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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2004.
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
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INTER PARFUMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3275609
--------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
551 FIFTH AVENUE, NEW YORK, NEW YORK 10176
------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 983-2640
---------------------------------------------
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days: Yes _X_ No __
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes __ No _X_
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At August 11, 2004 there were 19,170,936 shares of common stock, par value $.001
per share, outstanding.
INTER PARFUMS, INC. AND SUBSIDIARIES
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheets
as of June 30, 2004 (unaudited)
and December 31, 2003 (audited) 2
Consolidated Statements of Income
for the Three and Six Months Ended
June 30, 2004 (unaudited)
and June 30, 2003 (unaudited) 3
Consolidated Statements of Cash Flows
for the Six Months Ended
June 30, 2004 (unaudited) and
June 30, 2003 (unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 18
Item 4. Controls and Procedures 19
Part II. Other Information 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Certifications 24
INTER PARFUMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly our financial position,
results of operations and cash flows for the interim periods presented. We have
condensed such financial statements in accordance with the rules and regulations
of the Securities and Exchange Commission. Therefore, such financial statements
do not include all disclosures required by accounting principles generally
accepted in the United States of America. These financial statements should be
read in conjunction with our audited financial statements for the year ended
December 31, 2003 included in our annual report filed on Form 10-K.
The results of operations for the six months ended June 30, 2004 are
not necessarily indicative of the results to be expected for the entire fiscal
year.
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INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
ASSETS
June 30, December 31,
2004 2003
-------------------- --------------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 41,293 $ 58,958
Account receivable, net 55,987 63,467
Inventories 75,236 54,255
Receivables, other 6,691 1,631
Other current assets 1,812 1,638
Income tax receivable 475 1,110
Deferred tax asset 2,018 1,381
-------------------- --------------------
Total current assets 183,512 182,440
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 6,027 4,967
TRADEMARKS AND LICENSES, NET 28,057 6,323
GOODWILL 5,499 --
OTHER ASSETS 533 271
-------------------- --------------------
$ 223,628 $ 194,001
==================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable - banks $ 8,819 $ 121
Current portion of long-term debt 3,867 --
Accounts payable 42,080 45,152
Accrued expenses 15,220 17,403
Income taxes payable 2,175 3,411
Dividends payable 575 383
-------------------- --------------------
Total current liabilities 72,736 66,470
-------------------- --------------------
LONG-TERM DEBT, LESS CURRENT PORTION 14,262 --
-------------------- --------------------
DEFERRED TAX LIABILITY 2,006 1,417
-------------------- --------------------
PUT OPTIONS 1,920 --
-------------------- --------------------
MINORITY INTEREST 23,632 21,198
-------------------- --------------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par; authorized
1,000,000 shares; none issued
Common stock, $.001 par; authorized 30,000,000 shares;
outstanding 19,170,936 and 19,164,186 shares at
June 30, 2004 and December 31, 2003, respectively 19 19
Additional paid-in capital 34,387 34,363
Retained earnings 94,406 87,376
Accumulated other comprehensive income 6,506 9,404
Treasury stock, at cost, 7,180,579 common
shares at June 30, 2004 and December 31, 2003 (26,246) (26,246)
-------------------- --------------------
109,072 104,916
-------------------- --------------------
$ 223,628 $ 194,001
==================== ====================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------------------- ------------------ ------------------ ------------------
NET SALES $ 46,733 $ 41,393 $ 105,125 $ 78,956
COST OF SALES 23,051 21,267 52,719 40,942
------------------- ------------------ ------------------ ------------------
GROSS MARGIN 23,682 20,126 52,406 38,014
SELLING, GENERAL AND ADMINISTRATIVE 16,790 14,413 35,382 27,572
------------------- ------------------ ------------------ ------------------
INCOME FROM OPERATIONS 6,892 5,713 17,024 10,442
------------------- ------------------ ------------------ ------------------
OTHER EXPENSES (INCOME):
Interest expense 107 31 209 167
(Gain) loss on foreign currency (9) 199 483 145
Interest and dividend income (212) (282) (444) (457)
Loss on subsidiary's issuance of stock 25 144 25 155
------------------- ------------------ ------------------ ------------------
(89) 92 273 10
------------------- ------------------ ------------------ ------------------
INCOME BEFORE INCOME TAXES 6,981 5,621 16,751 10,432
Income taxes 2,489 1,932 5,953 3,642
------------------- ------------------ ------------------ ------------------
NET INCOME BEFORE MINORITY INTEREST 4,492 3,689 10,798 6,790
Minority interest in net income
of consolidated subsidiary 1,091 752 2,618 1,350
------------------- ------------------ ------------------ ------------------
NET INCOME $ 3,401 $ 2,937 $ 8,180 $ 5,440
=================== ================== ================== ==================
NET INCOME PER SHARE:
BASIC $0.18 $0.15 $0.43 $0.29
DILUTED $0.17 $0.15 $0.40 $0.27
=================== ================== ================== ==================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC 19,171 18,999 19,170 18,989
DILUTED 20,578 19,906 20,596 19,907
=================== ================== ================== ==================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
Six months ended
June 30,
2004 2003
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,180 $ 5,440
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,443 891
Minority interest in net income of consolidated
Subsidiary 2,618 1,350
Deferred tax (benefit) provision (90) 371
Loss on subsidiary's issuance of stock 25 155
Changes in:
Accounts receivable, net 5,997 (4,568)
Inventories (22,085) (12,137)
Other assets (5,387) (402)
Accounts payable and accrued expenses (5,305) 12,381
Income taxes payable, net (502) 213
------------------ ------------------
Net cash provided by (used in) operating activities (15,106) 3,694
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (1,919) (1,010)
Payment for licenses acquired (20,301) --
Acquisition of businesses, net of cash acquired (4,428) --
------------------ ------------------
Net cash used in investing activities (26,648) (1,010)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable - bank 8,482 1,416
Proceeds from long-term debt 18,454 --
Proceeds from sale of stock of subsidiary 199 505
Proceeds from exercise of options 24 5
Dividends paid (958) (664)
Dividends paid to minority interest (776) (409)
Purchase of treasury stock -- (64)
------------------ ------------------
Net cash provided by financing activities 25,425 789
------------------ ------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,336) 2,446
------------------ ------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (17,665) 5,919
Cash and cash equivalents - beginning of period 58,958 38,290
------------------ ------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 41,293 $ 44,209
================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 211 $ 446
Income taxes $ 7,053 $ 3,530
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies we follow are set forth in the notes to our
financial statements included in our Form 10-K which was filed with the
Securities and Exchange Commission for the year ended December 31,
2003. We also discuss such policies in Part I, Item 2, Management's
Discussion and Analysis of Financial Condition and Results of
Operations, included in this Form 10-Q.
2. 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 as if the
fair value based method had been applied to all awards.
(In thousands, except per share data) Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Reported net income $ 3,401 $ 2,937 $ 8,180 $ 5,440
Stock-based employee compensation expense included in
reported net income, net of related tax effect -- -- -- --
Stock-based employee compensation determined under the
fair value based method, net of tax effect -- -- (93) (22)
----------- ----------- ----------- -----------
Pro forma net income $ 3,401 $ 2,937 $ 8,087 $ 5,418
=========== =========== =========== ===========
Income per share, as reported:
Basic $ 0.18 $ 0.15 $ 0.43 $ 0.29
Diluted $ 0.17 $ 0.15 $ 0.40 $ 0.27
=========== =========== =========== ===========
Pro forma net income per share:
Basic $ 0.18 $ 0.15 $ 0.42 $ 0.29
Diluted $ 0.17 $ 0.15 $ 0.39 $ 0.27
=========== =========== =========== ===========
The weighted average fair values of the options granted during the 2004
and 2003 periods are estimated as $6.85 and $2.07 per share,
respectively, on the date of grant using the Black-Scholes option
pricing model with the following assumptions: dividend yield 0.5% in
2004 and 1.0% in 2003; volatility of 50% in both 2004 and 2003;
risk-free interest rates at the date of grant, 1.81% in 2004 and 1.70%
in 2003; and an expected life of the option of two years.
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INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. COMPREHENSIVE INCOME:
(In thousands) Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
-------------- ------------- -------------- -------------
Comprehensive income:
Net income $ 3,401 $ 2,937 $ 8,180 $ 5,440
Other comprehensive income, net of tax:
Foreign currency translation adjustment (994) 2,832 (2,860) 4,450
Change in fair value of derivatives (27) 70 (38) 93
-------------- ------------- -------------- -------------
Comprehensive income $ 2,380 $ 5,839 $ 5,282 $ 9,983
============= ============= ============= =============
4. GEOGRAPHIC AREAS:
Information related to domestic and foreign operations is as
follows:
(In thousands) Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
-------------- -------------- ------------- -------------
Net Sales:
United States $ 10,047 $ 10,102 $ 20,185 $ 20,513
Europe 36,836 31,326 85,125 58,541
Eliminations (150) (35) (185) (98)
-------------- -------------- ------------- -------------
$ 46,733 $ 41,393 $ 105,125 $ 78,956
============= ============= ============= =============
Net Income:
United States $ 145 $ 494 $ 343 $ 992
Europe 3,268 2,439 7,847 4,445
Eliminations (12) 4 (10) 3
-------------- ------------- -------------- -------------
$ 3,401 $ 2,937 $ 8,180 $ 5,440
============= ============= ============= =============
5. RECLASSIFICATIONS:
Certain items in the accompanying Consolidated Statements of Income
have been reclassified to conform to current period presentation.
6. EARNINGS PER SHARE:
Basic earnings per share are computed using the weighted average number
of shares outstanding during each period. Diluted earnings per share
are computed using the weighted average number of shares outstanding
during each period, plus the incremental shares outstanding assuming
the exercise of dilutive stock options.
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INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EARNINGS PER SHARE (CONTINUED):
The following table sets forth the computation of basic and diluted
earnings per share:
(In thousands) Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
------------ ----------- ----------- -----------
Numerator:
Net income $ 3,401 $ 2,937 $ 8,180 $ 5,440
============ =========== =========== ===========
Denominator:
Weighted average shares 19,171 18,999 19,170 18,989
Effect of dilutive securities:
Stock options 1,407 907 1,426 918
------------ ----------- ----------- -----------
Denominator for diluted earnings per share 20,578 19,906 20,596 19,907
============ =========== =========== ===========
7. INVENTORIES:
Inventories consist of the following:
(In thousands) June 30, December 31,
2004 2003
----------------- -----------------
Raw materials and component parts $ 27,793 $ 19,776
Finished goods 47,443 34,479
----------------- -----------------
$ 75,236 $ 54,255
================= =================
8. ACQUISITION OF BUSINESS:
In April 2004, the Company's French subsidiary, Inter Parfums, S.A.,
("IPSA") acquired a 67.5% interest in Nickel S.A. ("Nickel") for
approximately $8.3 million in cash including a capital infusion of $2.8
million made in June 2004, aggregating approximately $4.4 million, net
of cash acquired. In accordance with the purchase agreement, each of
the minority shareholders has an option to put their remaining interest
in Nickel to IPSA from January 2007 through June 2007. Based on a
preliminary independent valuation, management has valued the put
options at $1.92 million and has recorded a long term liability and
increased goodwill accordingly. Management will mark these options to
market on a quarterly basis through earnings and is in the process of
completing the valuation of the options. The purchase price for the
minority shares will be based upon a formula applied to Nickel's sales
for the year ending December 31, 2006, pro rated for the minority
holders' equity in Nickel or at a price approximately 7% above the
recent purchase price. In addition, the Company has the right to call
the stock based on the same formula and price. The acquisition has been
accounted for as a business combination and the results of Nickel have
been included in the Company's consolidated financial statements from
the date of the acquisition.
Net sales of Nickel products for the period April 1, 2004 through June
30, 2004 aggregated $1.1 million and net income for the same period was
insignificant. For the year ended March 31, 2004, prior to the
acquisition, Nickel generated net sales of approximately $6 million.
The company has not yet completed the evaluation and allocation of the
purchase price for the 2004 acquisition as the appraisals associated
with the valuations of certain
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INTER PARFUMS, INC. AND SUBSIDIARIES
intangible assets are preliminary. The company does not believe that
the final appraisals will materially modify the preliminary purchase
price allocation.
9. ACQUISITION OF LICENSE:
In June 2004, IPSA entered into an exclusive, worldwide license
agreement with Lanvin S.A. ("Lanvin") to create, develop and distribute
fragrance lines under the Lanvin brand name. The fifteen-year license
agreement takes effect July 1, 2004 and provided for an upfront
non-recoupable license fee of $19.2 million, the purchase of existing
inventory of $7.2 million subject to certain contractual adjustments,
and requires advertising expenditures and royalty payments in line with
industry practice, as well as, the assumption of certain pre-existing
contractual obligations.
10. LONG-TERM DEBT:
In connection with the acquisition of the license referred to above
IPSA initially financed the license fee by utilizing $18.0 million from
one of its short-term credit facilities. In July, IPSA converted the
loan into a $19.2 million five-year credit agreement, accordingly the
borrowings under the short-term credit agreement at June 30, 2004, has
been classified to long-term in accordance with the terms of the new
credit agreement. The long-term credit facility, which bears interest
at 0.60% above the Eurobor rate, provides for principal to be repaid in
20 equal quarterly installments of $0.96 million and requires the
maintenance of certain financial covenants.
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INTER PARFUMS, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Statements in this document, which are not historical in nature, are
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to be
materially different from projected results. Given these risks, uncertainties
and other factors, persons are cautioned not to place undue reliance on the
forward-looking statements.
Such factors include renewal of existing license agreements,
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".
OVERVIEW
We operate in a single segment in the fragrance and cosmetic industry,
and manufacture, market and distribute a wide array of fragrances, cosmetics and
health and beauty aids. We specialize in prestige perfumes and cosmetics and
mass-market perfumes, cosmetics and health and beauty aids. Most of our prestige
products are produced and marketed by our 75% owned subsidiary in Paris, Inter
Parfums, S.A., which is also a publicly traded company as 25% of Inter Parfums,
S.A. shares trade on the Paris Bourse.
o Prestige products - For each prestige brand, owned or licensed by us,
we develop an original concept for the perfume or cosmetic line
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.
Our prestige product lines, which are manufactured and distributed by
us primarily under license agreements with brand owners, represented
approximately 81% of net sales for the six-month period ended June 30, 2004.
Since 1992 we have built a portfolio of brands under licenses which include
Burberry, S.T. Dupont, Paul Smith, Christian Lacroix, Celine, Diane von
Furstenberg and Lanvin, which are distributed in over 120 countries around the
world. In terms of sales, Burberry is our most significant license, and sales of
Burberry products represented 64% and 49% of net sales for the six-month periods
ended June 30, 2004 and 2003, respectively.
Our current Burberry license extends us through December 31, 2006. We
believe it is important to have a long-term relationship with Burberry at this
time because product development and marketing strategies, including planning
for product launches, can and often do, extend over several years. Accordingly,
a new license agreement is under advanced discussion with Burberry. We expect
that a definitive agreement will be reached in September. Taking into
consideration discussions held to date, we anticipate that our royalty rate will
increase effective July 1, 2004, as will our advertising requirements beginning
in 2005. We are
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INTER PARFUMS, INC. AND SUBSIDIARIES
putting the finishing touches on our business plan that is expected to mitigate
theses incremental costs beginning in 2005. While we anticipate a short-term
impact on our bottom line, particularly for the second half of 2004, the growth
potential offered by this world-renown brand makes us confident about our future
long-term prospects.
In April 2004, we acquired a 67.5% interest in Nickel S.A. ("Nickel")
for approximately $8.3 million in cash, including a capital infusion of $2.8
million made in June 2004, aggregating approximately $4.4 million, net of cash
acquired. Nickel produces a full line of high-end skin care products for men
which are sold in prestige department and specialty stores throughout Western
Europe and the United States, as well as through its men's spas in France, New
York and its licensed spa in San Francisco.
In June 2004, IPSA entered into an exclusive, worldwide license
agreement with Lanvin to create, develop and distribute fragrance lines under
the Lanvin brand name. The fifteen-year license agreement takes effect July 1,
2004 and provided for an upfront license fee of $19.2 million and the purchase
of existing inventory of $7.2 million.
We have two 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. LV Capital owns approximately 18% of our outstanding
common shares. 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. We believe that our
association with LV Capital has enhanced our credibility in the cosmetic
industry, which should lead us to additional opportunities in our industry that
might not have been otherwise available to us.
Our mass market product lines, which represent 19% of sales for the
six-month period ended June 30, 2004, are comprised of alternative designer
fragrances, cosmetics, health and beauty aids and personal care products. These
lines are sold under trademarks owned by us or pursuant to license agreements we
have for the trademarks Jordache and Tatiana.
We grow our business in two distinct ways. First, we grow by adding new
brands to our portfolio, either through new licenses or out-right acquisition.
Second, we grow through the creation of product line extensions within the
existing brands in our portfolio. Every two to three years, we create a new
family of fragrances for each brand in our portfolio.
Our business is not very capital intensive, and it is important to note
that we do not own any manufacturing facilities. Rather, we act as a general
contractor and source our needed components from our suppliers. These components
are received at one of our distribution centers and then, based upon production
needs, the components are sent to one of several outside fillers which
manufacture the finished good for us and ship it back to our distribution
center.
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 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
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INTER PARFUMS, INC. AND SUBSIDIARIES
operations. These accounting policies generally require our management's most
difficult and subjective judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain. The
following is a brief discussion of the more critical accounting policies that we
employ.
REVENUE RECOGNITION
We sell our products to department stores, perfumeries, mass market
retailers, supermarkets and domestic and international wholesalers and
distributors. Sales of such products by our domestic subsidiaries are
denominated in U.S. dollars and sales of such products by our 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 our analysis of the customer's financial position as well as
previously established buying patterns. Generally, we do not bill customers for
shipping and handling costs and, accordingly, we classify such costs as selling
and administrative expenses. We recognize revenues 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.
SALES RETURNS
Generally, we do not permit 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 upon 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 our estimates, if factors such as economic
conditions, inventory levels or competitive conditions differ from our
expectations.
PROMOTIONAL ALLOWANCES
We have various performance-based arrangements with certain 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.
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INTER PARFUMS, INC. AND SUBSIDIARIES
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, or market acceptance of products, could
result in shortened useful lives.
Long-lived assets, including trademarks, licenses and goodwill, 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, then 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.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2004 AS COMPARED TO THE THREE AND SIX
MONTHS ENDED JUNE 30, 2003
NET SALES Three months ended June 30, Six months ended June 30,
(In millions) % %
2004 Change 2003 2004 Change 2003
------------ ------------ ------------ ----------
Prestige product sales $ 36.9 20% $ 30.7 $ 84.9 48% $ 57.4
Mass market product sales 9.8 (8%) 10.7 20.2 (6%) 21.6
------------ ------------ ------------ ----------
Total net sales $ 46.7 13% $ 41.4 $ 105.1 33% $ 79.0
============ ============ ============ ==========
Net sales for the three months ended June 30, 2004 increased 13% to
$46.7 million, as compared to $41.4 million for the corresponding period of the
prior year. At comparable foreign currency exchange rates, net sales increased
14% for the period.
Net sales for the six months ended June 30, 2004 increased 33% to
$105.1 million, as compared to $79.0 million for the corresponding period of the
prior year. At comparable foreign currency exchange rates, net sales increased
28% for the period.
Page 12
INTER PARFUMS, INC. AND SUBSIDIARIES
Prestige product sales increased 20% for the three months ended June
30, 2004 and 48% for the six months ended June 30, 2004, as compared to the
corresponding periods of the prior year. Growth in prestige product sales is
primarily attributable to the global rollout of Burberry Brit for women, which
began in the third quarter of 2003, and has expanded during 2004 to Asia, South
America and the Middle East. We anticipate that Burberry Brit for women will be
the best selling fragrance in our history. We are also looking forward to the
launch in the fall of the Burberry Brit for men line in selected markets.
In September 2003, we launched our first prestige cosmetics line, Diane
von Furstenberg Beauty, in some of the finest retail doors in the United States
as well as in the designer's boutiques in New York, Miami, London and Paris,
which opens later this summer. Initial sales have been satisfactory and efforts
are being made to increase consumer awareness. During the first half of 2004, we
undertook many promotional events including personal appearances, free makeovers
and gift with purchase programs in an attempt to increase sell through at store
level. Diane von Furstenberg products are now available on Sephora.com and at
several Sephora retail locations.
The year 2004, included a number of brand extensions. During the
second quarter of 2004, we launched a limited edition warm weather, seasonal
fragrance for our Celine and Christian Lacroix brands. In July, we unveiled new
fragrance families for both S.T. Dupont and Paul Smith and we will begin the
distribution for Lanvin, our newest products under license. In early 2005, we
also plan to introduce a new Christian Lacroix fragrance family for men and
women.
With respect to our mass market product lines, net sales were off 8%
for the three months ended June 30, 2004 and 6% for the six months ended June
30, 2004, as compared to the corresponding periods of the prior year. Sales
gains continue in the US dollar store retail environment as our customers
continued to open additional doors and carry more of our product offerings.
These gains however, were more than offset by a decline in export sales
primarily to Mexico and Central and South America. We continue to closely
monitor our credit risk in those territories and are willing to forego some
sales volume to minimize our overall credit exposure.
Our new product development program for all of our product groups is
well under way, and, as previously mentioned, we expect to roll out new products
throughout 2004 and 2005. In addition, we are actively pursuing other new
business opportunities. However, we cannot assure you that any new license or
acquisitions will be consummated.
In April 2004, the Company's French subsidiary, Inter Parfums, S.A.,
("IPSA") acquired a 67.5% interest in Nickel S.A. ("Nickel") for approximately
$8.3 million in cash including an additional capital infusion of $2.8 million
made in June 2004, aggregating approximately $4.4 million, net of cash acquired.
Established in 1996 by Philippe Dumont, Nickel has developed two
innovative concepts in the world of cosmetics: spas exclusively for male
customers and skin care product lines for men. The Nickel range of some fifteen
skin care products for the face and body is sold through prestige department and
specialty stores primarily in France (500 outlets), the balance of Western
Europe (900 outlets) and in the United States (300 outlets), as well as through
its men's spas in Paris, New York and, most recently, its licensed spa in San
Francisco.
Page 13
INTER PARFUMS, INC. AND SUBSIDIARIES
Net sales of Nickel products for the period April 1, 2004 through June
30, 2004 aggregated $1.1 million and net income for the same period was
insignificant. For the year ended March 31, 2004, prior to the acquisition
Nickel generated net sales of approximately $6 million.
In June 2004, IPSA entered into an exclusive, worldwide license
agreement with Lanvin S.A. ("Lanvin") to create, develop and distribute
fragrance lines under the Lanvin brand name. The fifteen-year license agreement
takes effect July 1, 2004.
A synonym of luxury and elegance, the Lanvin fashion house, founded in
1889 by Jeanne Lanvin, expanded into fragrances in the 1920s. Today, Lanvin
fragrances occupy important positions in the selective distribution market in
France, Europe and Asia particularly with the lines Arpege (created in 1927),
Lanvin L'Homme (1997), Oxygene (2000), Eclat d'Arpege (2002) and Vetyver (2003).
GROSS MARGINS Three months ended Six months ended
June 30, June 30,
(In millions) 2004 2003 2004 2003
------------ ------------- ------------ ------------
Net sales $ 46.7 $ 41.4 $ 105.1 $ 78.9
Cost of sales 23.0 21.3 52.7 40.9
------------ ------------- ------------ ------------
Gross margin $ 23.7 $ 20.1 $ 52.4 $ 38.0
============ ============= ============ ============
Gross margin as a
percent of net sales 51% 49% 50% 48%
============ ============= ============ ============
Gross profit margin was 51% and 50% for the three and six-month periods
ended June 30, 2004, as compared to 49% and 48% for the corresponding periods of
the prior year. Sales of products in our prestige fragrance lines generate a
significantly higher gross profit margin than sales of our mass-market product
lines. The gross margin improvement is primarily attributable to the 20% and 48%
net sales growth rate achieved in our prestige product lines for the three and
six-month periods ended June 30, 2004, respectively, as compared to the
corresponding periods of the prior year. In addition, it is important to point
out that gross margins are also affected by changes in exchange rates and, since
the cost of many promotional activities are included in cost of sales and the
timing of promotional activities vary, we have experienced, and expect to
continue to experience, fluctuations in our gross margin percentage.
SELLING, GENERAL & Three months ended Six months ended
ADMINISTRATIVE June 30, June 30,
(In millions) 2004 2003 2004 2003
------------ ------------- ------------ ------------
Selling, general & administrative $ 16.8 $ 14.4 $ 35.4 $ 27.6
============ ============= ============ ============
Selling, general & administrative
as a % of net sales 36% 35% 34% 35%
============ ============= ============ ============
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INTER PARFUMS, INC. AND SUBSIDIARIES
Selling, general and administrative expense increased 16% and 28% for
the three and six-month periods ended June 30, 2004, respectively, as compared
to the corresponding periods of the prior year. As a percentage of sales
selling, general and administrative was 36% and 34% of sales for the three and
six-month periods ended June 30, 2004, respectively, as compared to 35% for both
corresponding periods of the prior year. Sales growth in our prestige product
lines require higher selling, general and administrative expenses because
promotion and advertising are prerequisites for sales of designer prestige
products. We develop a complete marketing and promotional plan to support our
growing portfolio of prestige brands and to build upon each brand's awareness.
Promotion and advertising included in selling, general and
administrative expenses was approximately 12% of prestige product sales for the
six-month period ended June 30, 2004 and 15% for the six-month period ended June
30, 2003. Our mass-market product lines do not require extensive advertising and
therefore, more of our selling, general and administrative expenses are fixed
rather than variable.
As previously reported, IPSA was a party to litigation with Jean
Charles Brosseau, S.A. ("Brosseau"), the owner of the Ombre Rose trademark. In
October 1999, IPSA received notice of a judgment in favor of Brosseau, which
awarded damages of approximately $0.85 million (at current exchange rates).
IPSA appealed the judgment as it vigorously and categorically denied
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
$0.85 million, the full amount of the judgment. In February 2001, the Court of
Appeal named an expert to proceed with additional investigations and required
IPSA to pay $0.14 million as an advance for damages claimed by Brosseau.
In February 2004, the Court of Appeal ordered IPSA to pay total damages
of $0.39 million of which $0.14 million has already been advanced. Brosseau had
until the end of May 2004 to appeal this decision. No appeal has been filed, and
therefore, in May 2004, IPSA reversed its remaining litigation reserve
aggregating approximately $0.46 million. This reversal is included as a
reduction of administrative expenses in the accompanying consolidated statement
of income.
Interest expense aggregated $0.2 million for both six-month periods
ended June 30, 2004 and June 30, 2003. We use the credit lines available to us,
as needed, to finance our working capital needs and short-term financing for
acquisitions.
Foreign currency losses aggregated $0.5 million and $0.1 million for
the six-month periods ended June 30, 2004 and June 30, 2003, 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 35.7% for the three months ended June
30, 2004, as compared to 34.4% for the corresponding period of the prior year.
Our effective income tax rate was 35.5% for the six months ended June 30, 2004,
as compared to 34.9% for the corresponding period of the prior year. These rates
differ from statutory rates due to the effect of state and local taxes and tax
rates in foreign jurisdictions. No significant changes in tax rates were
experienced nor were any expected in jurisdictions where we operate.
Page 15
INTER PARFUMS, INC. AND SUBSIDIARIES
Net income increased 16% to $3.4 million for the three months ended
June 30, 2004, as compared to $2.9 million for the corresponding period of the
prior year. Net income increased 50% to $8.2 million for the six months ended
June 30, 2004, as compared to $5.4 million for the corresponding period of the
prior year.
Diluted earnings per share increased 13% to $0.17 for the three months
ended June 30, 2004, as compared to $0.15 for the corresponding period of the
prior year. Diluted earnings per share increased 48% to $0.40 for the six months
ended June 30, 2004, as compared to $0.27 for the corresponding period of the
prior year.
Weighted average shares outstanding aggregated 19.2 million for both
the three and six-month periods ended June 30, 2004, as compared to 19.0 million
for the corresponding periods of the prior year. On a diluted basis, average
shares outstanding were 20.6 million for the three and six-month periods ended
June 30, 2004, as compared to 19.9 million for the corresponding periods of the
prior year. The increase in the average diluted shares outstanding is the result
of the effect of dilutive securities resulting from an increase in our stock
price. The average stock price of our common shares was $23.15 per share for the
three-month period ended June 30, 2004, as compared to $7.20 per share for the
corresponding period of the prior year.
LIQUIDITY AND FINANCED RESOURCES
Our financial position remains strong. At June 30, 2004, working
capital aggregated $111 million and we had a working capital ratio of 2.5 to 1.
Cash and cash equivalents aggregated $41.3 million.
In April 2004, IPSA acquired a 67.5% interest in Nickel for
approximately $8.3 million in cash including an additional capital infusion of
$2.8 million made in June 2004, aggregating approximately $4.4 million, net of
cash acquired. We funded this acquisition with cash on hand and do not expect it
to have any further significant effect on our financial position.
In June 2004, IPSA entered into an exclusive, worldwide license
agreement with Lanvin to create, develop and distribute fragrance lines under
the Lanvin brand name. The fifteen-year license agreement takes effect July 1,
2004 and provided for an upfront license fee of $19.2 million and the purchase
of existing inventory of $7.2 million subject to certain contractual
adjustments. IPSA initially financed the license fee by utilizing $18.0 million
from one of its short-term credit facilities. In July, IPSA converted the loan
into a $19.2 million five-year credit agreement. This long-term credit facility,
which bears interest at 0.60% above the Eurobor rate, provides for principal to
be repaid in 20 equal quarterly installments of $0.96 million and requires the
maintenance of certain financial coverants
Our short-term cash requirements are expected to be met by available
cash at June 30, 2004, cash generated by operations and short-term credit lines
provided by domestic and foreign banks. The principal credit facilities consist
of a $12.0 million unsecured revolving line of credit provided by a domestic
commercial bank and approximately $45.0 million in credit lines provided by a
consortium of international financial institutions. Historically, borrowings
under these facilities have been minimal as we typically use our cash to finance
all of our working capital needs. However, as of June 30, 2004 we drew down
approximately $8.5 million on our credit lines to help finance our working
capital needs.
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INTER PARFUMS, INC. AND SUBSIDIARIES
Cash used in operating activities aggregated $15.1 million for the
six-month period ended June 30, 2004, as compared to cash provided by operating
activities of $3.7 million for the corresponding period of the prior year. We
finance our growth primarily with working capital and to a lesser extent our
available credit lines. Cash used in operating activities for 2004 reflects a
significant increase (approximately $22.1 million) in inventory. This increase
includes approximately $7.2 million acquired in late June 2004 from Lanvin in
connection with our new license agreement. We have also been building inventory
in anticipation of the launches of new product lines in planned for July and
September 2004.
Cash flows used in investing activities normally consists of $1.0 to
$2.0 million per year spent on tools and molds, depending on our new product
development calendar, with the balance of capital expenditures representing
office fixtures, computer equipment and industrial equipment needed at our
distribution centers. For the six-month period ended June 30, 2004, cash flows
used in investing activities aggregated $26.6 million. Included in this amount
is approximately $20.3 million paid for the purchase of the Lanvin license
(including legal expenses and fees) and approximately $4.4 million paid for the
Nickel acquisition, net of cash acquired.
In March 2004, our board of directors increased our cash dividend to
$.12 per share, approximately $2.3 million per annum, payable $.03 per share on
a quarterly basis. This increased cash dividend in 2004 represents a small part
of our cash position and is not expected to have any significant impact on our
financial position.
We believe that funds generated from operations, supplemented by our
present cash position and available credit facilities, will provide us with
sufficient resources to meet all present and reasonably foreseeable future
operating needs.
CONTRACTUAL OBLIGATIONS
We lease our office and warehouse facilities under operating leases
expiring through 2013. Obligations pursuant to these leases for the years ended
December 31, 2004, 2005, 2006, 2007, 2008 and thereafter are $3.8 million, $3.2
million, $2.1 million, $1.5 million, $1.3 million and $2.6 million,
respectively.
We are obligated under a number of license agreements for the use of
trademarks and rights in connection with the manufacture and sale of our
products. Obligations pursuant to these license agreements for the years ended
December 31, 2004, 2005, 2006, 2007, 2008 and thereafter are $5.3 million, $7.8
million, $8.0 million, $5.5 million, $5.2 million and $33.1 million,
respectively.
Page 17
INTER PARFUMS, INC. AND SUBSIDIARIES
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
GENERAL
We address certain financial exposures through a controlled program of
risk management that primarily consists of the use of derivative financial
instruments. Our French subsidiary primarily enters into foreign currency
forward exchange contracts in order to reduce the effects of fluctuating foreign
currency exchange rates. We do not engage in the trading of foreign currency
forward exchange contracts or interest rate swaps.
FOREIGN EXCHANGE RISK MANAGEMENT
We periodically enter into foreign currency forward exchange contracts
to hedge exposure related to receivables denominated in a foreign currency and
to manage risks related to future sales expected to be denominated in a foreign
currency. We enter into these exchange contracts for periods consistent with our
identified exposures. The purpose of the hedging activities is to minimize the
effect of foreign exchange rate movements on the receivables and cash flows of
Inter Parfums, S.A., our French subsidiary, whose functional currency is the
Euro. All foreign currency contracts are denominated in currencies of major
industrial countries and are with large financial institutions, which are rated
as strong investment grade.
All derivative instruments are required to be reflected as either
assets or liabilities in the balance sheet measured at fair value. Generally,
increases or decreases in fair value of derivative instruments will be
recognized as gains or losses in earnings in the period of change. If the
derivative is designated and qualifies as a cash flow hedge, the changes in fair
value of the derivative instrument will be recorded in other comprehensive
income.
Before entering into a derivative transaction for hedging purposes, we
determine that the change in the value of the derivative will effectively offset
the change in the fair value of the hedged item from a movement in foreign
currency rates. Then, we measure the effectiveness of each hedge throughout the
hedged period. Any hedge ineffectiveness is recognized in the income statement.
We believe that our risk of loss as the result of nonperformance by any
of such financial institutions is remote and in any event would not be material.
The contracts have varying maturities with none exceeding one year. Costs
associated with entering into such contracts have not been material to our
financial results. At June 30, 2004, we had foreign currency contracts in the
form of forward exchange contracts in the amount of approximately U.S. $16.3
million and GB Pounds 6.4 million.
Page 18
INTER PARFUMS, INC. AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have reviewed
and evaluated the effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934 Rule 13a-14(c)) as of the end of
the period covered by this quarterly report on Form 10-Q (the "Evaluation
Date"). Based on their review and evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that, as of the Evaluation Date, our
Company's disclosure controls and procedures were adequate and effective to
ensure that material information relating to our Company and its consolidated
subsidiaries would be made known to them by others within those entities, so
that such material information is recorded, processed and reported in a timely
manner, particularly during the period in which this quarterly report on Form
10-Q was being prepared, and that no changes were required at this time.
CHANGES IN INTERNAL CONTROLS
There were no significant changes in our Company's internal controls or
in other factors that could significantly affect our internal controls after the
Evaluation Date, or any significant deficiencies or material weaknesses in such
internal controls requiring corrective actions. As a result, no corrective
actions were taken.
Page 19
INTER PARFUMS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEMS 1, 2 AND 3 ARE OMITTED AS THEY ARE EITHER NOT APPLICABLE OR HAVE
BEEN INCLUDED IN PART I.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Inter Parfums, Inc. was held on 6
August 2004 at 10:00 a.m., local time, at the offices of the Company, 551 Fifth
Avenue, New York, New York 10176.
(b) The following individuals were nominated for election as members of the
Board of Directors to hold office for a term of one (1) year until the next
annual meeting of stockholders and until their successors are elected and
qualify: Jean Madar, Philippe Benacin, Russell Greenberg, Francois Heilbronn,
Joseph A. Caccamo, Jean Levy, Robert Bensoussan-Torres, Daniel Piette, Jean
Cailliau, Philippe Santi and Serge Rosinoer. The results of the voting were as
set forth below. A plurality of the votes having been cast in favor of each of
the above-named Directors, they were duly elected to serve a one (1) year term.
Nominee Votes For Votes Withheld
Jean Madar 17,823,609 1,118,230
Philippe Benacin 17,823,309 1,118,530
Russell Greenberg 17,823,549 1,118,290
Francois Heilbronn 18,413,683 528,156
Joseph A. Caccamo 17,823,549 1,118,290
Jean Levy 18,412,287 529,552
Robert Bensoussan-Torres 18,496,539 445,300
Daniel Piette 18,313,137 628,702
Jean Cailliau 18,474,839 467,000
Philippe Santi 17,902,949 1,038,890
Serge Rosinoer 17,763,579 1,178,260
(c) The other items presented to the shareholders at the annul meeting and the
results of voting are described below. A majority of the outstanding shares were
cast for all of such proposals, and all of such proposals were passed.
1. The results of the voting were as follows on the proposal to approve
an amendment to our Certificate of Incorporation to authorize an increase in the
number of authorized shares of Common Stock from 30,000,000 to 100,000,000:
17,006,082 FOR
1,920,111 AGAINST
15,643 ABSTAINED
3 BROKER NON VOTES
2. The results of the voting were as follows for the proposal to
approve the adoption of our 2004 Stock Option Plan:
14,792,060 FOR
1,415,396 AGAINST
12,863 ABSTAINED
2,721,520 BROKER NON VOTES
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INTER PARFUMS, INC. AND SUBSIDIARIES
3. The results of the voting were as follows for the proposal to
approve the adoption of our 2004 Nonemployee Director Stock Option Plan:
15,488,115 FOR
725,995 AGAINST
6,208 ABSTAINED
2,721,521 BROKER NON VOTES
ITEM 5. OTHER INFORMATION
In accordance with Section 10A(i)(2) of the Securities Exchange Act of
1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002, our company is
responsible for disclosing the "non-audit services" to be performed by our
auditors that were approved by our company's audit committee during the
quarterly period covered by this report. Non-audit services are defined in the
law as services other than those provided in connection with an audit or a
review of the financial statements of the company.
During the quarterly period covered by this report, the audit committee
authorized the following non-audit services to be performed by our auditors.
1. We were authorized to retain each of KPMG LLP and KPMG SA in order
to perform such review as may be necessary in order to provide their required
consents in the Registration Statement on Form S-8 to incorporate by reference
their reports on the audit of our financial statements which are included in the
Annual Report on Form 10-K for the year ended December 31, 2003. Fees for such
services are to be subject to the approval of the Audit Committee.
2. We were authorized to retain each of KPMG LLP and KPMG SA in order
to provide tax consultation in the ordinary course of for fiscal year ending 31
December 2004.
3. We were authorized to retain each of KPMG LLP and KPMG SA in order
to provide tax consultation as may be required on a project by project basis
that would not be considered in the ordinary course of business, up a $5,000 fee
limit per project, subject to an aggregate fee limit of $25,000 for fiscal year
ending 31 December 2004. Approval of the audit committee is required for any
further tax services.
4. Francois Heilbronn, the Chairman of the Committee, has been
delegated the authority by the audit committee to grant pre-approvals for other
services that are to be provided by either KPMG LLP and KPMG SA on an expedited
basis, if obtaining pre-approval of the audit committee is not practicable under
the circumstances.
Page 21
INTER PARFUMS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The following documents are filed herewith:
Exhibit No. Description
3.1.6 Amendment to Certificate of Incorporation dated 6 August 2004
10.104 Lease dated as of 1 March 2001 for 300 West 14th Street, New
York, NY
10.105 Loan Contract dated 12 July 2004 between Credit Lyonnais and
Inter Parfums, S.A. (French Original)
10.105.1 Loan Contract dated 12 July 2004 between Credit Lyonnais and
Inter Parfums, S.A. (English Translation)
10.106 Lease effective as of 1 April 2004 for 4-6 Rond Point des Champs
Elysees, Ground and 1st Floor, Paris, France (French Original)
10.106.1 Lease effective as of 1 April 2004 for 4-6 Rond Point des Champs
Elysees, Ground and 1st Floor, Paris, France (English
Translation)
10.107 Lease effective as of 1 April 2004 for 4-6 Rond Point des Champs
Elysees, 5th Floor-Left, Paris, France (French Original)
10.107.1 Lease effective as of 1 April 2004 for 4-6 Rond Point des Champs
Elysees, 5th Floor-Left, Paris, France(English Translation)
10.108 Lease effective as of 1 April 2004 for 4-6 Rond Point des Champs
Elysees, 6th Floor-Right, Paris, France (French Original)
10.108.1 Lease effective as of 1 April 2004 for 4-6 Rond Point des Champs
Elysees, 6th Floor-Right, Paris, France(English Translation)
31 Certifications required by Rule 13a-14(a)
32 Certification Required by Section 906 of the Sarbanes-Oxley Act
(b) We filed or furnished the following Current Reports on Form 8-K:
(1) Date of event - 10 May 2004, reporting Items 7, 9 and 12;
(2) Date of event - 3 June 2004, reporting Items 5 and 7;
(3) Date of event - 14 June 2004, reporting Items 5 and 7;
(4) Date of event - 15 July 2004, reporting Items 7, 9 and 12; and
(5) Date of event - 11 August 2004, reporting Items 7, 9 and 12.
Page 22
INTER PARFUMS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 23rd day of August 2004.
INTER PARFUMS, INC.
By: /s/ RUSSELL GREENBERG
----------------------------
Executive Vice President and
Chief Financial Officer
Page 23