition in 1991 of the controlling interest in Inter
Parfums, S.A., now a subsidiary, we entered into an employment agreement with
Philippe Benacin. The agreement provides that Mr. Benacin will be employed as
Vice Chairman of the Board and President and Chief Executive Officer of Inter
Parfums Holdings and its subsidiary, Inter Parfums. The initial term expired on
September 2, 1992, and has subsequently been automatically renewed for
additional annual periods. The agreement provides for automatic annual renewal
terms, unless either party terminates the agreement upon 120 days notice. Mr.
Benacin presently receives an annual salary of 135,000 Euros, which is
approximately US$120,000, together with annual lodging expenses of approximately
$38,000 and automobile expenses of approximately $15,000, which are subject to
increase in the discretion of the Board of Directors. The agreement also
provides for indemnification and a covenant not to compete for one year after
termination of employment.
COMPENSATION OF DIRECTORS
All nonemployee directors receive $1,000 for each board meeting at which
they participate. Mr. Caccamo's board fees are paid to his law firm.
In March 1997 our Board of Directors adopted our 1997 Nonemployee Stock
Option Plan. This plan was approved by our stockholders at the annual meeting of
shareholders held in July 1997. The purpose of this plan is to assist us in
attracting and retaining key directors who are responsible for continuing the
growth and success of our company
Our 1997 Nonemployee Stock Option Plan provides for the grant of
nonqualified stock options to nonemployee directors to purchase an aggregate of
25,000 shares of common stock. Options to purchase 1,000 shares are granted on
each February 1st to all nonemployee directors for as long as each is a
nonemployee director on such date except for Joseph A. Caccamo, who is granted
options to purchase 4,000 shares. Options to purchase 2,000 shares are granted
to each nonemployee director upon his initial election or appointment to our
board.
In December 2000 our Board of Directors adopted our 2000 Nonemployee Stock
Option Plan, as substantially all of the shares reserved under our 1997
Nonemployee Stock Option Plan had been allocated to outstanding options. This
plan was approved by our stockholders at the
38
annual meeting of shareholders held in July 2001. The purpose of this plan is to
assist us in attracting and retaining key directors who are responsible for
continuing the growth and success of our company.
Our 2000 Nonemployee Stock Option Plan provides for the grant of
nonqualified stock options to nonemployee directors to purchase an aggregate of
30,000 shares of common stock. Options to purchase 1,000 shares are granted on
each February 1st to all nonemployee directors for as long as each is a
nonemployee director on such date except for Joseph A. Caccamo, who is granted
options to purchase 4,000 shares. Options to purchase 2,000 shares are granted
to each nonemployee director upon his initial election or appointment to our
board.
On 3 February 2003, options to purchase 1,000 shares were granted to each
of Francois Heilbronn, Jean Levy, Robert Bensoussan-Torres, Daniel Piette, Jean
Cailliau and Serge Rosinoer, and an option to purchase 4,000 shares was granted
to Joseph A. Caccamo at the exercise price of $7.22 per share under the 2000
plan. The options held by Mr. Caccamo are held as nominee for his present law
firm.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 15, 2003 with
respect to the beneficial ownership of our common stock by (a) each person we
know to be the beneficial owner of more than five percent of our outstanding
common stock, (b) our executive officers and directors and (c) all of our
directors and officers as a group. As of March 15, 2003, we had 18,978,007
shares of common stock outstanding.
- --------------------------------------------------------------------------------
Amount of Approximate
Name and Address Beneficial Percent
of Beneficial Owner Ownership(1) of Class
- --------------------------------------------------------------------------------
Jean Madar 6,620,667(2) 33.5%
c/o Inter Parfums, S.A
4, Rond Point Des Champs Elysees
75008 Paris, France
- --------------------------------------------------------------------------------
Philippe Benacin 6,442,786(3) 32.7%
c/o Inter Parfums, S.A
4, Rond Point Des Champs Elysees
75008 Paris, France
- --------------------------------------------------------------------------------
- ------------------------
(1) All shares of common stock are directly held with sole voting power and sole
power to dispose, unless otherwise stated. Jean Madar, the Chairman of the Board
and Chief Executive Officer of Inter Parfums, Inc. (the "Company"), Philippe
Benacin, the Vice Chairman of the Board and President of the Company, and LV
Capital USA, Inc., an indirect subsidiary of LVMH Moet Hennessy Louis Vuitton,
S.A., have entered into a Shareholders' Agreement dated 22 November 1999
relating to certain corporate governance issues, including the agreement to vote
for Jean Madar, Philippe Benacin and six (6) nominees of Messrs. Madar and
Benacin, and two (2) designees of LV Capital USA, Inc., as directors of the
Company.
(2) Consists of 5,834,417 shares held directly and options to purchase 786,250
shares.
(3) Consists of 5,724,036 shares held directly and options to purchase 718,750
shares.
39
- --------------------------------------------------------------------------------
Russell Greenberg 105,750(4) Less than 1%
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
- --------------------------------------------------------------------------------
Francois Heilbronn 20,375(5) Less than 1%
60 Avenue de Breteuil
75007 Paris, France
- --------------------------------------------------------------------------------
Joseph A. Caccamo, Esq 14,000(6) Less than 1%
Becker & Poliakoff, P.A
3111 Stirling Road
Ft. Lauderdale, FL 33312
- --------------------------------------------------------------------------------
Jean Levy 10,250(7) Less than 1%
Chez Axcess Groupe
8 rue de Berri
75008 Paris, France
- --------------------------------------------------------------------------------
Robert Bensoussan Torres 10,250(8) Less than 1%
7 Beaufort Gardens, Flat 3
London, England SW3 1PT
- --------------------------------------------------------------------------------
Bruce Elbilia 54,000(9) Less than 1%
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
- --------------------------------------------------------------------------------
Wayne C. Hamerling 95,750(10) Less than 1%
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
- --------------------------------------------------------------------------------
Daniel Piette 8,000(11) Less than 1%
LV Capital
18 rue Francois 1er
75008, Paris, France
- --------------------------------------------------------------------------------
Jean Cailliau 8,000(12) Less than 1%
LV Capital
18 rue Francois 1er
75008, Paris, France
- --------------------------------------------------------------------------------
- ------------------------
(4) Consists of 10,000 shares held directly and options to purchase 95,750
shares.
(5) Consists of 12,375 shares held directly and options to purchase 8,000
shares.
(6) Consists of shares of common stock underlying options., which are held as
nominee for his employer. Beneficial ownership of such shares is disclaimed.
(7) Consists of 2,250 shares held directly and options to purchase 8,000 shares.
(8) Consists of 2,250 shares held directly and options to purchase 8,000 shares.
(9) Consists of shares of common stock underlying options.
(10) Consists of 10,000 shares held directly and options to purchase 85,750
shares.
(11) Consists of shares of common stock underlying options. Beneficial ownership
of shares of common stock held by LV Capital USA, Inc. is disclaimed.
(12) Consists of shares of common stock underlying options. Beneficial ownership
of shares of common stock held by LV Capital USA, Inc. is disclaimed.
40
- --------------------------------------------------------------------------------
Philippe Santi 15,000(13) Less than 1%
Inter Parfums, S.A
4, Rond Point Des Champs Elysees
75008, Paris France
- --------------------------------------------------------------------------------
Serge Rosinoer 22,700(14) Less than 1%
14 rue LeSueur
75116 Paris, France
- --------------------------------------------------------------------------------
Eric de Labouchere 0 NA
Inter Parfums, S.A
4, Rond Point Des Champs Elysees
75008, Paris France
- --------------------------------------------------------------------------------
Frederic Garcia Pelayo 0 NA
Inter Parfums, S.A
4, Rond Point Des Champs Elysees
75008, Paris France
- --------------------------------------------------------------------------------
LV Capital USA, Inc. 3,653,550 19.3%
19 East 57th Street
New York, NY 10022
- --------------------------------------------------------------------------------
Dimensional Fund Advisors, Inc. 1,130,451(15) 6.0%
1299 Ocean Avenue, 11th Fl
Santa Monica, CA 90401
- --------------------------------------------------------------------------------
Cannell Capital LLC 978,375(16) 5.2%
150 California Street
San Francisco, CA 94111
- --------------------------------------------------------------------------------
All Directors and Officers 17,065,078(17) 82.1%
as a Group (15 Persons)
- --------------------------------------------------------------------------------
- ------------------------
(13) Consists of shares of common stock underlying options.
(14) Consists of 17,700 shares held directly and options to purchase 5,000
shares.
(15) Information is derived from a Schedule 13G amendment filed on 10 February
2003 of Dimensional Fund Advisor Inc., ("Dimensional"), an investment advisor.
Dimensional furnishes investment advice to four investment companies (the
"Funds"). Dimensional possesses voting and/or investment power over our common
stock that is owned by the Funds, and may be deemed to be the beneficial owner
of such shares. However, all such shares are owned by the Funds, and Dimensional
disclaims beneficial ownership of shares.
(16) Information is derived from a Schedule 13G amendment filed on 14 February
2003 by (i) Cannell Capital, LLC, a registered investment adviser ("IA"), (ii)
J. Carlo Cannell ("Managing Member"), and certain of its investment advisory
clients. IA has discretionary authority to buy, sell, and vote shares of our
common stock for its investment advisory clients. Managing Member's beneficial
ownership of our common stock is indirect as a result of Managing Member's
ownership and management of IA.
(17) Consists of 11,613,028 shares held directly, and options to purchase
1,798,500 shares. It also includes 3,653,550 shares held by LV Capital USA,
Inc., an affiliate of LVMH Moet Hennessy Louis Vuitton, S.A.
41
The following table sets forth certain information as of the end of our
last fiscal year regarding all equity compensation plans that provide for the
award of equity securities or the grant of options, warrants or rights to
purchase our equity securities.
EQUITY COMPENSATION PLAN INFORMATION
- --------------------------------------------------------------------------------
Plan category Number of Number of
Weighted securities
securities to -averagage remaining
be issued exercise available for
upon price of future
exercise of outstanding issuance
outstanding options, under equity
options, warrants compensation
warrants and and rights plans
rights (excluding
securities
reflected in
column (a))
(a) (b) (c)
- --------------------------------------------------------------------------------
Equity compensation plans 1,969,162 $3.90 528,729
approved by security holders
- --------------------------------------------------------------------------------
Equity compensation plans not -0- N/A -0-
approved by security holders
- --------------------------------------------------------------------------------
Total 1,969,162 $3.90 528,729
- --------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH FRENCH SUBSIDIARIES
In connection with the acquisitions by our subsidiary, Inter Parfums, S.A.,
of the world-wide rights under the Burberry license agreement and the Paul Smith
license agreement, we guaranteed the obligations of Inter Parfums, S.A. under
the Burberry and Paul Smith license agreements.
OPTION EXERCISE PAID WITH TENDER OF SHARES
In December 2002, the Chief Executive Officer exercised an outstanding
stock option to purchase 132,000 shares of common stock, and the President
exercised two outstanding stock options to purchase an aggregate of 199,500
shares of common stock. The exercise prices of $381,348 for the Chief Executive
Officer and $613,818 for the President, respectively, were paid by each of them
tendering to us 46,419 and 74,721 shares of our common stock, previously owned
by the Chief Executive Officer and the President, respectively, valued at $8.215
per share, the fair market value on the date of exercise. All shares issued
pursuant to these option exercises were issued from our treasury stock. In
addition, the Chief Executive Officer tendered an additional 23,535 shares for
payment of withholding taxes resulting from the option exercises. As a result of
this transaction, we expect to receive a tax benefit of approximately $600,000,
42
which has been reflected as an increase to additional paid-in capital in the
accompanying financial statements.
REMUNERATION OF COUNSEL
Joseph A. Caccamo, a director, is a senior attorney at the law firm of
Becker & Poliakoff, P.A., our general counsel. In Fiscal 2002, we paid Becker &
Poliakoff, P.A. an aggregate of $191,202, for legal fees and reimbursement of
disbursements incurred on our behalf.
On 3 February 2003 in accordance with the terms of our 2000 Nonemployee
Stock Option Plan, Mr. Caccamo was granted an option with a term of five years
to purchase 4,000 shares at $7.22 per share, the fair market value at the time
of grant. He holds this option as nominee for his firm.
TRANSACTIONS WITH LVMH MOET HENNESSY LOUIS VUITTON S.A.
ACQUISITION OF COMMON STOCK AND SHAREHOLDERS' AGREEMENT
In November 1999, LV Capital, USA Inc. ("LV Capital"), a wholly-owned
subsidiary of LVMH Moet Hennessy Louis Vuitton S.A., purchased shares of our
common stock from management and employees, and increased its beneficial
ownership of our common stock to approximately 20% of our outstanding shares.
Further, in return for LV Capital becoming our strategic partner, LV Capital was
granted the right to buy additional shares in order to maintain its percentage
ownership upon issuance of shares to third parties, subject to certain
exceptions, and was granted demand registrations rights for all of its shares.
In addition, LV Capital has agreed to a standstill agreement, which limits the
amount of shares of common stock that LV Capital can hold to twenty-five percent
(25%) of our outstanding shares.
CELINE
In May 2000 we entered into an exclusive worldwide license agreement with
Celine, S.A., a division of LVMH Moet Hennessy Louis Vuitton S.A., for the
development, manufacturing and distribution of prestige fragrance lines under
the Celine brand name. The term of the License Agreement is for eleven (11)
years, beginning as of 1 January 2001, with an optional five (5) year renewal
term, which is subject to certain minimum sales requirements, advertising
expenditures and royalty payments as are customary in our industry.
CHRISTIAN LACROIX
In March 1999, we entered into an exclusive license agreement with the
Christian Lacroix Company, a division of LVMH Moet Hennessy Louis Vuitton S.A.,
for the worldwide development, manufacture and distribution of perfumes. The
license agreement has an 11 year term, and is subject to certain minimum sales
requirements, advertising expenditures and royalty payments as are customary in
our industry.
43
ITEM 14. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have reviewed and
evaluated the effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934 Rule 13a-14(c)) as of a date
within 90 days of the filing date of this annual report on Form 10-K (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 disclosure controls and procedures were adequate and effective to
ensure that material information relating to our company and its consolidated
subsidiaries would be made known to them by others within those entities, so
that such material information is recorded, processed and reported in a timely
manner, particularly during the period in which this annual report on Form 10-K
was being prepared, and that no changes were required at this time.
CHANGES IN INTERNAL CONTROLS
There were no significant changes in our internal controls or in other
factors that could significantly affect our internal controls after the
Evaluation Date, or any significant deficiencies or material weaknesses in such
internal controls requiring corrective actions. As a result, no corrective
actions were taken.
44
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a)(1) Financial Statements annexed hereto PAGE NO.
Independent Auditors' Reports F-1
Consolidated Balance Sheets as at December 31, 2002
and December 31, 2001 F-3
Consolidated Statements of Income for the Years
ended December 31, 2002, December 31, 2001, and
December 31, 2000 F-4
Consolidated Statements of Changes in Shareholders'
Equity for the Years ended December 31, 2002,
December 31, 2001 and December 31, 2000 F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 2002, December 31, 2001
and December 31, 2000 F-6
Notes to Financial Statements F-7
(a)(2)Financial Statement Schedules annexed hereto:
Schedule II - Valuation and Qualifying Accounts
and Reserves F-20
Schedules other than those referred to above have
been omitted as the conditions requiring their
filing are not present or the information has been
presented elsewhere in the consolidated financial statements.
45
(a)(3) Exhibits
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - January 18, 1990), as follows:
EXHIBIT NO. AND DESCRIPTION
10.13 License Agreement between the Company and Jordache dated January 18, 1990
(as no. 10.1 therein).
10.16 Letter Agreement from Jordache to the Company regarding foreign license
rights dated January 18, 1990 (as no. 10.4 therein).
The following document heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991:
EXHIBIT NO. AND DESCRIPTION
10.25 Employment Agreement between the Company and Philippe Benacin dated July
29, 1991
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's Registration Statement on Form S-1
(No. 33-48811):
EXHIBIT NO. AND DESCRIPTION
10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992:
EXHIBIT NO. AND DESCRIPTION
4.10 Amendment to 1992 Stock Option Plan
4.11 1993 Stock Option Plan
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - July 15, 1993), as follows:
46
EXHIBIT NO. AND DESCRIPTION
10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter
Parfums, S.A. and Jean Philippe Fragrances, Inc. (excised form)
10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A.
and Inter Parfums, S.A. (French, excised form)
10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A.
and Inter Parfums, S.A. (English translation, excised form)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - February 28, 1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums,
S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994
(re: Parfums Molyneux)
10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18,
1994
10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February
18, 1994
10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques
et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums,
S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated
March 14, 1994) to the Current Report on Form 8-K (date of event - February 28,
1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels de
Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de
France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux)
The following document heretofore filed with the Commission is
incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated
March 21, 1994) to the Current Report on Form 8-K (date of event - February 28,
1994), as follows:
47
EXHIBIT NO. AND DESCRIPTION
10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et
Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean
Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February
18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993:
EXHIBIT NO. AND DESCRIPTION
3.3 Articles of Incorporation of Inter Parfums Holding, S.A.
3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter
Parfums Holding, S.A.
3.4 Articles of Incorporation of Inter Parfums, S.A.
3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter
Parfums, S.A.
4.15 1994 Nonemployee Director Stock Option Plan
10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization
Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel
D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums,
S.A. and Selective Industrie, S.A.)
10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September
30, 1993
10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond
Point Des Champs Des Elysees dated September 30, 1993
10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2,
1994
10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond
Point Des Champs Des Elysees dated March 2, 1994
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994:
48
4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no.
4.15 therein)
10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan
Life Insurance Company and Jean Philippe Fragrances, Inc.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995:
EXHIBIT NO. AND DESCRIPTION
10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial
Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July
10, 1995
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997:
EXHIBIT NO. AND DESCRIPTION
10.67 Second Modification of Lease made as of the 30th day of April, 1997
between Metropolitan Life Insurance Company as landlord and Jean Philippe
Fragrances, Inc. as tenant.
10.68 Amendment I to License Agreement dated September 3, 1997 between Jordache
Enterprises, Inc. as Licensor and Jean Philippe Fragrances, Inc. as Licensee.
10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont, S.A.
and Inter Parfums (English translation, excised form)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998:
EXHIBIT NO. AND DESCRIPTION
3.2 Amended and Restated By-laws
4.17 1997 Nonemployee Director Stock Option Plan
10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and
Jean-Philippe Fragrances, Inc. (excised form)
10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and
Inter Parfums, S.A (English translation, excised form)
49
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's current report on Form 8-K (date of
event - November 22, 1999):
EXHIBIT NO. AND DESCRIPTION
4.2 Shareholder's Agreement among LV Capital USA, Inc., Jean Madar and Philippe
Benacin dated November 22, 1999.
99.1 Stock Purchase Agreement among LV Capital USA, Inc., Jean Madar and
Philippe Benacin dated November 22, 1999.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999:
EXHIBIT NO. AND DESCRIPTION
3.1.4 Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 13, 1999 (listed therein as 3.1(d))
10.73 Burberry Confidential Treatment Agreement dated 8 February, 2000
10.74 Burberry Licence Amendment dated February, 2000 (excised form)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's current report on Form 8-K/A no. 1
(date of event - 18 May 2000):
EXHIBIT NO. DESCRIPTION
10.76 Celine License Agreement (French, excised form).
10.76.1 Celine License Agreement (English translation, excised form).
The following document heretofore filed with the Commission is
incorporated by reference to the Company's current report on Form 8-K/A no. 1
(date of event - 23 June 2000):
EXHIBIT NO. DESCRIPTION
10.77 Sublicense Agreement for FUBU Fragrances, dated June 22, 2000 (excised
form).
The following document heretofore filed with the Commission is
incorporated by reference to the Company's quarterly report on Form 10-Q for the
period ending 30 June 2000:
50
EXHIBIT NO. DESCRIPTION
3.1.5 Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated 12 July 2000 (listed therein as 3.1(e))
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended 31 December 2000:
EXHIBIT NO. DESCRIPTION
3.1.1 Restated Certificate of Incorporation dated September 3, 1987
3.1.2 Amendment to the Company's Restated Certificate of Incorporation
dated July 31, 1992
3.1.3 Amendment to the Company's Restated Certificate of Incorporation
dated July 9, 1993
4.19 2000 Nonemployee Director Stock Option Plan
10.78 Revolving Credit Agreement dated June 1, 2000 between HSBC Bank
USA and Inter Parfums, Inc.
10.79 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris France
[French Original]
10.79.1 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris France
[English Translation]
10.80 Credit Lyonnais Letter Agreement dated 22 March 2001 - [French
Original]
10.80.1 Credit Lyonnais Letter Agreement dated 22 March 2001 - [English
Translation]
10.81 Barclays Bank Letter Agreement dated 4 June 1998 - [French
Original]
10.81.1 Barclays Bank Letter Agreement dated 4 June 1998 - [English
Translation]
10.82 Banque OBC Odier Bungener Courvoisier Letter Agreement one dated
31 July 1998 - [French Original]
10.82.2 Banque OBC Odier Bungener Courvoisier Letter Agreement one dated
31 July 1998 - [English Translation]
10.83 Banque OBC Odier Bungener Courvoisier Letter Agreement two dated
31 July 1998 - [French Original]
10.83.2 Banque OBC Odier Bungener Courvoisier Letter Agreement two dated
31 July 1998 - [English Translation]
10.84 Banque Worms Letter Agreement dated 22 December 1997 - [French
Original]
10.84.1 Banque Worms Letter Agreement dated 22 December 1997 - [English
Translation]
10.85 Credit Agricole ile de France Letter Agreement dated 19 June 1996
- [French Original]
10.85.1 Credit Agricole ile de France Letter Agreement dated 19 June 1996
- [English Translation]
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended 31 December 2001:
51
EXHIBIT NO. DESCRIPTION
3.2 Amended and Restated By-laws
4.20 1999 Stock Option Plan, as amended
10.86 Revolving Credit Agreement dated 21 September 2001 between HSBC
Bank USA and Inter Parfums, Inc.
10.87 Burberry Licence Amendment effective 1 October 2001
21 List of Subsidiaries
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's current report on Form 8-K (date of
event - 21 May 2002):
EXHIBIT NO. DESCRIPTION
2.1 Agreement dated 21 May 2002 between Jean Philippe Fragrances, LLC
and Tristar Corporation, Debtor-in-Possession*
10.87 Manufacturing Agreement dated 21 May 2002 between Jean Philippe
Fragrances, LLC and Fragrance Impressions Corporation**
10.88 Noncompetition and Nonsolicition Agreement dated 21 May 2002
among Jean Philippe Fragrances, LLC, Tristar Corporation,
Debtor-in-Possession and Fragrance Impressions Corporation
- -----------------
* Certain disclosure schedules and other attachments are omitted, but will be
furnished supplementally to the Commission upon request.
** Filed in excised form.
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's current report on Form 8-K (date of
event - 29 May 2002):
EXHIBIT NO. DESCRIPTION
10.90 Agreement dated 29th day of May, 2002, among Diane Von Furstenberg
Studio, L.P., Inter Parfums USA, LLC and Inter Parfums, Inc.*
- -----------------
* Filed in excised form.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's quarterly report on Form 10-Q for
the period ending 30 June 2002:
EXHIBIT NO. DESCRIPTION
10.91 Bail entre SCI et Inter Parfums, S.A. [Original in French]
10.91.1 Lease between SCI and Inter Parfums, S.A. [English Translation
Version]
10.92 Third Modification of Lease dated June 17, 2002 between Metropolitan
Life Insurance Company, and Jean Philippe Fragrances, LLC
52
The following documents are filed herewith:
EXHIBIT NO. DESCRIPTION
10.93 Revolving Credit Agreement dated as of 23 June 2002 between HSBC
Bank USA and Inter Parfums, Inc.
23.1 Consent of Eisner LLP
23.2 Consent of KPMG Audit, a division of KPMG S.A.
99.1 Certification Required by Section 906 of the Sarbanes-Oxley Act
(b) Reports on Form 8-K:
Current Report on Form 8-K, Date of Event: 21 November 2002, reporting items 5
and 7.
53
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Inter Parfums, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Inter Parfums,
Inc. and subsidiaries (the "Company") as of December 31, 2002 and 2001, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Inter Parfums Holdings, S.A. and subsidiaries, consolidated foreign subsidiaries
of the Company, which statements reflect total assets and net sales constituting
69% and 68% for 2002 and 63% and 71% for 2001 and net sales constituting 69% for
2000. Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts for Inter
Parfums Holdings, S.A. and subsidiaries, is based solely on the reports of the
other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements enumerated above present fairly, in all material respects,
the consolidated financial position of Inter Parfums, Inc. and subsidiaries as
of December 31, 2002 and 2001, and the consolidated results of their operations
and their consolidated cash flows for each of the years in the three-year period
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
In connection with our audits of the financial statements enumerated above, we
audited Schedule II for each of the years in the three-year period ended
December 31, 2002. In our opinion, Schedule II, when considered in relation to
the financial statements taken as a whole, presents fairly, in all material
respects, the information stated therein.
Eisner LLP
New York, New York
March 5, 2003
With respect to accounts for foreign subsidiaries
March 21, 2003
F-1
INTER PARFUMS HOLDING, S.A. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Inter Parfums
Holding S.A. and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of income, shareholders' equity and comprehensive
income, and cash flows for the each of the years in the three-year period ended
December 31, 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Inter
Parfums Holding S.A. and subsidiaries as of December 31, 2002 and 2001, and of
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
Paris La DeFense, March 21, 2003
KPMG Audit
A division of KPMG S.A.
Rene Amirkhanian
Partner
F-2
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
DECEMBER 31,
------------------------
2002 2001
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 38,290 $ 28,562
Accounts receivable, net of allowances of $1,801 and
$1,914 in 2002 and 2001, respectively 41,232 31,223
Inventories (Notes A and D) 32,198 27,645
Receivables, other 1,211 944
Other current assets 2,122 1,362
Income tax receivable 2,014 2,633
Deferred tax asset (Note L) 1,099 1,360
--------- ---------
Total current assets 118,166 93,729
Equipment and leasehold improvements, net (Notes A and E) 4,213 3,896
Trademarks and licenses, net (Notes A, F and M) 6,745 3,842
Other assets 246 305
Deferred tax asset 767
--------- ---------
$ 129,370 $ 102,539
========= =========
LIABILITIES
Current liabilities:
Loans payable - banks (Note G) $ 1,794 $ 1,308
Accounts payable 20,007 15,510
Accrued expenses 10,733 7,960
Income taxes payable 1,519 747
Dividends payable 285
--------- ---------
Total current liabilities 34,338 25,525
--------- ---------
Deferred tax liability (Note L) 650 739
--------- ---------
Long-term debt (Note H) 1,366
---------
Minority interest 13,466 9,818
--------- ---------
Commitments and contingencies (Notes I and M)
SHAREHOLDERS' EQUITY (NOTES J AND M)
Preferred stock, $.001 par value; authorized 1,000,000 shares; none issued
Common stock, $.001 par value; authorized 30,000,000 shares; outstanding
18,976,207 and 18,692,269 shares, in 2002 and 2001, respectively 19 19
Additional paid-in capital 33,441 32,470
Retained earnings 75,063 66,788
Accumulated other comprehensive loss (1,394) (8,043)
Treasury stock, at cost, 7,305,609 and 7,492,463 common shares in
2002 and 2001, respectively (26,213) (26,143)
--------- ---------
Total shareholders' equity 80,916 65,091
--------- ---------
$ 129,370 $ 102,539
========= =========
SEE NOTES TO FINANCIAL STATEMENTS
F-3
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except share and per share data)
YEAR ENDED DECEMBER 31,
------------------------------------------------
2002 2001 2000
------------ ------------ ------------
Net sales $ 130,352 $ 112,233 $ 101,582
Cost of sales 69,760 57,887 51,873
------------ ------------ ------------
Gross margin 60,592 54,346 49,709
Selling, general and administrative 43,072 39,624 37,509
Litigation expense 556
------------ ------------ ------------
Income from operations 17,520 14,722 11,644
------------ ------------ ------------
Other charges (income):
Interest 394 347 363
Loss (gain) on foreign currency 106 (53) 185
Interest income (628) (1,115) (1,065)
Realized gain on sale of marketable securities (1,396)
Loss on subsidiary's issuance of stock 67 87 18
------------ ------------ ------------
(61) (734) (1,895)
------------ ------------ ------------
Income before income taxes 17,581 15,456 13,539
Income taxes 6,282 5,659 5,631
------------ ------------ ------------
Income before minority interest 11,299 9,797 7,908
Minority interest in net income of consolidated subsidiary 1,894 1,678 1,319
------------ ------------ ------------
NET INCOME $ 9,405 $ 8,119 $ 6,589
============ ============ ============
NET INCOME PER SHARE:
Basic $ 0.50 $ 0.46 $ 0.37
Diluted $ 0.47 $ 0.41 $ 0.34
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 18,776,988 17,834,945 17,590,106
Diluted 19,948,305 19,935,534 19,500,648
SEE NOTES TO FINANCIAL STATEMENTS
F-4
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands except share data)
ADDITIONAL
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME
------ ------ ------- -------- -------------
BALANCE - JANUARY 1, 2000 17,749,082 $ 18 $ 26,512 $ 52,080
Comprehensive income:
Net income 6,589 $ 6,589
Foreign currency translation adjustments (1,892)
Reclassification adjustment for gains
realized in net income (392)
------------
TOTAL COMPREHENSIVE INCOME $ 4,305
============
Shares issued upon exercise of stock
options (including income tax benefit) 280,734 1,210
Purchased treasury shares (515,400)
------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 2000 17,514,416 18 27,722 58,669
Comprehensive income:
Net income 8,119 $ 8,119
Foreign currency translation adjustments (1,474)
Cumulative effect of adopting SFAS
No. 133 as of January 1, 2001 274
Gains on derivatives reclassified into
earnings (274)
Change in fair value of derivatives 5
------------
TOTAL COMPREHENSIVE INCOME $ 6,650
============
Shares issued upon exercise of stock
options (including income tax benefit) 1,864,925 2 4,748
Shares received as proceeds of option
exercises (616,822) (1)
Purchased treasury shares (70,250)
------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 2001 18,692,269 19 32,470 66,788
Comprehensive income:
Net income 9,405 $ 9,405
Foreign currency translation adjustments 6,746
Change in fair value of derivatives (97)
------------
TOTAL COMPREHENSIVE INCOME $ 16,054
============
Dividends (1,130)
Shares issued upon exercise of stock
options (including income tax benefit) 428,613 971
Shares received as proceeds of option
exercises (144,675)
------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 2002 18,976,207 19 $ 33,441 $ 75,063
============ ============ ============ ============
ACCUMULATED
OTHER
COMPREHENSIVE TREASURY
LOSS STOCK TOTAL
---- ----- -----
BALANCE - JANUARY 1, 2000 $ (4,290) $ (21,959) $ 52,361
Comprehensive income:
Net income 6,589
Foreign currency translation adjustments (1,892) (1,892)
Reclassification adjustment for gains
realized in net income (392) (392)
TOTAL COMPREHENSIVE INCOME
Shares issued upon exercise of stock
options (including income tax benefit) 1,210
Purchased treasury shares (2,815) (2,815)
------------ ------------ ------------
BALANCE - DECEMBER 31, 2000 (6,574) (24,774) 55,061
Comprehensive income:
Net income 8,119
Foreign currency translation adjustments (1,474) (1,474)
Cumulative effect of adopting SFAS
No. 133 as of January 1, 2001 274 274
Gains on derivatives reclassified into
earnings (274) (274)
Change in fair value of derivatives 5 5
TOTAL COMPREHENSIVE INCOME
Shares issued upon exercise of stock
options (including income tax benefit) 5,225 9,975
Shares received as proceeds of option
exercises (6,167) (6,168)
Purchased treasury shares (427) (427)
------------ ------------ ------------
BALANCE - DECEMBER 31, 2001 (8,043) (26,143) 65,091
Comprehensive income:
Net income 9,405
Foreign currency translation adjustments 6,746 6,746
Change in fair value of derivatives (97) (97)
TOTAL COMPREHENSIVE INCOME
Dividends (1,130)
Shares issued upon exercise of stock
options (including income tax benefit) 1,119 2,090
Shares received as proceeds of option
exercises (1,189) (1,189)
------------ ------------ ------------
BALANCE - DECEMBER 31, 2002 $ (1,394) $ (26,213) $ 80,916
============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS
F-5
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
YEAR ENDED DECEMBER 31,
------------------------------------
2002 2001 2000
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,405 $ 8,119 $ 6,589
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,220 2,134 2,362
Realized gain on sale of marketable securities (1,396)
Minority interest in net income of consolidated subsidiary 1,894 1,678 1,319
Deferred tax benefit provision 830 2 476
Loss on subsidiary's issuance of stock 67 87 18
Gain on sale of trademark (87)
Changes in:
Accounts receivable, net (5,515) (1,535) (6,173)
Inventories (1,185) (3,282) (6,872)
Other assets (543) (78) (252)
Accounts payable and accrued expenses 3,363 (663) 3,753
Income taxes payable 2,291 494 412
-------- -------- --------
Net cash provided by operating activities 12,740 6,956 236
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (1,317) (2,453) (1,580)
Trademark acquisitions (3,225)
Proceeds from sale of trademark 158
Purchase of marketable securities (3,671)
Proceeds from sale of marketable securities 8,325
-------- -------- --------
Net cash (used in) provided by investing activities (4,384) (2,453) 3,074
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in loans payable - banks 353 (1,130) 1,788
Repayment of long-term debt (1,445)
Proceeds from sale of stock of subsidiary 15 112 67
Purchase of treasury stock (193) (1,925) (2,815)
Proceeds from exercise of options 295 224 1,210
Dividends paid (844)
Dividends paid to minority interest (273) (197) (135)
-------- -------- --------
Net cash (used in) provided by financing activities (2,092) (2,916) 115
-------- -------- --------
Effect of exchange rate changes on cash 3,464 (624) (762)
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,728 963 2,663
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 28,562 27,599 24,936
-------- -------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 38,290 $ 28,562 $ 27,599
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 334 $ 409 $ 404
Income taxes $ 2,047 $ 4,235 $ 2,683
SEE NOTES TO FINANCIAL STATEMENTS
F-6
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
[1] BUSINESS OF THE COMPANY:
The Company is a manufacturer and distributor of prestige brand name
fragrances and mass market fragrances, cosmetics and personal care
products.
[2] BASIS OF PREPARATION:
The consolidated financial statements include the accounts of Inter
Parfums, Inc. and its domestic and foreign subsidiaries (the "Company")
including, majority-owned Inter Parfums, S.A. ("IPSA"), a subsidiary
whose stock is publicly traded in France. All material intercompany
balances and transactions have been eliminated.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
[3] FOREIGN CURRENCY TRANSLATION:
For foreign subsidiaries that operate in a foreign currency, assets and
liabilities are translated to U.S. dollars at year-end exchange rates.
Income and expense items are translated at average rates of exchange
prevailing during the year. Gains and losses from translation
adjustments are accumulated in a separate component of shareholders'
equity. In instances where the financial statements of foreign entities
are remeasured into their functional currency (U.S. dollars), the
remeasurement adjustment is recorded in operations.
[4] CASH EQUIVALENTS:
All highly liquid investments purchased with a maturity of three months
or less are considered to be cash equivalents.
[5] MARKETABLE SECURITIES:
All marketable securities are classified as available-for-sale and are
available to support current operations or to take advantage of other
investment opportunities. These securities are stated at fair value
based upon market quotes. Unrealized holding gains and losses, net of
deferred taxes, are computed on the basis of specific identification and
are reported as a separate component of shareholders' equity. Realized
gains and losses, and decreases in value, judged to be other than
temporary, are included in other charges (income). The cost of
securities sold is based on the specific identification method and
interest and dividend income is recognized when earned.
[6] FINANCIAL INSTRUMENTS:
The carrying amount of accounts receivable, other receivables, accounts
payable and accrued expenses approximates fair value due to the short
terms to maturity of these instruments. The carrying amount of loans
payable and long-term debt approximates fair value as the interest rates
on the Company's indebtedness approximate current market rates.
F-7
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] FINANCIAL INSTRUMENTS: (CONTINUED)
All derivative instruments are reported as either assets or liabilities
on the balance sheet measured at fair value. Generally, increases or
decreases in the fair value of derivative instruments will be recognized
as gains or losses in earnings in the period of change. If the
derivative instrument is designated and qualifies as a cash flow hedge,
the changes in fair value of the derivative instrument will be recorded
as a separate component of shareholders' equity.
The Company occasionally enters into foreign currency forward exchange
contracts to hedge exposure related to receivables denominated in a
foreign currency and to manage risks related to future sales expected to
be denominated in a foreign currency. 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 value of the derivative instrument will effectively offset the
change in the fair value of the hedged item. The effectiveness of each
hedged item is measured throughout the hedged period. Any hedge
ineffectiveness as defined by SFAS No. 133 is recognized in the income
statement. At December 31, 2002, the Company had foreign currency
contracts in the form of forward exchange contracts in the amount of
approximately US $10.3 million and GB pounds 2.3 million.
[7] INVENTORIES:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
[8] EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
provided using the straight-line method and the declining-balance method
over the estimated useful asset lives for equipment, which range between
three and ten years and the shorter of the lease term or estimated
useful asset lives for leasehold improvements.
[9] TRADEMARKS AND LICENSES:
Trademarks with indefinite useful lives are stated at cost and through
December 31, 2001, were amortized by the straight-line method over 20
years. The cost of licenses acquired is being amortized by the
straight-line method over the term of the respective licenses.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142
establishes new guidelines for accounting for goodwill and other
intangible assets. In accordance with SFAS No. 142, goodwill and
intangible assets with an "indefinite useful life" associated with
acquisitions consummated after June 30, 2001 are not amortized until
their useful lives are determined to no longer be indefinite. The
Company has adopted the remaining provisions of SFAS No. 142 on January
1, 2002. Since adoption, existing intangible assets with an "indefinite
useful life" are no longer amortized but instead are assessed for
impairment at least annually. The Company does not believe that the
adoption of SFAS No. 142 had any material effect on the Company's
financial statements. Amortization of intangible assets with indefinite
useful lives for the years ended December 31, 2001 and 2000 was $350 and
$510, respectively.
The Company reviews trademarks and licenses for impairment whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable.
F-8
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[10] REVENUE RECOGNITION:
Revenue is recognized when merchandise is shipped and the risk of loss
passes to the customer. The Company, at its discretion, permits limited
returns of merchandise and establishes allowances for estimated returns
based upon historic trends and relevant current data.
[11] ISSUANCE OF COMMON STOCK BY CONSOLIDATED SUBSIDIARY:
The difference between the Company's share of the proceeds received by
the subsidiary and the carrying amount of the portion of the Company's
investment deemed sold is reflected as a gain or loss in the
consolidated statements of income.
[12] STOCK-BASED COMPENSATION:
The Company accounts for stock-based employee compensation under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" and related interpretations ("APB 25"). The Company has
adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" and SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure", which was released in
December 2002 as an amendment of SFAS No. 123.
The Company applies APB No. 25 and related interpretations in accounting
for its stock option incentive plans. The following table illustrates
the effect on net income and earnings per share if the fair value based
method had been applied to all awards.
YEAR ENDED DECEMBER 31,
---------------------------------------
2002 2001 2000
--------- --------- ---------
Reported net income $ 9,405 $ 8,119 $ 6,589
Stock-based employee compensation expense
included in reported net income, net of
related tax effects 0 0 0
Stock-based employee compensation determined
under the fair value based method, net of
related tax effects (257) (244) (105)
--------- --------- ---------
Pro forma net income $ 9,148 $ 7,875 $ 6,484
========= ========= =========
Income per share, as reported:
Basic $ 0.50 $ 0.46 $ 0.37
Diluted $ 0.47 $ 0.41 $ 0.34
Pro forma net income per share:
Basic $ 0.49 $ 0.44 $ 0.37
Diluted $ 0.46 $ 0.40 $ 0.33
The weighted average fair values of the options granted during 2002,
2001 and 2000 are estimated as $2.25, $1.94 and $1.93 per share,
respectively, on the date of grant using the Black-Scholes option
pricing model with the following assumptions: dividend yield 0.8% in
2002, 0% in 2001 and 2000; volatility of 50% in 2002 and 40% in 2001 and
2000; risk-free interest rates at the date of grant, 1.83% in 2002,
3.05% in 2001 and 5.88% in 2000; and an expected life of the option of
two years.
F-9
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[13] EARNINGS PER SHARE:
Basic earnings per share is computed using the weighted average number
of shares outstanding during each year. Diluted earnings per share is
computed using the weighted average number of shares outstanding during
each year, plus the incremental shares outstanding assuming the exercise
of dilutive stock options using the treasury stock method.
The following table sets forth the computation of basic and diluted
earnings per share:
YEAR ENDED DECEMBER 31,
-------------------------------------------
2002 2001 2000
----------- ----------- -----------
Numerator:
Net income $ 9,405 $ 8,119 $ 6,589
=========== =========== ===========
Denominator:
Weighted average shares 18,776,988 17,834,945 17,590,106
Effect of dilutive securities:
Stock options 1,171,317 2,100,589 1,910,542
----------- ----------- -----------
Denominator for diluted earnings
per share 19,948,305 19,935,534 19,500,648
=========== =========== ===========
Not included in the above computations is the effect of anti-dilutive
potential common shares which consist of options to purchase 114,000,
9,000 and 2,000 shares of common stock for 2002, 2001 and 2000,
respectively.
[14] RECENT ACCOUNTING PRONOUNCEMENTS:
In April 2002, The FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections", which is effective for fiscal years beginning
after May 15, 2002. This statement rescinds the indicated statements and
amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability
under changed conditions. We do not expect the adoption of this new
standard to have a material impact on our results of operations or
financial position.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which is effective for
exit or disposal activities after December 31, 2002. This statement
nullifies Emerging Issue Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)".
This statement requires that liabilities associated with exit or
disposal activities initiated after adoption to be recognized and
measured at fair value when incurred as opposed to at the date an entity
commits to the exit or disposal plans. We do not expect the adoption of
this new standard to have a material impact on our results of operations
or financial position.
F-10
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE B - ASSET ACQUISITION
On May 21, 2002, we purchased certain mass market fragrance brands and
inventories of Tristar Corporation, a Debtor-in-Possession. The trademarks and
related intellectual property was purchased for approximately $3.2 million, and
we acquired certain existing inventory for approximately $3.7 million.
NOTE C - MARKETABLE SECURITIES
Marketable securities represent equity securities classified as
available-for-sale. During the year ended December 31, 2000 all marketable
securities were sold and a gain of $1,396 was realized.
NOTE D - INVENTORIES
DECEMBER 31,
-------------------
2002 2001
------- -------
Raw materials and component parts $11,080 $ 8,823
Finished goods 21,118 18,822
------- -------
$32,198 $27,645
======= =======
NOTE E - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
DECEMBER 31,
-------------------
2002 2001
------- -------
Equipment $11,772 $ 9,122
Leasehold improvements 383 382
------- -------
12,155 9,504
Less accumulated depreciation and amortization 7,942 5,608
------- -------
$ 4,213 $ 3,896
======= =======
NOTE F - TRADEMARKS AND LICENSES
DECEMBER 31,
-------------------
2002 2001
------- -------
Trademarks $ 7,333 $ 6,396
Licenses 2,904 2,452
------- -------
10,237 8,848
Less accumulated amortization 3,492 5,006
------- -------
$ 6,745 $ 3,842
======= =======
During 2002, the Company recorded charges for the impairment of trademarks with
indefinite useful lives aggregating $501 based on fair value as determined using
discounted cash flows.
F-11
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE G - LOANS PAYABLE - BANKS
Loans payable - banks consist of the following:
Borrowings by the Company's foreign subsidiaries under several bank overdraft
facilities bearing interest at 0.6%% above EURIBOR (2.86% and 3.3% at December
31, 2002 and 2001, respectively). Outstanding amounts totaled $794 and $808 at
December 31, 2002 and 2001, respectively.
Borrowings under a $12,000 unsecured revolving line of credit due on demand and
bearing interest at the banks' prime rate or 1.75% above LIBOR. Outstanding
amounts totaled $1,000 and $500 at December 31, 2002 and 2001, respectively.
NOTE H - LONG-TERM DEBT
As of December 31, 2001, long-term debt represented borrowings by a foreign
subsidiary of $1,366 originally due in 2004. The debt agreement required
interest payable monthly at 4.56% per annum; however, the Company entered into a
swap agreement with the bank effectively converting the interest to a variable
rate equal to EURIBOR. During 2002, the Company paid off the entire loan.
NOTE I - COMMITMENTS
[1] LEASES:
The Company leases its office and warehouse facilities under operating
leases expiring through 2013. Rental expense amounted to $2,524 in 2002
and $1,263 in 2001 and 2000. Minimum future rental payments are as
follows:
2003 $ 2,670
2004 2,112
2005 1,704
2006 689
2007 689
Thereafter 1,666
-------
$ 9,530
=======
[2] LICENSE AGREEMENTS:
The Company is obligated under a number of license agreements for the
use of trademarks and rights in connection with the manufacture and sale
of its products. One such license, which expires in December 2006,
subject to renewal, corresponded to 40.6%, 40.8% and 37.8% of net sales
for the years ended December 31, 2002, 2001 and 2000, respectively.
Royalty expense, included in selling general and administrative
expenses, aggregated $5,498, $4,205, and $3,960 for the years ended
December 31, 2002, 2001 and 2000. In connection therewith, the Company
is subject to certain minimum annual royalties as follows:
2003 $ 3,251
2004 4,545
2005 4,846
2006 5,013
2007 2,675
Thereafter 8,093
--------
$ 28,423
========
F-12
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE J - SHAREHOLDERS' EQUITY
[1] COMMON STOCK SPLIT:
On August 6, 2001, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50% stock dividend
distributed on September 14, 2001 to shareholders of record as of August
31, 2001. As a result of the stock split, the accompanying consolidated
financial statements reflect an increase in the number of outstanding
shares of common stock and the transfer of the par value of these
additional shares from paid-in capital. All share and per share amounts
have been restated for all periods to reflect the retroactive effect of
the stock split.
[2] ISSUANCE OF COMMON STOCK OF SUBSIDIARY:
During 2002, 2001 and 2000, 14,893, 13,670 and 6,658, shares,
respectively, of capital stock of IPSA were issued as a result of
employees exercising stock options. At December 31, 2002, the Company's
percentage ownership of IPSA was approximately 77%.
The difference between the Company's share of the issuance or conversion
proceeds and the carrying amount of the portion of the Company's
investment sold is reflected as a gain or loss in the consolidated
statements of income. Deferred taxes have not been provided because
application of available tax savings strategies would eliminate taxes on
this transaction.
[3] STOCK OPTION PLANS:
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 vest
immediately and are exercisable for a period of five to six years.
A summary of the Company's stock option activity, and related
information follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
2002 2001 2000
--------------------------- ---------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
Shares under option -
beginning of year 2,198,075 $ 3.35 3,850,425 $ 2.75 3,976,988 $ 2.73
Options granted 200,950 8.02 223,075 7.81 170,813 4.75
Options exercised (428,613) 3.01 (1,864,925) 2.62 (280,688) 3.59
Options cancelled (1,250) 6.16 (10,500) 4.75 (16,688) 3.74
------------ ----------- -----------
Shares under options -
end of year 1,969,162 3.90 2,198,075 3.35 3,850,425 2.75
============ =========== ===========
F-13
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE J - SHAREHOLDERS' EQUITY (CONTINUED)
[3] STOCK OPTION PLANS: (CONTINUED)
The following table summarizes stock option information as of December
31, 2002:
OPTIONS OUTSTANDING
NUMBER WEIGHTED AVERAGE OPTIONS
EXERCISE PRICES OUTSTANDING REMAINING CONTRACTUAL LIFE EXERCISABLE
--------------- ----------- -------------------------- -----------
$2.56 - $2.89 1,324,950 2.16 Years 1,324,950
$3.10 - $3.94 87,750 0.46 Years 87,750
$4.06 - $4.53 35,662 2.02 Years 35,662
$5.08 - $5.81 97,275 2.83 Years 97,275
$6.50 - $6.92 28,500 3.17 Years 28,500
$7.08 - $7.95 194,075 3.89 Years 194,075
$8.03 191,950 4.97 Years 191,950
$9.60 9,000 3.66 Years 9,000
---------------- ----------------
Totals 1,969,162 2.58 Years 1,969,162
================ ================
At December 31, 2002 options for 528,729 shares were available for
future grant under the plans.
In September 2001, the Chief Executive Officer and the President each
exercised 899,625 of their outstanding stock options. The aggregate
purchase price of $2,335 each, was paid by each of them tendering to the
Company 233,469 shares of the Company's common stock, previously owned
by them, valued at $10 per share, the fair market value on the date of
exercise. The shares issued pursuant to the options exercised were
issued from treasury stock of the Company. In addition, the Chief
Executive Officer tendered an additional 149,884 shares for payment of
withholding taxes resulting from the exercise of the options. As a
result of this transaction, the Company expects to receive tax benefits
aggregating $4,800, which has been reflected as an increase to
additional paid-in capital in the accompanying financial statements.
In December 2002, the Chief Executive Officer exercised 132,000 of his
outstanding stock options and the President exercised 199,500 of his
outstanding stock options. The purchase price of $381 for the Chief
Executive Officer and $614 for the President was paid by them tendering
to the Company an aggregate of 121,140 shares of the Company's common
stock, previously owned by them, valued at $8.215 per share, the fair
market value on the date of exercise. The shares issued pursuant to the
options exercised were issued from treasury stock of the Company. In
addition, the Chief Executive Officer tendered an additional 23,535
shares for payment of withholding taxes resulting from the exercise of
the options. As a result of this transaction, the Company expects to
receive tax benefits aggregating $600, which has been reflected as an
increase to additional paid-in capital in the accompanying financial
statements.
[4] TREASURY STOCK:
The Board of Directors of the Company has authorized a stock repurchase
program whereby the Company purchases shares of its stock to be held in
treasury. As of December 31, 2002, the Company is authorized to purchase
an additional 404,350 treasury shares.
F-14
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE J - SHAREHOLDERS' EQUITY (CONTINUED)
[5] DIVIDENDS:
During 2002, the Company declared dividends of $.06 per share per annum
payable quarterly. The quarterly dividend of $285 declared in December
2002 was paid January 15, 2003.
NOTE K - GEOGRAPHIC AREAS
Information on the Company's operations by geographical areas is as follows. The
European assets are primarily located, and operations are conducted, in France.
European operations primarily represent the sales of the prestige brand name
fragrances.
YEAR ENDED DECEMBER 31,
---------------------------------------
2002 2001 2000
--------- --------- ---------
Net sales:
United States $ 41,972 $ 33,103 $ 31,268
Europe 88,565 79,270 70,434
Eliminations (185) (140) (120)
--------- --------- ---------
$ 130,352 $ 112,233 $ 101,582
========= ========= =========
Net income:
United States $ 3,013 $ 2,411 $ 1,977
Europe 6,396 5,708 4,616
South America (4)
Eliminations (4)
--------- --------- ---------
$ 9,405 $ 8,119 $ 6,589
========= ========= =========
Depreciation and amortization expense:
United States $ 380 $ 394 $ 632
Europe 1,840 1,740 1,730
--------- --------- ---------
$ 2,220 $ 2,134 $ 2,362
========= ========= =========
Interest income:
United States $ 245 $ 523 $ 647
Europe 383 592 418
--------- --------- ---------
$ 628 $ 1,115 $ 1,065
========= ========= =========
F-15
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE K - GEOGRAPHIC AREAS (CONTINUED)
YEAR ENDED DECEMBER 31,
---------------------------------------
2002 2001 2000
--------- --------- ---------
Interest expense:
United States $ 88 $ 24 $ 38
Europe 306 323 325
--------- --------- ---------
$ 394 $ 347 $ 363
========= ========= =========
Total assets:
United States $ 49,077 $ 47,024 $ 39,305
Europe 89,370 64,553 64,294
Eliminations (9,077) (9,038) (9,028)
--------- --------- ---------
$ 129,370 $ 102,539 $ 94,571
========= ========= =========
Additions to long-lived assets:
United States $ 3,417 $ 437 $ 86
Europe 1,125 2,016 1,494
--------- --------- ---------
$ 4,542 $ 2,453 $ 1,580
========= ========= =========
Total long-lived assets:
United States $ 5,054 $ 2,016 $ 1,973
Europe 5,904 5,722 5,728
--------- --------- ---------
$ 10,958 $ 7,738 $ 7,701
========= ========= =========
United States export sales were approximately $11,000, $9,800 and $11,000 for
the years ended December 31, 2002, 2001 and 2000, respectively. Consolidated net
sales for the year ended December 31, 2002 by region is as follows:
North America 31%
Europe 40%
Central and South America 8%
Middle East 9%
Asia 10%
Other 2%
F-16
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE L - INCOME TAXES
The components of income before income taxes and minority interest consist of
the following:
YEAR ENDED DECEMBER 31,
-----------------------
2002 2001 2000
------- ------- -------
U.S. operations $ 4,670 $ 3,601 $ 3,096
Foreign operations 12,911 11,855 10,443
------- ------- -------
$17,581 $15,456 $13,539
======= ======= =======
The provision for current and deferred income tax expense (benefit) consists of
the following:
YEAR ENDED DECEMBER 31,
---------------------------------
2002 2001 2000
------- ------- -------
Current:
Federal $ 700 $ 1,103 $ 796
State and local (75) 257 170
Foreign 4,827 4,297 4,189
------- ------- -------
5,452 5,657 5,155
------- ------- -------
Deferred:
Federal 731 (138) 172
State and local 297 (31) (19)
Foreign (198) 171 323
------- ------- -------
830 2 476
------- ------- -------
Total income tax expense $ 6,282 $ 5,659 $ 5,631
======= ======= =======
Deferred taxes are provided principally for reserves, and certain other expenses
that are recognized in different years for financial reporting and income tax
purposes. At December 31, 2002, the deferred tax assets, which aggregate $1,099,
consist of accounts receivable and inventory writedowns which are not currently
deductible for tax purposes, the future tax benefit of domestic net operating
loss carryforwards and foreign net operating loss carryforwards and the
difference between the book basis and tax basis of fixed assets. At December 31,
2002, the deferred tax liability of $650 relates primarily to the difference
between the book basis and tax basis of intangible assets and certain foreign
production equipment. At December 31, 2002, the Company has federal net
operating loss carryforwards of $170 which expire in 2021.
The Company has provided a valuation allowance of $125, representing the full
amount of the deferred tax assets arising from foreign net operating loss
carryforwards. No allowance has been provided on the balance of the Company's
deferred tax assets, as management believes that it is more likely than not that
the asset will be realized in the reduction of future taxable income.
F-17
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE L - INCOME TAXES (CONTINUED)
Differences between the United States federal statutory income tax rate and the
effective income tax rate were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2002 2001 2000
---- ---- ----
Statutory rates 34.0% 34.0% 34.0%
State and local taxes, net of federal benefit 1.0 0.8 0.7
Effect of foreign taxes in excess of U.S. statutory rates 1.3 2.8 6.9
Other (0.6) (1.0)
---- ---- ----
Effective rates 35.7% 36.6% 41.6%
==== ==== ====
NOTE M - OTHER MATTERS
[1] As previously reported, IPSA is a party to litigation with Jean Charles
Brosseau, S.A. ("Brosseau"), the licensor of the Ombre Rose trademark.
In October 1999, IPSA received notice of a judgment in favor of
Brosseau, which awarded damages of approximately $600 to Brosseau, and
which directed IPSA to turn over its license to Brosseau within six
months.
IPSA is appealing the judgment as it vigorously and categorically denies
the claims of Brosseau. In June 2000, as a result of certain
developments, IPSA and its special litigation counsel considered it
likely that the judgment would be sustained and therefore, in June 2000,
the Company recorded a charge against earnings for $600, the full amount
of the judgment.
In February 2001, the Court of Appeal confirmed the Brosseau claim with
respect to turning over the license. In addition, the Court named an
expert to proceed with additional investigations and required IPSA to
pay $142 as an advance for damages claimed by Brosseau.
IPSA is continuing its appeal as it still denies the claims of Brosseau.
Management does not believe that such litigation will have any further
material adverse effect on the financial condition or results of
operations of the Company. As of December 31, 2000, the Company had
fully reserved the unamortized portion of the license cost.
[2] IPSA is the subject of tax audits commenced by the French Tax
Authorities. Assessments have been issued aggregating $2,300. IPSA is
contesting these assessments. Management and its tax consultants believe
they have sound arguments to support their position and that the
majority of these assessments will be reversed, and therefore, will not
have a material adverse effect on the financial condition or results of
operations of the Company. The Company has reserves of approximately
$760, which it presently believes will be its ultimate exposure.
F-18
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(in thousands except share and per share data)
NOTE M - OTHER MATTERS (CONTINUED)
[3] On November 22, 1999, the Chief Executive Officer and the President of
the Company entered into and closed a Stock Purchase Agreement with LV
Capital, USA Inc. ("LV Capital"), a wholly-owned subsidiary of LVMH Moet
Hennessy Louis Vuitton, S.A. ("LVMH"). As a result, LV Capital owns
approximately 20% of the outstanding common stock of the Company. In
accordance with the terms of the Stock Purchase Agreement and in return
for LV Capital becoming a strategic partner of the Company, LV Capital
was granted the right to maintain its percentage ownership of the
outstanding shares of Common Stock, by receiving an option to purchase
shares of the Company's common stock for cash upon issuance of shares to
any party other than LV Capital at the price paid by the purchaser,
subject to certain exceptions such as the exercise of stock options
previously granted and the grant of new stock options up to a certain
limit. There have been no common stock or option transactions through
December 31, 2002 which effected the LVMH option. LVMH was also granted
demand registration rights for all shares of common stock it holds.
Finally, LV Capital has agreed to a standstill agreement, which includes
a limitation on the amount of shares that LV Capital can hold equal to
25% of the outstanding shares of common stock of the Company.
In March 1999 and May 2000, the Company entered into two eleven year
license agreements with Christian Lacroix Company and Celine S.A.,
divisions of LVMH, respectively. Both agreements have minimum sales and
advertising requirements and require the Company to pay royalties as are
customary in the industry.
F-19
INTER PARFUMS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ----------------- ----------------------------------------------- ----------------------
ADDITIONS
------------------------------------
(1) (2)
BALANCE ------------------ -----------------
AT CHARGED TO BALANCE
BEGINNING CHARGED TO OTHER AT
OF COSTS AND ACCOUNTS - DEDUCTIONS - END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------------- ----------------- ------------------ ----------------- ---------------------------------
Year ended December 31, 2002:
Allowances for sales returns
and doubtful accounts $1,914 $ 110 $ 205 (b) $428 (a) $1,801
====== ========= ====== ==== ======
Year ended December 31, 2001:
Allowances for sales returns
and doubtful accounts $2,067 $ 291 $ (59) (b) $385 (a) $1,914
====== ========= ===== ==== ======
Year ended December 31, 2000:
Allowances for sales returns
and doubtful accounts $2,095 $ 669 $ (119) (b) $578 (a) $2,067
====== ========= ====== ==== ======
(a) Write off of bad debts and sales returns.
(b) Foreign currency translation adjustment.
SEE NOTES TO FINANCIAL STATEMENTS
F-20
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Inter Parfums, Inc.
By: /s/ Jean Madar
---------------------------
Jean Madar, Chief Executive
Officer
Date: March 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Jean Madar Chairman of the Board of Directors March 21, 2003
- -------------- and Chief Executive Officer
Jean Madar
/s/ Russell Greenberg Chief Financial and Accounting Officer March 21, 2003
- --------------------- and Director
Russell Greenberg
/s/ Philippe Benacin Director March 27, 2003
- ---------------------
Philippe Benacin
/s/ Francois Heilbronn Director March 17, 2003
- ----------------------
Francois Heilbronn
/s/ Joseph A. Caccamo Director March 24, 2003
- ---------------------
Joseph A. Caccamo
/s/ Jean Levy Director March 21, 2003
- -------------
Jean Levy
- ------------------------ Director March __, 2003
Robert Bensoussan-Torres
/s/ Daniel Piette Director March 24, 2003
- -----------------
Daniel Piette
/s/ Jean Cailliau Director March 24, 2003
- -----------------
Jean Cailliau
/s/ Philippe Santi Director March 18, 2003
- ------------------
Philippe Santi
/s/ Serge Rosinoer Director March 26, 2003
- ------------------
Serge Rosinoer
CERTIFICATIONS
--------------
I, Jean Madar, certify that:
1. I have reviewed this annual report on Form 10-K of Inter Parfums, Inc.;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, 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 in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 21, 2003
/s/ Jean Madar
- --------------
Jean Madar, Chief Executive Officer
I, Russell Greenberg, certify that:
1. I have reviewed this annual report on Form 10-K of Inter Parfums, Inc.;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, 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 in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 21, 2003
/s/ Russell Greenberg
- ---------------------
Russell Greenberg
Chief Financial Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBIT INDEX TO
REPORT ON FORM 10-K
(Mark one)
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended 31 December 2002 or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File No. 0-16469
INTER PARFUMS, INC.
(Exact name of registrant as specified in its charter)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - January 18, 1990), as follows:
EXHIBIT NO. AND DESCRIPTION
10.13 License Agreement between the Company and Jordache dated January 18, 1990
(as no. 10.1 therein).
10.16 Letter Agreement from Jordache to the Company regarding foreign license
rights dated January 18, 1990 (as no. 10.4 therein).
The following document heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991:
EXHIBIT NO. AND DESCRIPTION
10.25 Employment Agreement between the Company and Philippe Benacin dated July
29, 1991
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's Registration Statement on Form S-1
(No. 33-48811):
EXHIBIT NO. AND DESCRIPTION
10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992:
EXHIBIT NO. AND DESCRIPTION
4.10 Amendment to 1992 Stock Option Plan
4.11 1993 Stock Option Plan
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - July 15, 1993), as follows:
EXHIBIT NO. AND DESCRIPTION
10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter
Parfums, S.A. and Jean Philippe Fragrances, Inc. (excised form)
10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A.
and Inter Parfums, S.A. (French, excised form)
10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A.
and Inter Parfums, S.A. (English translation, excised form)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - February 28, 1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums,
S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994
(re: Parfums Molyneux)
10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18, 1994
10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18,
1994
10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques
et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums,
S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated
March 14, 1994) to the Current Report on Form 8-K (date of event - February 28,
1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels de
Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de
France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux)
The following document heretofore filed with the Commission is
incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated
March 21, 1994) to the Current Report on Form 8-K (date of event - February 28,
1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et
Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean
Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A.
dated February 18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993:
EXHIBIT NO. AND DESCRIPTION
3.3 Articles of Incorporation of Inter Parfums Holding, S.A.
3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter
Parfums Holding, S.A.
3.4 Articles of Incorporation of Inter Parfums, S.A.
3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter
Parfums, S.A.
4.15 1994 Nonemployee Director Stock Option Plan
10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization
Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel
D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums,
S.A. and Selective Industrie, S.A.)
10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September
30, 1993
10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond
Point Des Champs Des Elysees dated September 30, 1993
10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2,
1994
10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond
Point Des Champs Des Elysees dated March 2, 1994
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994:
4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no.
4.15 therein)
10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan
Life Insurance Company and Jean Philippe Fragrances, Inc.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995:
EXHIBIT NO. AND DESCRIPTION
10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial
Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July
10, 1995
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997:
EXHIBIT NO. AND DESCRIPTION
10.67 Second Modification of Lease made as of the 30th day of April, 1997
between Metropolitan Life Insurance Company as landlord and Jean Philippe
Fragrances, Inc. as tenant.
10.68 Amendment I to License Agreement dated September 3, 1997 between Jordache
Enterprises, Inc. as Licensor and Jean Philippe Fragrances, Inc. as Licensee.
10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont, S.A.
and Inter Parfums (English translation, excised form)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998:
EXHIBIT NO. AND DESCRIPTION
3.2 Amended and Restated By-laws
4.17 1997 Nonemployee Director Stock Option Plan
10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and
Jean-Philippe Fragrances, Inc. (excised form)
10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and
Inter Parfums, S.A (English translation, excised form)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's current report on Form 8-K (date of
event - November 22, 1999):
EXHIBIT NO. AND DESCRIPTION
4.2 Shareholder's Agreement among LV Capital USA, Inc., Jean Madar and Philippe
Benacin dated November 22, 1999.
99.1 Stock Purchase Agreement among LV Capital USA, Inc., Jean Madar and
Philippe Benacin dated November 22, 1999.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999:
EXHIBIT NO. AND DESCRIPTION
3.1.4 Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 13, 1999 (listed therein as 3.1(d))
10.73 Burberry Confidential Treatment Agreement dated 8 February, 2000
10.74 Burberry Licence Amendment dated February, 2000 (excised form)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's current report on Form 8-K/A no. 1
(date of event - 18 May 2000):
EXHIBIT NO. DESCRIPTION
10.76 Celine License Agreement (French, excised form).
10.76.1 Celine License Agreement (English translation, excised form).
The following document heretofore filed with the Commission is
incorporated by reference to the Company's current report on Form 8-K/A no. 1
(date of event - 23 June 2000):
EXHIBIT NO. DESCRIPTION
10.77 Sublicense Agreement for FUBU Fragrances, dated June 22, 2000 (excised
form).
The following document heretofore filed with the Commission is
incorporated by reference to the Company's quarterly report on Form 10-Q for the
period ending 30 June 2000:
EXHIBIT NO. DESCRIPTION
3.1.5 Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated 12 July 2000 (listed therein as 3.1(e))
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended 31 December 2000:
EXHIBIT NO. DESCRIPTION
3.1.1 Restated Certificate of Incorporation dated
September 3, 1987
3.1.2 Amendment to the Company's Restated Certificate of
Incorporation dated July 31, 1992
3.1.3 Amendment to the Company's Restated Certificate of
Incorporation dated July 9, 1993
4.19 2000 Nonemployee Director Stock Option Plan
10.78 Revolving Credit Agreement dated June 1, 2000 between
HSBC Bank USA and Inter Parfums, Inc.
10.79 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris
France [French Original]
10.79.1 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris
France [English Translation]
10.80 Credit Lyonnais Letter Agreement dated 22 March 2001 -
[French Original]
10.80.1 Credit Lyonnais Letter Agreement dated 22 March 2001 -
[English Translation]
10.81 Barclays Bank Letter Agreement dated 4 June 1998 -
[French Original]
10.81.1 Barclays Bank Letter Agreement dated 4 June 1998 -
[English Translation]
10.82 Banque OBC Odier Bungener Courvoisier Letter Agreement
one dated 31 July 1998 - [French Original]
10.82.2 Banque OBC Odier Bungener Courvoisier Letter Agreement
one dated 31 July 1998 - [English Translation]
10.83 Banque OBC Odier Bungener Courvoisier Letter Agreement
two dated 31 July 1998 - [French Original]
10.83.2 Banque OBC Odier Bungener Courvoisier Letter Agreement
two dated 31 July 1998 - [English Translation]
10.84 Banque Worms Letter Agreement dated 22 December 1997 -
[French Original]
10.84.1 Banque Worms Letter Agreement dated 22 December 1997 -
[English Translation]
10.85 Credit Agricole ile de France Letter Agreement dated 19
June 1996 - [French Original]
10.85.1 Credit Agricole ile de France Letter Agreement dated 19
June 1996 - [English Translation]
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended 31 December 2001:
EXHIBIT NO. DESCRIPTION
3.2 Amended and Restated By-laws
4.20 1999 Stock Option Plan, as amended
10.86 Revolving Credit Agreement dated 21 September 2001
between HSBC Bank USA and Inter Parfums, Inc.
10.87 Burberry Licence Amendment effective 1 October 2001
21 List of Subsidiaries
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's current report on Form 8-K (date of
event - 21 May 2002):
EXHIBIT NO. DESCRIPTION
2.1 Agreement dated 21 May 2002 between Jean Philippe
Fragrances, LLC and Tristar Corporation,
Debtor-in-Possession*
10.87 Manufacturing Agreement dated 21 May 2002 between Jean
Philippe Fragrances, LLC and Fragrance Impressions
Corporation**
10.88 Noncompetition and Nonsolicition Agreement dated 21 May
2002 among Jean Philippe Fragrances, LLC, Tristar
Corporation, Debtor-in-Possession and Fragrance
Impressions Corporation
- -----------------
* Certain disclosure schedules and other attachments are omitted, but will be
furnished supplementally to the Commission upon request.
** Filed in excised form.
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's current report on Form 8-K (date of
event - 29 May 2002):
EXHIBIT NO. DESCRIPTION
10.90 Agreement dated 29th day of May, 2002, among Diane Von
Furstenberg Studio, L.P., Inter Parfums USA, LLC and
Inter Parfums, Inc.*
- -----------------
* Filed in excised form.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's quarterly report on Form 10-Q for the
period ending 30 June 2002:
EXHIBIT NO. DESCRIPTION
10.91 Bail entre SCI et Inter Parfums, S.A.
[Original in French]
10.91.1 Lease between SCI and Inter Parfums, S.A. [English
Translation Version]
10.92 Third Modification of Lease dated June 17, 2002
between Metropolitan Life Insurance Company, and
Jean Philippe Fragrances, LLC
The following documents are filed herewith:
EXHIBIT NO. DESCRIPTION EDGAR PAGE NUMBER
10.93 Revolving Credit Agreement dated as of 23 June 2002 between HSBC
Bank USA and Inter Parfums, Inc. 89
23.1 Consent of Eisner LLP 94
23.2 Consent of KPMG Audit, a division of KPMG S.A. 95
99.1 Certification Required by Section 906 of the Sarbanes-Oxley Act 96