Back to GetFilings.com
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 DECEMBER 31, 1999 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
(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)
Registrant's telephone number, including area code: 212.983.2640.
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
$.001 PAR VALUE PER SHARE.
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. / /
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant (based on the closing price of $ 12.875 on MARCH 24, 2000:
$21,386,443.
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
(MARCH 24, 2000): 7,873,481.
Documents Incorporated By Reference: None.
PART I
ITEM 1. BUSINESS
Introduction
We are Inter Parfums, Inc., a world-wide provider of prestige perfumes and
mass market perfumes and cosmetics. 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 wholly-owned New York
limited liability company, Jean Philippe Fragrances, 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., and its
two majority-owned indirect subsidiaries, Inter Parfums, S.A. and Inter Parfums
Grand Public, 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 (62% of net sales) and mass market perfumes and cosmetics:
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 - In our United States operations, we design, market
and distribute inexpensive fragrances and personal care products, including
alternative designer fragrances and mass market cosmetics.
Production and Supply
The stages of the development and production process for all perfumes are
as follows:
o Simultaneous briefing with perfume designers and creators (includes
analysis of esthetic and olfactory trends, target clientele and mass market
communication approach);
o Concept choice;
o Production of mock-ups for final acceptance of bottles and packaging;
1
o Invitation of bids from component suppliers (glass makers, plastic
processors, printers, etc.) and packaging companies;
o Choice of vendor partners;
o Supply and packaging schedules;
o Issuance of component purchase orders:
o Packaging and inventory control;
Suppliers/vendor-partners who assist the Company with product development
include:
o Independent perfumery design companies (Federico Restrepo, Ateliers
Dinand);
o Perfumers (IFF, Firmenich, Creations Aromatiques, Robertet, Wessel
Fragrances) which create a fragrance consistent with our expectations and,
that of the fragrance designers and creators;
o Industrialists who manufacture components such as glassware (Saint Gobain,
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, CCI, CEI
Bottling, 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 French francs and for our United States operations, suppliers'
accounts are primarily settled in U.S. dollars.
Marketing and Distribution of Prestige Products
International distribution is performed by independent distribution
companies specializing in luxury goods. In each country, anywhere from one to
three distributors are given 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.
Approximately 50% of prestige fragrance net sales are sold primarily in US
dollars. The cautious and non-speculative management of foreign currency
exchange risk is aimed at hedging the risk arising from operations, in an effort
to reduce our exposure to foreign
2
currency exchange fluctuations. As a result of our international
operations, 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 60% of prestige product
sales in France are made to approximately 40 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 40
customers out of a total of over 250 active accounts represent 80% of prestige
fragrance sales. No one customer represents more than 10% of sales.
Marketing and Distribution of Mass Market Products
In the United States, mass merchandisers, drug store chains and supermarket
chains, are the target customers for our mass market products. Our current
customer list includes
o Albertsons
o Bradlees
o Drug Emporium
o Longs Drug Stores
o CVS
o Family Dollar
o Dollar General
o Dollar Tree Distributors
o Consolidated Stores
o Food Lion
In addition, our mass market products are sold to wholesale distributors,
specialty store chains, and to multiple locations of accessory, jewelry and
clothing outlets, such as Rainbow Shops.
These products are sold through a highly efficient and dedicated in-house
sales team and reach approximately 12,000 retail outlets throughout the United
States. We utilize an Electronic Data Interchange system with 30 of the largest
retail chains in the country. This
3
system facilitates the processing of customer orders and the remittance of
customer invoices. Our 140,000 square foot distribution center has provided us
with the opportunity and resources to better 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 perfumery market can be broken down into two types of distribution:
o Selective distribution - perfumeries and specialty sections of department
stores, who sell brand name products with a luxury image,
o Mass distribution - moderately-priced mass market products for a broad
customer base with limited purchasing power.
Selective Distribution
During 1999, the French perfume industry, which accounts for about 30% of
the world market, reported a 6% growth rate with sales of $11.9 billion, as
compared to a 5% growth rate in 1998 and an 8% growth rate in 1997. (Source:
Federation des Industries de la Parfumerie)
In connection with a recovery in mass market spending, the French domestic
market for all distribution channels ($5.9 billion in 1999) increased 6% in 1999
and 8% in 1998. In the selective distribution segment alone (approximately $1.6
billion), the increase was 7% in 1999, and 6% in 1998.
During 1999, the French export market continues to vary:
o Western Europe increased by slightly more than 3%.
4
o Asia increased by 15%, recovering from its 1997 and 1998 economic crisis
(South Korea alone increased 40%).
o Eastern Europe was still feeling the effects of its financial crisis and
was down 58% in Russia alone.
o Latin America, also feeling the effects of its financial crisis was down
12%. (Source: Federation des Industries de la Parfumerie)
While our market share is less than 1% in France, in other countries such
as the United States, Italy, Portugal, Saudi Arabia and South Korea, the
Company's market share is reportedly between 1% and 4% of French perfumery
imports (internal source).
Mass Market Distribution
Our mass market products, including our alternative designer fragrance
lines, which rely heavily on exports from the United States, was negatively
affected during the first and second quarters of 1999 by the economic situation
in Eastern Europe, and Latin America.
However, in the latter part of 1999 and continuing into the year 2000, the
downward trend began to reverse, and the United States domestic market is
becoming stronger.
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.
While our closest competitors in the prestige market typically do not have
mass market products departments, if they do, they also develop cosmetics. We do
not presently sell prestige cosmetics.
At the present time, we are aware of approximately five established
companies which market similar alternative designer fragrances. This market is
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 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
5
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.
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, in
exchange for the payment of royalties.
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 $10.9 million in 1999 with approximately $3.6 million in point of
sale support, which is included in cost of sales and $7.2 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.) can vary from $0.2 million to $2.0 million.
The smooth and consistent operation of our prestige perfume operations
require 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 $50. Sales of our prestige perfume lines, assuming a constant
U.S. dollar exchange rate, aggregated $37.2 million in 1997, $50.0 million in
1998 and $54.4 million in 1999.
Our brand name portfolio, which has been steadily increasing since 1988, is
now made up essentially of five brand names, each of which has a variety of
product lines. In addition, we have planned several new product launches for
2000.
6
Burberry
(Burberry of London, Week end)
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.
Burberry enjoys a very distinctive, upscale-market and classic image, with an
undeniable international cachet.
The growth in sales of this brand, which began in 1995 and continued
through 1998, maintained its sales level in 1999, despite no new product
introductions. We expect to launch two new Burberry perfume lines in October
2000. These lines are designed with a style intended to be consistent with the
new, more modern and trend-setting Burberry brand image.
S.T. Dupont
(S.T. Dupont Paris, Signature)
In June 1997 we signed an 11-year 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, the 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.
A new S.T. Dupont Signature line of two new highly selective perfumes,
designed around the theme of writing for which S.T. Dupont is famous, was
launched in March 2000.
Paul Smith
A 12-year exclusive license agreement was signed with Paul Smith in
December 1998 for the creation, manufacture and worldwide distribution of Paul
Smith perfumes and cosmetics. This license represents a new avenue for growth,
as it provides us with a unique opportunity in designer perfumes, a sector from
which we have been absent until now.
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. The international launch of the first line of Paul Smith
perfumes is scheduled for July through September, 2000.
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.
("LVMH"), for the worldwide development, manufacture and distribution of
perfumes. For us, this new
7
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 was launched in Europe during 1999.
During 2000, the line is expected to be launched in the United States, with an
exclusive distribution arrangement with Saks Fifth Avenue, and in South America.
Also in the Spring of 2000, we plan to develop and sell a lighter fragrant eau
de toilette. We also plan to develop a new line for Christian Lacroix in the
year 2001.
Molyneux
(Quartz, Quartz Pour Homme, I Love You, 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 Quartz, by Molyneux, in a modernistic package.
Other Selective Brand Names
We also create, develop and market the following products:
o Jean Charles Brosseau's Ombre Rose lines, which are sold predominantly in
the United States and Japan.
o Parfums Weil, which includes "Fleur de Weil", "Secret de Venus" and
"Bambou" and which are sold predominantly in France and Europe.
o Regine's, who's "Regine's for men" line is primarily distributed in the
Middle East.
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
Molyneux Owned Mar. 94 N/A 4.2
Weil Owned Mar. 94 N/A 1.8
Jean Charles Brosseau Licensed July 93 10 years 1.7
Regines Licensed June 88 Year to year 0.0
Christian Lacroix Licensed Mar. 99 11 years 0.0
8
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 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, men's deodorant sticks, ladies' roll-on
deodorants and perfumed creams. Product line extensions into additional personal
care products is 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.
Under the terms of a license agreement signed in 1991 with Jordache
Enterprises, we have capitalized on the strength and awareness of the Jordache
trademark. Recent new introductions in the fragrance category are directed at
and focused on the younger, trendy mass market who is the core of the Jordache
franchise. New packaging, which utilizes the latest in graphic technology, is
both innovative and attractive. We expect to continue this trend with additional
line extensions under the Jordache brand name.
In the first quarter of 2000 we introduced a new mass market line of
alternative designer fragrances, which was conceived, designed and created
entirely in-house, and is produced in the United States. This new line consists
of fragrances with a unique canister packaging. Our customers initial response
to our new line has been very promising.
Mass Market Cosmetics
We purchased the trademark for our Aziza hypo allergenic eye cosmetics from
Unilever N.V. in 1995. After extensive market research and product development,
we launched an Aziza product line in February 1996. Aziza was the first mass
market cosmetic brand to focus solely on the eyes. The recognition of the Aziza
trade name provided us with the opportunity to introduce a new cosmetic line
with an existing loyal customer base. The line was developed
9
to incorporate the 38 best selling eye care products, and to meet the needs
of the modern mass market. The packaging clearly conveys its message "Aziza it's
easy" by including professional makeup techniques with each product. Our primary
distribution targets, mass market merchandisers, drug store chains and
supermarkets, are consistent with our overall marketing strategy for mass market
products.
We have recently introduced our new Aziza II line of low priced eyeshadow
kits, mascara, colorful lip gloss products 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 deep discount chains,
including the 99 Cent and Dollar Store markets.
Our Aziza cosmetic line is presently distributed in approximately
12,000 mass market outlets in 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 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.
10
Trademarks
Under various license agreements we have the right to use certain
registered trademarks throughout the world. These registered trademarks include:
o Burberrys
o S.T. Dupont
o Paul Smith
o Christian LaCroix
o Ombre Rose
o Regine's
o Jordache
In addition, we are the registered trademark owner of:
o Intimate
o Aziza
o the Parfums Molyneux trademarks which include Captain, Quartz and Lord
o the Parfums Weil trademarks which include Bambou, Antilope and Kipling
o Beverly
o Fire
o Fleur de Paris
Employees
As of March 1, 2000 we had 84 full-time employees world-wide. Of these, 36
are engaged in sales activities and 48 in administrative and marketing
activities.
As of March 1, 2000 we had 34 full-time United States employees. Of
these, 9 were engaged in sales activities and 25 in administrative and marketing
activities.
We believe that our relationship with our employees is good.
ITEM 2. PROPERTIES
The offices or our corporate headquarters and United States mass market
brand operations are located in approximately 7,000 square feet of office space
at 551 Fifth Avenue, New York, New York. These premises are leased for a five
year term ending October 31, 2002. Our monthly rental is approximately $19,000,
which is subject to escalations.
Our prestige fragrance operations maintain offices located at 4 Rond Point
Des Champs Elysees, Paris, France, in approximately 6,000 square feet of leased
office space pursuant to two 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 1, 2005, unless terminated
11
earlier by either party on six months written notice at three year
specified intervals. The annual rentals are 833,000 French francs for the first
lease and 467,000 French francs for the second lease. Rent is subject to
escalations each July 1.
We believe our office facilities are satisfactory for our present needs and
those for the foreseeable future.
We also occupy a 140,000 square foot distribution center at 60 Stults Road
in Dayton, New Jersey. These premises have been leased by the company for an
eight year term which expires October 2003 and requires monthly rental payments
of approximately $57,000. Our distribution center is satisfactory for our
present needs and those for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Brosseau Lawsuit
As previously reported, litigation was commenced against Inter Parfums
S.A., our majority owned French subsidiary, regarding the Ombre Rose fragrance
license in the French Commercial Court of Paris in February 1997 by the
licensor, Jean Charles Brosseau, S.A. ("Brosseau"). We asserted claims against
Brosseau for interference with our distributors. In response, Brosseau then
claimed damages of approximately $7 million against us, allegedly for the
decreased value of his fragrance brands.
In October 1999, we received notice of a judgment in favor of Brosseau,
which awarded damages of approximately $600,000, and which directed us to return
the license back to Brosseau within six months.
We appealed the judgment as we vigorously and categorically deny the claims
of Brosseau, and believe we have meritorious defenses to such claims. Payment of
the judgment has been stayed, and we are permitted to continue operating under
the license agreement during the appeal process. We have been advised by our
special litigation counsel that, in its opinion, it is unlikely that the
monetary judgment will be sustained on appeal, or that any final, substantial
monetary judgment will be entered against us. We do not believe that such
litigation will have any material adverse effect on our financial condition or
operations, and we have set up a reserve of $275,000 against the unamortized
portion of the license agreement. After such reserve, the remaining unamortized
portion of the license is approximately $322,000.
French Tax Audit
In November 1999 the French Tax Authorities commenced a tax audit against
Inter Parfums S.A., our majority owned French subsidiary, and issued an
assessment of approximately $1.1 million. We are contesting this assessment. We
and our French tax consultants believe that we have sound arguments to support
our position, and believe the majority of the assessment will be reversed.
Accordingly, we believe this proceeding will not
12
have a material adverse effect on our financial condition or operations. We
have set up a reserve of approximately $260,000, which we believe will cover our
ultimate exposure in this matter.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
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 the company's common stock.
================= ================================ =============================
FISCAL 1999 HIGH CLOSING PRICE LOW CLOSING PRICE
- ----------------- -------------------------------- -----------------------------
Fourth Quarter $10.50 $8.88
- ----------------- -------------------------------- -----------------------------
- ----------------- -------------------------------- -----------------------------
Third Quarter $10.63 $7.50
- ----------------- -------------------------------- -----------------------------
- ----------------- -------------------------------- -----------------------------
Second Quarter $ 8.50 $6.00
- ----------------- -------------------------------- -----------------------------
- ----------------- -------------------------------- -----------------------------
First Quarter $ 7.00 $5.63
================= ================================ =============================
================= ================================ =============================
FISCAL 1998 HIGH CLOSING PRICE LOW CLOSING PRICE
- ----------------- -------------------------------- -----------------------------
Fourth Quarter $6.94 $4.75
- ----------------- -------------------------------- -----------------------------
- ----------------- -------------------------------- -----------------------------
Third Quarter $8.25 $6.38
- ----------------- -------------------------------- -----------------------------
- ----------------- -------------------------------- -----------------------------
Second Quarter $9.25 $7.44
- ----------------- -------------------------------- -----------------------------
- ----------------- -------------------------------- -----------------------------
First Quarter $7.69 $6.25
================= ================================ =============================
As of March 1, 2000, the number of record holders, which include
brokers and broker's nominees, etc., of the company's common stock was 77. We
believe there are approximately 770 beneficial owners of the company's common
stock.
Dividends
Our company has not paid cash dividends since inception and we do not
foresee paying cash dividends in the foreseeable future as earned surplus is to
be retained for working capital for anticipated growth.
14
Sales of Unregistered Securities
The following sets forth certain information as to all equity
securities, other than the grant of options, of the company sold during the past
year, except as previously reported, which were not registered under the
Securities Act of 1933, as amended. In each of the transactions, we sold common
stock to accredited investors, affiliates and employees, upon the exercise of
outstanding stock options which were exempt from the registration requirements
of Section 5 of the Securities Act under Sections 4(2) and 4(6) of the
Securities Act.
From October 1 through November 10, 1999, six (6) executive officers
and a director exercised outstanding stock options to purchase an aggregate of
264,500 shares of Common Stock and the Company received approximately $1.8
million in proceeds as a result of such exercises.
On November 22, 1999, Mr. Jean Madar, the Chairman of the Board and
Chief Executive Officer of the Company and Philippe Benacin, the Vice Chairman
of the Board and 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. In accordance with the
terms of the Stock Purchase Agreement, affiliates, management and employees
exercised outstanding stock options to purchase an aggregate of 312,200 shares
of Common Stock and the Company received approximately $2.1 million in proceeds
as the result of such exercises.
On November 22, 1999 an executive officer exercised an option to
purchase 10,000 shares and the Company received proceeds of $57,500.
The following sets forth certain information as all options granted to
purchase equity securities of the company sold during the past year, except as
previously reported, which were not registered under the Securities Act of 1933,
as amended. In each of the transactions, the Company granted options to
affiliates (executive officer and directors) and employees, which were exempt
from the registration requirements of Section 5 of the Securities Act under
Sections 4(2) and 4(6) of the Securities Act.
On February 1, 1999, options to purchase an aggregate of 7,000 shares
for a five (5) year period at the exercise price of $6.4375 per share were
granted to four (4) directors under the 1997 Non-Employee Stock Option Plan.
On March 5, 1999, options to purchase an aggregate of 722,000 shares
for a six (6) year period at the exercise price of $5.75 per share were granted
to ten (10) executive officers, all under the 1999 Stock Option Plan.
On December 2, 1999 and in accordance with the terms of our 1997
Non-Employee Director Stock Option Plan, options to purchase 2,000 shares at
$8.875 per share, the fair market value at the time of grant, were granted to
each of two (2) directors for a five (5) year period.
15
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)
============================== ================== ====================== ===================== ================= =================
1999 1998 1997 1996 1995
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Income Statement Data:
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Net Sales $ 87,140 $ 89,388 $ 91,462 $ 93,281 $ 93,669
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Cost of Sales 45,325 47,417 49,388 51,355 48,703
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Selling, General and 31,965 32,944 32,334 32,416 32,990
Administrative
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Income Before Taxes and 9,868 9,164 8,172 9,081 12,380
Minority Interest
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Net Income 4,828 4,613 4,507(1) 5,658 9,038(1)(2)
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Net Income per Share:
Basic $ .64 $ .53 $ .48(1) $ .57 $ .90(1)(2)
Diluted $ .60 $ .52 $ .48(1) $ .57 $ 87(1)(2)
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
- ------------------------------ ------------------ ---------------------- --------------------- ----------------- -----------------
Average Common Shares
Outstanding:
Basic 7,591,923 8,707,290 9,299,401 9,871,698 10,044,653
Diluted 8,103,484 8,898,805 9,397,329 9,984,463 10,438,896
============================== ================== ====================== ===================== ================= =================
(1) Includes a nonrecurring charge, net of taxes, of $0.8 million or $.08
per diluted share and $1.3 million or $.13 per diluted share, for fiscal years
ended December 31, 1997 and December 31, 1995, respectively, relating to the
divestiture of the Cutex license in 1997 and discontinuance of a product line in
1995.
(2) Includes a net gain of $3.3 million or $.32 per diluted share for
fiscal years ended December 31, 1995 resulting from the sale of common stock of
a subsidiary.
16
AS AT DECEMBER 31
(In Thousands Except Share and Per Share Data)
========================================= =============== ============== ============== =============== ==============
1999 1998 1997 1996 1995
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
Balance Sheet Data:
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
Working Capital $ 52,402 $ 49,599 $ 44,842 $ 46,568 $ 41,363
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
Total Assets 87,223 87,739 80,282 85,585 84,001
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
Long-Term Debt 1,531 200 424 485 596
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
- ----------------------------------------- --------------- -------------- -------------- --------------- --------------
Shareholders' Equity 52,361 53,680 50,194 53,366 51,976
========================================= =============== ============== ============== =============== ==============
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Our Company is a leading manufacturer and distributor of fragrances,
cosmetics and personal care products. Innovation and creativity are combined to
produce quality products for our customers around the world.
We specialize in the production of both prestige fragrances and mass
market fragrances and cosmetics:
o Prestige products -- For each prestige brand, owned or licensed, we
create 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 and mass market cosmetics.
1999 COMPARED TO 1998
Net sales for the year ended December 31, 1999 were $87.1 million, as
compared to $89.4 million in 1998. At comparable foreign currency exchange
rates, net sales for the year ended December 31, 1999 were virtually unchanged
from that of 1998.
These results were in line with management's expectations as no new
prestige fragrance launches were scheduled for 1999 and we entered the year
during a downward trend in our mass market product lines, which resulted from
the unsteady economic situation in Eastern Europe, Brazil and other Latin
American countries.
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") and a new Christian Lacroix product line was launched in October 1999.
In addition, in the latter part of 1999, the downward trend in our mass market
product lines began to reverse. As a result, at comparable foreign currency
exchange rates, net sales increased 17% for the three
17
months ended December 31, 1999, as compared to the corresponding period of
the prior year.
Several new projects are planned for the year 2000 including, the
launch of our Paul Smith fragrance line, two new perfume lines under the
Burberry name, as well as two new perfume lines under the S.T. Dupont name. The
improving trend in our mass market product lines, which appears to be continuing
into 2000, combined with the potential of our new prestige fragrance launches,
makes us very optimistic of the potential for a 20% growth in both sales and
earnings for the year 2000.
We are also actively pursuing new license agreements to build upon the
strength of our existing portfolio.
Gross profit margins increased to 48% of net sales for the year ended
December 31, 1999, as compared to 47% in 1998. Gross profit margins have
continued to increase over the past three years. Part of the gross profit margin
improvement is the result of the strength of the US dollar relative to the Euro,
as certain European sales are denominated in US dollars. Our prestige fragrance
lines also generate a higher gross profit margin than our mass market product
lines and these gross profit margin benefits have offset the negative affect of
lower margin mass market product sales and closeout sales.
Selling, general and administrative expenses declined to $32.0 million
for the year ended December 31, 1999, as compared to $32.9 million in 1998.
Selling, general and administrative expenses represented 37% of sales in both
1999 and 1998.
In the United States, selling, general and administrative expenses
declined 20% to $9.1 million for the year ended December 31, 1999, as compared
to $11.4 million in 1998, and declined to 34% of net sales in 1999, as compared
to 37% of net sales in 1998. As a result of the weakness in domestic mass market
product sales experienced in early 1999, we instituted extraordinarily tight
controls in an effort to keep spending in line with sales.
Selling, general and administrative expenses incurred by our French
subsidiary, Inter Parfums, S.A., were $22.8 million for the year ended December
31, 1999, as compared to $21.5 million in 1998. Some savings has been achieved
in distribution and freight costs. However, a reasonable level of advertising is
necessary to support our growing portfolio of prestige fragrance brands and to
build upon each brand's awareness.
Interest expense was $0.3 million for the year ended December 31, 1999,
as compared to $0.5 million in 1998. We uses the credit lines available to us,
as needed, to finance our working capital needs.
We incurred a loss on foreign currency of $0.2 million for the year
ended December 31, 1999, as compared to $0.1 million in 1998. Occasionally, we
enter into foreign currency forward exchange contracts to manage exposure
related to certain foreign currency commitments.
18
Our effective income tax rate was 40% for the year ended December 31,
1999, as compared to 39% in 1998. The effective tax rate for 1998 reflects the
positive effects of the tax benefit to be realized upon the closing of our
Brazilian subsidiary.
Net income increased 5% to $4.8 million for the year ended December 31,
1999, as compared to $4.6 million in 1998. Earnings per diluted share increased
15% to $0.60 for the year ended December 31, 1999, as compared to $0.52 in 1998.
Weighted average shares outstanding aggregated 7.6 million for the year
ended December 31, 1999, as compared to 8.7 million in 1998. On a diluted basis,
average shares outstanding was 8.1 million for the year ended December 31, 1999,
as compared to 8.9 million in 1998. The declines are the result of our common
stock repurchase program.
1998 compared to 1997
Net sales aggregated $89.4 million in 1998, as compared to $91.5
million in 1997. On April 30, 1997, the Company divested its Cutex nail and lip
products license and net sales for 1997 includes $3.3 million of Cutex product
sales.
Sales generated by the our company's French subsidiary, Inter Parfums,
S.A., posted strong sales growth with an increase of 15% in 1998. At comparable
foreign currency exchange rates, sales by Inter Parfums, S.A. increased 17% in
1998. Inter Parfums, S.A.'s licensed and brand name lines increased 35% while
its international moderately priced fragrance line decreased 43%. Such increase
is primarily the result of expanded distribution of the Burberrys fragrance line
as well our new product introduction of "I Love You" by Molyneux and the launch
of their new S.T. Dupont fragrance line. 1999 is expected to be a year of
continued growth for Inter Parfums, S.A., as it prepares for the launch, in
early 2000, of its new Paul Smith fragrance line. Inter Parfums, S.A. is also
preparing new product introductions for its Burberry line for the year 2000.
Management is determined to strengthen these brands with continued new product
development as well as product line expansion. We are actively pursuing new
license agreements to build upon the strength of its existing product lines.
In 1998, the success of the designer fragrance lines was somewhat
mitigated by sales declines in the international moderately priced fragrance
line referred to above and the domestic Alternative Designer Fragrances.
Excluding the effect of 1997 Cutex product sales, net sales generated by the our
domestic operations decreased 18% in 1998. These declines were primarily the
result of the economic situation in Eastern Europe and factors leading up to the
ultimate closing of the our Brazilian subsidiary.
As previously reported, sales generated by the our Brazilian
subsidiary, Jean Philippe Brasil, were $2.0 million in 1997 as compared to $3.0
million in 1996. This trend has continued, with net sales declining to $0.8
million in 1998. In October 1998, we determined that was in our best interest to
close our Brazilian subsidiary. We believed that the decline in sales reflected
the Brazilian mass markets' fear of a possible currency devaluation, which in
fact took place in January 1999. In view of that less than optimistic Brazilian
mass market
19
confidence level and the heavily regulated Brazilian environment, further
direct investment in Brasil was not warranted. Such closing did not have a
material adverse effect on our results from operations. We will continue to sell
into the Brazilian market and we have entered into a distribution agreement with
a well known Brazilian fragrance distributor, which included the purchase of all
existing inventory.
Gross profit margin increased to 47% of sales in 1998, as compared to
46% of sales in 1997. Our designer fragrance lines generate a slightly higher
gross profit margin than the our other product lines. Sales of the Company's
designer line products continue to experience solid growth, and therefore,
represent a greater portion of the our overall sales. Our program of "Product
Value Analysis" has also enabled us at least to maintain, and in some areas
improve our gross profit margin. These cost saving techniques are utilized in
all new product introductions.
Selling, general and administrative expenses aggregated $32.9 million
and $32.3 million in 1998 and 1997, respectively, and represented 37% of net
sales in 1998 and 35% of net sales in 1997. Domestic selling, general and
administrative expenses declined to $10.5 million in 1998 as compared to $12.5
million in 1997. However, as a result of the decline in sales, selling, general
and administrative expenses increased as a percentage of domestic net sales to
35% in 1998 from 32% in 1997. In connection with the April 30, 1997
restructuring of the Company's domestic operations, which coincided with the
divestiture of our Cutex license, we reduced our domestic work force by
approximately 20%. Further, as a result of the economic climates in Russia and
Brasil, during 1998 our management took the steps it deemed necessary to
reorganize its infrastructure and cut its selling, general and administrative
expenses once again.
Selling, general and administrative expenses incurred by Inter Parfums
increased to $21.5 million or 36.6% of sales in 1998 as compared to $18.6
million or 36.5% of sales in 1997. Such increase is the result of expenses
incurred to support new product introductions, to build upon each brand's
awareness, as well as to support Inter Parfums, S.A.'s revenue growth.
In the first quarter of 1997, we took a pre-tax charge against earnings
of $1.3 million to write-off intangible assets and other expenses relating to
the divestiture of the Cutex license. We are confident that such charge is
sufficient to cover all potential obligations relating to the Cutex business.
Interest expense declined to $0.5 million in 1998 from $0.7 million in
1997. The Company uses its available credit lines, as needed, to finance its
working capital needs. As a result of profitable operating results and positive
cash flow, overall borrowing levels, during the year, have been reduced.
Our company incurred a loss on foreign currency of $0.1 million in 1998
as compared to a loss of $0.2 million in 1997. Our company, at appropriate
times, enters into foreign currency forward exchange contracts as a hedge for
short-term inter company borrowings, or for receivables to be collected in a
foreign currency.
20
Our company's effective income tax rate was 39% in 1998, as compared to
36% in 1997. The 1997 rate was favorably impacted by reduction of valuation
reserves on deferred tax assets, relating to the utilization of net operating
loss carry forwards made available to Inter Parfums, S.A. as a result of the
1996 sale of the Bal a Versailles trademarks. No such benefit was available for
1998. In addition, corporate income tax rates in France have increased from 36%
to approximately 43% in the past two years. The effective tax rate for 1998
includes an expected tax benefit to be realized as a result of our company's
decision to close its Brazilian subsidiary.
Net income was $4.6 million or $0.52 per diluted share in 1998 as
compared to $4.5 million or $0.48 per diluted share in 1997. Results for 1997
include a nonrecurring charge of $0.8 million, on an after tax basis, relating
to the divestiture of the Cutex license. Excluding the nonrecurring charge, net
income was $5.3 million or $0.56 per diluted share in 1997.
The weighted average shares outstanding declined 6.5% to 8.7 million in
1998, as compared to 9.3 million in 1997. On a diluted basis, average shares
outstanding was 8.9 million in 1998 and 9.4 million in 1997. Such decline is the
result of our ongoing stock buyback program.
Liquidity and Financed Resources
Profitable operating results and cash provided by operations, continues
to strengthen our financial position. At December 31, 1999, working capital
aggregated $52 million and we had a working capital ratio of over 3 to 1. Cash
and marketable securities on hand aggregated $29 million, and our net book value
was $6.64 per outstanding share as of December 31, 1999.
We recently used a portion of our cash to make an investment in
marketable equity securities which are classified as available-for-sale. These
funds are available to support current operations or to take advantage of other
investment opportunities. This investment was made to maximize our return on
cash.
In 1999, we continued our stock repurchase program by acquiring over
1.2 million of the Company's common shares at an average cost of $6.91 per
share. Our 77% owned publicly traded French subsidiary, Inter Parfums, S.A., has
a current market cap in excess of $130 million, which exceeds that of the
Company. Management is of the opinion that the current market price of the
Company's common shares understates its real value.
In November 1999 we finalized and closed on our strategic alliance with
LV Capital USA, Inc., a wholly-owned subsidiary of LVMH Moet Hennessy Louis
Vuitton S.A. LV Capital had already purchased, in the open market, approximately
10.5% of the outstanding shares of our Company. At the closing, LV Capital
increased its equity ownership to approximately 20% by purchasing outstanding
shares and shares issued upon exercise of stock options held by management and
employees. Our Company received proceeds of
21
approximately $5.8 million, including related tax benefits, as a result of the
exercise of stock options. We are already experiencing the benefits of this
association, with the worlds largest luxury goods manufacturer, as several new
business prospects are already under discussion. We are confident that this
strategic alliance will bring us new opportunities in licensing and
distribution, which can further add to our planned growth in both sales and
earnings.
Our short-term financing requirements are expected to be met by
available cash and marketable securities at December 31, 1999, cash generated by
operations and short-term credit lines provided by domestic and foreign banks.
The principal credit facilities for 2000 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 $12.6 million for the year
ended December 31, 1999. Cash provided by operating activities continues to be
the primary source of funds to finance operating needs, investments in new
ventures, as well as to finance our stock repurchase program. During 1999, we
repurchased 1.2 million shares of our common stock at a total cost of $8.4
million.
Management believes 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.
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 is scheduled to phase in over a period ending January 1, 2002. The
introduction of the Euro and the phasing out of the other currencies should not
have a material impact on our consolidated financial statements.
Inflation rates in the U.S. and foreign countries in which we operate have
not had a significant impact on operating results for the year ended December
31, 1999.
Forward Looking Statements
Statements included herein 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. Such factors include changes in
product acceptance by mass markets, effectiveness of sales and marketing
efforts, competition, currency fluctuation and prevailing economic conditions.
Given these uncertainties, persons are cautioned not to place undue reliance on
the forward looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements commence on page F-1.
22
Supplementary Data
QUARTERLY DATA (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1999
(In Thousands Except Share and Per Share Data)
====================================== =============== =============== =============== =============== ===============
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER FULL YEAR
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
Net Sales $ 19,584 $ 22,192 $ 21,652 $ 23,712 $ 87,140
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
Cost of Sales 10,099 11,741 11,649 11,836 45,325
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
Net Income 1,157 1,084 1,204 1,383 4,828
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
Net Income per Share:
Basic $ .15 $ .15 $ .16 $ .18 $ .64
Diluted $ .15 .14 $ .15 $ .17 $ .60
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
- -------------------------------------- --------------- --------------- --------------- --------------- ---------------
Average Common Shares Outstanding:
Basic
Diluted 7,888,373 7,433,152 7,397,423 7,648,745 7,591,923
7,975,223 7,856,022 8,211,713 8,371,199 8,103,484
====================================== =============== =============== =============== =============== ===============
QUARTERLY DATA (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1998
(In Thousands Except Share and Per Share Data)
====================================== ================ ================ =============== =============== ==============
1ST 2ND QUARTER 3RD QUARTER 4TH QUARTER FULL YEAR
QUARTER
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
Net Sales $ 20,806 $ 24,093 $ 22,505 $ 21,984 $ 89,388
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
Cost of Sales 10,902 12,840 12,420 11,255 47,417
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
Net Income 1,222 1,158 1,072 1,161 4,613
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
Net Income per Share:
Basic $ .14 $ .13 $ .12 $ .14 $ .53
Diluted $ .14 $ .13 $ .12 $ .14 $ .52
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
- -------------------------------------- ---------------- ---------------- --------------- --------------- --------------
Average Common Shares Outstanding:
Basic
Diluted 8,825,731 8,799,927 8,724,076 8,474,677 8,707,290
9,019,620 9,151,554 8,946,954 8,477,093 8,898,805
====================================== ================ ================ =============== =============== ==============
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
23
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT
As of March 15, 2000, 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 Bensoussan-Torres Director
- ----------------------------------------------------------------------------------------------------------------------
Daniel Piette Director
- ----------------------------------------------------------------------------------------------------------------------
Jean Cailliau Director
- ----------------------------------------------------------------------------------------------------------------------
Bruce Elbilia Executive Vice President
- ----------------------------------------------------------------------------------------------------------------------
Wayne Hamerling Executive Vice President
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Philippe Santi Director and Director of Finance, Inter Parfums, S.A.
- ----------------------------------------------------------------------------------------------------------------------
Eric de Labouchere Director of Operations, Inter Parfums, S.A.
- ----------------------------------------------------------------------------------------------------------------------
Frederic Garcia-Pelayo Director of Export Sales, Inter Parfums, S.A.
- ----------------------------------------------------------------------------------------------------------------------
Claude Villedieu Director of Domestic Sales, Inter Parfums, S.A.
======================================================================================================================
The directors will serve until the next annual meeting of stockholders and
thereafter until their successors shall have been elected and qualified. 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 39, 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 our
company; in January 1994 he became Director General of Inter Parfums, our
subsidiary; and in January 1997 he became Chief Executive Officer of our
company. Mr. Madar was previously the managing director of Inter Parfums, our
subsidiary, from September 1983 until June 1985. At our subsidiary, he
24
had the 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 41, a Director, has been the Vice Chairman of the Board
since September 1991, and is a co-founder of our company with Mr. Madar. He was
elected the Executive Vice President in September 1991, Senior Vice President in
April 1993, and President of our company in January 1994. In addition, he has
been the President of Inter Parfums, our subsidiary, 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 43, the Chief Financial Officer, was Vice-President,
Finance when he joined our 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. From July
1987 through June 1992, he was with Richard A. Eisner & Company, our independent
accountants.
Francois Heilbronn
Mr. Heilbronn, age 39, 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
working as a consultant for the firm of M.M. Friedrich, Heilbronn & Fiszer, of
which he is a partner. He was formerly employed by The Boston Consulting Group,
Inc. from 1986 through 1991 as a management consultant. He 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 44, a Director of our company since 1992, is a partner of
Nason, Yeager, Gerson, White & Lioce, P.A., general counsel to our company. 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 the
company. From August 1992 through September 1997, he was a director of and
general counsel to Hydron Technologies, Inc., a company primarily engaged in the
development of cosmetic and personal care products, which has its common stock
listed on The Nasdaq Stock Market.
25
Jean Levy
Jean Levy, age 67, 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 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".
Robert Bensoussan-Torres
Robert Bensoussan-Torres, age 42, has been a Director since March 1997. He
is currently the Managing Director of Gianfranco Ferre fashion group, based in
Milano, Italy. Mr. Bensoussan-Torres was a Director of Towers Consulting Europe,
Ltd. from May 1998 to September 1999. 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 Houte 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 54 and a director since December 1999, is also a member of
the executive compensation committee of the Board of Directors. Mr. Piette is
the Chairman of LV Capital USA, Inc. ("LV Capital"), the US vehicle of LV
Capital SA, which is the investment arm of LVMH Moet Hennessy Louis Vuitton S.A.
("LVMH") the world's largest luxury goods conglomerate. For the past ten (10)
years, he has been a Group Executive Vice President of LVMH. Mr. Piette is also
a director of Cryo Interactive Entertainment (Paris) and a non-executive
director of Davis 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 37 and a director since December 1999, is also a member
of the audit and the stock option committees of the Board of Directors. Mr.
Cailliau is the Deputy General Manager of LV Capital SA, the investment arm of
LVMH and the CEO of LV Capital USA Inc, its US vehicle. For the past eight (8)
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.
26
Bruce Elbilia
Mr. Elbilia, age 41, 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 our company's marketing efforts. In 1994 Mr. Elbilia became head of
international sales and marketing for our company, and had expanded our
company's export sales to South America, the Middle East and Eastern Europe. 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 44, 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.
Philippe Santi
Philippe Santi, age 38 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.
Eric de Labouchere
Eric de Labouchere, age 45, 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 41, 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.
Claude Villedieu
Claude Villedieu, age 58, has been the Director of Domestic Sales of Inter
Parfums, S.A. since June 1989. Mr. Villedieu previously worked for the L'Oreal
Group.
27
Section 16(a) Beneficial Ownership Reporting Compliance
During fiscal year ended December 31, 1999, LVMH Moet Hennessey Louis
Vuitton, S.A., a 10% shareholder, filed its Form 3 approximately four (4) weeks
late.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded to,
earned by or paid to, our company's Chief Executive Officer and each of the four
most highly compensated executive officers of our company whose compensation
exceeded $100,000 per annum for services rendered in all capacities to our
company and its subsidiaries during fiscal years ended December 31, 1999,
December 31, 1998 and December 31, 1997:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Awards
=======================================================================================================================
Other Annual Securities
Compensation Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) ($) Options (#)(1) Compensation
- -----------------------------------------------------------------------------------------------------------------------
Jean Madar(2), Chairman of the 1999 280,000 $48,000 756,500(3) 275,000 -0-
Board, Chief Executive Officer of 1998 280,000 -0- 48,000(4) 130,000 -0-
Inter Parfums, Inc. and Director 1997 267,000 -0- 18,000(4) 325,000 -0-
General of Inter Parfums, S.A.
- -----------------------------------------------------------------------------------------------------------------------
Philippe Benacin(5), President of 1999 136,000 16,000 765,500(6) 275,000 -0-
Inter Parfums, Inc. and President 1998 139,000 10,000 53,000(7) 130,000 -0-
of Inter Parfums, S.A. 1997 86,000 25,000 33,000(8) 325,000 -0-
- -----------------------------------------------------------------------------------------------------------------------
Russell Greenberg(9), Executive Vice 1999 230,000 5,000 225,819(10) 33,000 -0-
President and Chief Financial 1998 228,446 3,000 2,214 15,500 -0-
Officer 1997 213,600 15,000 2,214 22,500 -0-
- -----------------------------------------------------------------------------------------------------------------------
Bruce Elbilia(11), Executive Vice 1999 160,500 5,000 262,467(12) 33,000 -0-
President 1998 146,045 3,000 8,776(13) 15,500 -0-
1997 168,000 18,500 78,473(13) 25,500 -0-
- -----------------------------------------------------------------------------------------------------------------------
Wayne C. Hamerling(14), Executive 1999 166,120 5,000 326,782(15) 33,000 -0-
Vice President 1998 166,120 13,000 2,590(16) 15,500 -0-
1997 166,120 7,000 55,363(17) 25,500 -0-
=======================================================================================================================
- ----------
(1) Includes options granted in 1998 and 1997 as replacements for
out-of-the-money or expired options.
(2) As of December 31, 1999, Mr. Madar held 2,356,049 restricted shares of
common stock, with an aggregate value of $22,382,561 based upon the closing
price of our company's common stock as reported by the Nasdaq Stock Market,
National Market system, of $9.50.
(3) Includes lodging expenses of $ 48,000 and $708,500 realized upon exercise
of options.
(4) Consists of lodging expenses.
(5) Compensation figures for Mr. Benacin are approximate, as he is paid in
French francs, and conversion into U.S. dollars was made at the average
exchange rates prevailing during the respective periods. As of December 31,
1999, Mr. Benacin held 2,208,049 restricted shares of common stock, with an
aggregate value of $20,976,466 based upon the closing price of the
company's common stock as reported by the Nasdaq Stock Market, National
Market system, of $9.50.
28
(6) Includes lodging expenses of $42,000, $15,000 for automobile expenses and
$708,500 and realized upon exercise of options.
(7) Consists of $48,000 for lodging expenses and $5,000 for automobile
expenses.
(8) Consists of $31,000 for lodging expenses and $2,000 for automobile
expenses.
(9) Mr. Greenberg held no restricted shares of common stock as of December 31,
1999.
(10) Consists of $2,214 car allowance and $223,605 realized upon the exercise of
options.
(11) Mr. Elbilia held 10,000 shares of common stock as of December 31, 1999 with
an aggregate value of $9,500, based upon the closing price of the company's
common stock as reported by the Nasdaq Stock Market, National Market
system, of $9.50.
(12) Consists of $27,985 selling commissions and $234,482 realized upon the
exercise of options.
(13) Consists of selling commissions.
(14) Mr. Hamerling held no restricted shares of common stock as of December 31,
1999.
(15) Consists of selling commissions of $43,388 ; non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile;
and $278,794 realized upon the exercise of options.
(16) Consists of selling commissions of $48,090 and non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile.
(17) Consists of selling commissions of $50,863 and non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile.
The following table sets forth certain information relating to stock option
grants during Fiscal 1999 to our company's Chief Executive Officer and each of
the four most highly compensated executive officers of the company whose
compensation exceeded $100,000 per annum for services rendered in all capacities
to our company and its subsidiaries during Fiscal 1999:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized Value at
Assumed Annual Rates of Stock
Individualized Grants Price Appreciation for Option Term
========================================================================================================================
NAME NUMBER OF % OF TOTAL EXERCISE EXPIRATION FIVE (5%) TEN (10%)
SECURITIES OPTIONS/SARS OR BASE DATE PERCENT PERCENT
UNDERLYING GRANTED TO PRICE ($) ($)
OPTIONS EMPLOYEES IN ($/SH)
GRANTED (#) FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------
Jean Madar 275,000 38 5.75 3/4/05 436,870 965,329
- ------------------------------------------------------------------------------------------------------------------------
Philippe Benacin 275,000 38 5.75 3/4/05 436,870 965,329
- ------------------------------------------------------------------------------------------------------------------------
Russell Greenberg 33,000 4.5 5.75 3/4/05 52,424 115,844
- ------------------------------------------------------------------------------------------------------------------------
Bruce Elbilia 33,000 4.5 5.75 3/4/05 52,424 115,844
- ------------------------------------------------------------------------------------------------------------------------
Wayne Hamerling 33,000 4.5 5.75 3/4/05 52,424 115,844
========================================================================================================================
The following table sets forth certain information relating to option
exercises effected during Fiscal 1999, and the value of options held as of such
date by each of the Chief Executive Officer and the four most highly compensated
executive officers of our company whose compensation exceeded $100,000 per annum
for services rendered in all capacities to the company and its subsidiaries
during Fiscal 1999:
29
AGGREGATE OPTION EXERCISES FOR FISCAL 1999
AND YEAR END OPTION VALUES
NUMBER OF UNEXERCISED VALUE(1) OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1999(#) DECEMBER 31, 1999($)
==========================================================================================-----------------------
NAME SHARES ACQUIRED VALUE ($) EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED(2) UNEXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------
Jean Madar 150,000 562,500 813,500/-0- 2,767,225/-0-
- -----------------------------------------------------------------------------------------------------------------
Philippe Benacin 150,000 562,500 813,500/-0- 2,767,225/-0-
- -----------------------------------------------------------------------------------------------------------------
Russell Greenberg 41,500 223,605 48,500/-0- 159,000/-0-
- -----------------------------------------------------------------------------------------------------------------
Bruce Elbilia 93,000 266,982 -0-/-0- -0-/-0-
- -----------------------------------------------------------------------------------------------------------------
Wayne C. Hamerling 51,000 278,794 42,000/-0- 139,500/-0-
================================================================================================================
- ----------
(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 $9.50 on
December 31, 1999.
(2) Value realized in dollars is based upon the difference between the fair
market value of the common stock on the date of exercise, and the exercise
price of the option.
The following table sets forth certain information regarding repricing of
options held by all executive officers of the company for the last ten years.
Employment Agreements
As part of the acquisition by our company of the controlling interest in
Inter Parfums, S.A. now a subsidiary, in 1991, we entered into an employment
agreement with Philippe Benacin. The agreement provides that Mr. Benacin will be
employed as Vice Chairman of the Board and President and Chief Executive Officer
of Inter Parfums Holdings and its subsidiary, Inter Parfums. The initial term
expired on September 2, 1992, and has subsequently been automatically renewed
for additional annual periods. The agreement provides for automatic annual
renewal terms, unless either party terminates the agreement upon 120 days
notice. Mr. Benacin is entitled to receive an annual salary of 600,000ff, which
was approximately US$ 100,000, together with 5,000ff per month, which was
approximately US$833, for lodging expenses, both of which are subject to
increases in the discretion of the Board of Directors. In addition he is to
receive a nonaccountable expense allowance of 1,200ff, which was approximately
US$ 200 per week and reimbursement for all out-of-pocket expenses associated
with the acquisition, operation and maintenance of an automobile. The agreement
also provides for indemnification and a covenant not to compete for one year
after termination of employment.
Compensation of Directors
30
All nonemployee directors receive $1,000 for each board meeting at which
they participate, except for Mr. Caccamo's, whose law firm receives $500 for
each board meeting at which he participates.
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
The 1997 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.
On December 2, 1999 and in accordance with the terms of our 1997 plan,
options to purchase 2,000 shares at $8.875 per share, the fair market value at
the time of grant, were granted to each of two (2) directors for a five year
period.
On February 1, 2000, options to purchase 1,000 shares were granted to each
of Francois Heilbronn, Jean Levy and Robert Bensoussan-Torres, and an option to
purchase 4,000 shares was granted to Joseph A. Caccamo at the exercise price of
$10.1875 per share under the 1997 plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 15, 2000 with
respect to the beneficial ownership of our company's common stock by (a) each
person known by the company to be the beneficial owner of more than five percent
of the company's outstanding common Stock, (b) the executive officers and
directors of the company and (c) the directors and officers of the company as a
group:
31
- ---------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS AMOUNT OF BENEFICIAL OWNERSHIP(1) APPROXIMATE PERCENT OF CLASS
OF BENEFICIAL OWNER
- ---------------------------------------------------------------------------------------------------------------------
Jean Madar 3,169,549(2) 36.5%
c/o Inter Parfums, S.A.
4, Rond Point Des Champs Elysees
75008 Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Philippe Benacin 3,021,549(3) 34.8%
c/o Inter Parfums, S.A.
4, Rond Point Des Champs Elysees
75008 Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Russell Greenberg 48,500(4) Less than 1%
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
- ---------------------------------------------------------------------------------------------------------------------
Francois Heilbronn 7,500(5) Less than 1%
12 Rue Pierre Leroux
75007 Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Joseph A. Caccamo, Esq. 4,000(6) Less than 1%
Nason, Yeager, Gerson,
White & Lioce, P.A.
1645 Palm Beach Lakes Blvd., Suite 1200
West Palm Beach, FL 33401
- ---------------------------------------------------------------------------------------------------------------------
Jean Levy 3,000(4) Less than 1%
29 rue du Colisee
75008 Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Robert Bensoussan-Torres 3,000(4) Less than 1%
48, Boulevard Raspail
75006 Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Bruce Elbilia 10,000 Less than 1%
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
- ---------------------------------------------------------------------------------------------------------------------
Wayne C. Hamerling 42,000(7) Less than 1%
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
- ---------------------------------------------------------------------------------------------------------------------
- ----------
(1) All shares of common stock are directly held with sole voting power to
dispose, unless otherwise stated.
(2) Consists of 2,356,049 shares held directly and options to purchase 813,500
shares.
(3) Consists of 2,208,049 shares held directly and options to purchase 813,500
shares.
(4) Consists of options to purchase shares.
(5) Consists of 4,500 shares held directly and options to purchase 3,000
shares.
(6) Consists of options to purchase shares.
(7) Consists of 10,000 shares held directly and options to purchase 32,000
shares.
32
- ---------------------------------------------------------------------------------------------------------------------
Daniel Piette 2,000(8) Less than 1%
LVMH Moet Hennessy
Louis Vuitton, S.A.
30 Avenue Hoche
75008, Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Jean Cailliau 2,000(8) Less than 1%
LVMH Moet Hennessy
Louis Vuitton, S.A.
30 Avenue Hoche
75008, Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Philippe Santi -0- NA
Inter Parfums, S.A.
4, rond point des Champs Elysees
75008, 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
- ---------------------------------------------------------------------------------------------------------------------
Claude Villedieu -0- NA
Inter Parfums, S.A.
4, rond point des Champs Elysees
75008, Paris France
- ---------------------------------------------------------------------------------------------------------------------
LVMH Moet Hennessy Louis Vuitton, S.A. 1,623,800(9) 20.1%
30 Avenue Hoche
75008 Paris, France
- ---------------------------------------------------------------------------------------------------------------------
Dimensional Fund Advisors, Inc. 555,700(10) 7.1%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
- ---------------------------------------------------------------------------------------------------------------------
All Directors and Officers 7,936,898(11) 82.7%
as a Group (15 Persons)
- ---------------------------------------------------------------------------------------------------------------------
- ----------
(8) Does not include shares held by LV Capital USA, Inc., an affiliate of LVMH
Moet Hennessy Louis Vuitton, S.A.
(9) Consists of shares held by LV Capital USA, Inc., an affiliate.
(10) Information is derived forth in a Schedule 13G dated February 4, 2000 of
Dimensional Fund Advisor Inc., which may be deemed to be the beneficial
owner of the shares which are owned by its advisory clients. Dimensional
Fund Advisor disclaims beneficial ownership of all of the shares.
(11) Consists of 4,588,598 shares held directly, and options to purchase
1,724,500 shares. It also includes 1,623,800 shares held by LV Capital USA,
Inc., an affiliate of LVMH Moet Hennessy Louis Vuitton, S.A.
33
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, the Paul Smith
license agreement and the Brosseau license agreement, we guaranteed the
obligations of Inter Parfums, S.A. under the Burberry license agreement and the
Paul Smith license agreement and the distribution agreement for Ombre Rose
fragrances.
Remuneration of Counsel
Joseph A. Caccamo, a director of our company, is a partner of Nason,
Yeager, Gerson, White & Lioce, P.A., our general counsel. In Fiscal 1999, Mr.
Caccamo's firm was paid an aggregate of $141,802 in legal fees and for
reimbursement of disbursements incurred on behalf of the company. Commencing as
of January, 2000, Mr. Caccamo's law firm receives a monthly retainer of $8,000
together with reimbursement for expenses. Mr. Caccamo's firm also receives $500
for each board meeting at which he participates.
On February 1, 2000 in accordance with the terms of our company's stock
option plan, Mr. Caccamo was granted an option with a term of five years to
purchase 4,000 shares at $10.1875 per share, the fair market value at the time
of grant. He holds those options as nominee for his firm.
Transactions with LVMH Moet Hennessy Louis Vuitton S.A.
In March 1999, we entered into an exclusive license agreement with the
Christian Lacroix Company (a division of Group LVMH) for the worldwide
development, manufacture and distribution of perfumes.
On November 22, 1999, Mr. Jean Madar, the Chairman of the Board and Chief
Executive Officer of Inter Parfums, Inc. (the "Company") and Philippe Benacin,
the Vice Chairman of the Board and 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. Counsel to the
Company represented Messrs. Madar and Benacin in this transaction without any
additional charge.
In accordance with the terms of the Stock Purchase Agreement, LV Capital
purchased an aggregate of 849,200 shares of Common Stock of the Company, at
$12.00 per share as follows: 260,000 shares (inclusive of 50,000 shares acquired
upon exercise of an outstanding stock option) from each of Messrs. Madar and
Benacin, and an aggregate of 329,200 shares (inclusive of 212,200) shares issued
upon exercise of outstanding stock options) from management and employees. As
the result of such transaction, LV Capital increased its beneficial ownership of
Common Stock of the Company to approximately 20.5% of the
34
outstanding shares, and the Company received proceeds of approximately $4.2
million as the result of the exercise of the outstanding stock options.
In addition, LV Capital and Messrs. Madar and Benacin have executed and
delivered a Shareholders' Agreement relating to certain corporate governance
issues, including increasing the number of Board members from seven (7) to ten
(10), granting two (2) seats on the Board of directors to designees of LV
Capital, and annual limitations on the grant of employee stock options.
Further, in return for LV Capital becoming a strategic partner of the
Company, LV Capital is to be granted the right to maintain is percentage
ownership of the outstanding shares of Common Stock, by receiving an option to
purchase shares of the Company for cash at fair market value upon issuance of
shares to any party other than LV Capital, subject to certain exceptions, and is
to be granted demand registrations rights for all shares of Common Stock it
holds. Finally, LV Capital is to agree to a standstill agreement, which includes
a limitation on the amount of shares that LV Capital can hold equal to
twenty-five percent (25%) of the outstanding shares of Common Stock of the
Company.
35
PART IV
ITEM 14. 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, 1999
and December 31, 1998 F-3
Consolidated Statements of Income for the Years
ended December 31, 1999, December 31, 1998 and
December 31, 1997 F-4
Consolidated Statements of Changes in Shareholders'
Equity for the Years ended December 31, 1999,
December 31, 1998 and December 31, 1997 F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 1999, December 31, 1998
and December 31, 1997 F-6
Notes to Financial Statements F-7
(a)(2) Financial Statement Schedules annexed hereto:
Schedule II - Valuation and Qualifying Accounts
and Reserves F-18
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.
36
(a)(3) Exhibits
The following documents heretofore filed by our company with the Securities
and Exchange Commission are hereby incorporated by reference from the Company's
Registration Statement on Form S-18, file no. 33-17139-NY:
Exhibit No. and Description
3.1 Restated Certificate of Incorporation
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).
10.15 Letter of Indemnification from Jordache to the Company dated January
18, 1990 (as no. 10.3 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 documents 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, 1990:
Exhibit No. and Description
3.1(a) Certificate of Amendment of the Restated Certificate of Incorporation
The following document heretofore filed with the Commission is incorporated
herein by reference to the Company's Current Report on Form 8-K (date of event -
July 29, 1991), as follows:
37
Exhibit No. and Description
10.24 Agreement and Plan of Reorganization dated July 29, 1991 among the
Company, Jean Madar and Philippe Benacin (as No. 10.1 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
3.1(b) Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 31, 1992
4.9 1992 Stock Option Plan
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:
38
Exhibit No. and Description
10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter
Parfums, S.A. and Jean Philippe Fragrances, Inc.(1)
10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau,
S.A. and Inter Parfums, S.A. (original in French)(1)
10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau,
S.A. and Inter Parfums, S.A.(translation of French into English)(1)
10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums,
S.A.(1)
10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean
Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc.
10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A.,
Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.(1)
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)
10.37 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 Weil)
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
10.40 Commission Agreement among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Sodipe S.A. dated February 18, 1994
39
- -----------------------------
(1)Filed in excised form.
10.41 Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de
France-I.D., S.A. dated February 18, 1994 (re inventory purchase)
10.42 Convention de Nantissement among Cosmetiques et Parfums de France,
S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe
Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security
agreement)
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)
10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc., Revlon
Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994
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)
10.47. English translation of exhibit no. 10.37, 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 Weil)
10.48. English translation of exhibit no. 10.41, Convention between Inter
Parfums, S.A. and Cosmetiques et
Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase)
10.49. English translation of exhibit no. 10.42, Convention de Nantissement
among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de
France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter
Parfums, S.A. dated February 18, 1994 (re security agreement)
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:
40
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
3.1(c) Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 9, 1993
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
41
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
10.60 Guaranty and Security Agreement of Jean Philippe Fragrances, Inc. and
Elite Parfums, Ltd. to Republic National Bank of New York (France) dated July
19, 1995
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, 1996:
Exhibit No. and Description
10.65 Asset Repurchase Agreement between Carson, Inc. and Jean Philippe
Fragrances, Inc. dated March 27, 1997
11 Statement re: Computation of Earnings Per Share
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.
42
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 version)
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
4.18 1999 Stock Option Plan
10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and
Jean-Philippe Fragrances, Inc. (excised version)
10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH
and Inter Parfums, S.A (English translation, excised version)
10.72 Revolving Credit Agreement dated June 1, 1998 among Republic National
Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd.
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 - November 22, 1999):
Exhibit No. and Description
4.2 Shareholder's Agreement among LV Capital USA, Inc., Jean Mader 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.
43
The following documents are filed herewith:
Exhibit No. and Description
3.1(d) Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 13, 1999
10.73 Burberry Confidential Treatment Agreement dated 8 February, 2000
10.74 Burberry Licence Amendment dated February, 2000 (filed in excised
form)
10.75 Revolving Credit Agreement dated June 1, 1999 among Republic National
Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd.
(b) Reports on Form 8-K:
A Current Report on Form 8-K (date of event November 22, 1999) was
filed during the fourth quarter of Fiscal 1999, reporting items 5 and 7.
44
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Inter Parfums, Inc. and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheets of Inter Parfums,
Inc. and subsidiaries as of December 31, 1999 and 1998, 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, 1999.
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 subsidiaries of the Company, which
statements reflect total assets and net sales constituting 66% and 69% for 1999
and 64% and 66% for 1998 and net sales constituting 56% for 1997. 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 generally accepted auditing
standards. 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, based on our audits and the reports of the other auditors, the
consolidated financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of Inter Parfums, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
Our audits referred to above included Schedule II for each of the years in the
three-year period ended December 31, 1999. In our opinion, such schedule
presents fairly the information set forth therein in accordance with the
applicable accounting regulations of the Securities and Exchange Commission.
Richard A. Eisner & Company, LLP
New York, New York
March 7, 2000
With respect to accounts for
foreign subsidiaries
March 17, 2000
F-1
INTER PARFUMS HOLDING, S.A. AND SUBSIDIARIES
--------------------------------------------
INDEPENDENT AUDITOR'S REPORT
----------------------------
We have audited the accompanying consolidated balance sheets of Inter Parfums
Holding, S.A. and subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of income, retained earnings and cash flows for the
years ended December 31, 1999, 1998 and 1997. 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 conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Inter Parfums Holding, S.A. and
subsidiaries as of December 31, 1999 and 1998 and the results of its operations
and its cash flows for the years ended December 31, 1999, 1998 and 1997, in
conformity with generally accepted accounting principles.
Paris La DeFense, March 17, 2000
Cabinet Cauvin, Angleys, Saint-Pierre
International
Rene Amirkhanian
F-2
INTER PARFUMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share and per share data)
December 31,
----------------
1999 1998
------- -------
ASSETS
Current assets:
Cash and cash equivalents $24,936 $23,356
Marketable securities (Note B) 4,424
Accounts receivable, net of allowances of $2,095 and $2,432 in
1999 and 1998, respectively (Note F) 26,033 28,014
Inventories (Notes A and C) 19,450 21,939
Receivables, other 875 617
Other 1,169 1,085
Deferred tax benefit (Note K) 858 1,107
------- -------
Total current assets 77,745 76,118
Equipment and leasehold improvements, net (Notes A and D) 3,126 2,988
Other assets 508 922
Trademarks and licenses, net (Notes A, E and L) 5,844 7,711
------- -------
$87,223 $87,739
======= =======
LIABILITIES
Current liabilities:
Loans payable - banks (Note F) $ 787 $ 4,172
Accounts payable 18,449 14,300
Accrued expenses 4,351 3,892
Income taxes payable 768 2,864
Deferred tax liability (Note K) 988 1,291
------- -------
Total current liabilities 25,343 26,519
------- -------
Long-term debt (Note G) 1,531 200
------- -------
Minority interest 7,988 7,340
------- -------
Commitments (Note H)
SHAREHOLDERS' EQUITY (Notes I and L)
Preferred stock, $.001 par value; authorized 1,000,000 shares; none
issued
Common stock, $.001 par value; authorized 30,000,000 shares;
outstanding 7,888,481 and 8,462,781 shares in 1999 and 1998,
respectively 8 8
Additional paid-in capital 26,522 20,730
Retained earnings 52,080 47,343
Accumulated other comprehensive income (4,290) (812)
Treasury stock, at cost 3,595,203 and 2,383,203 shares in 1999 and
1998, respectively (21,959) (13,589)
------- -------
Total shareholders' equity 52,361 53,680
------- -------
$87,223 $87,739
======= =======
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,
--------------------------------
1999 1998 1997
--------- --------- ---------
Net sales $ 87,140 $ 89,388 $ 91,462
Cost of sales 45,325 47,417 49,388
--------- --------- ---------
Gross margin 41,815 41,971 42,074
Selling, general and administrative 31,965 32,944 32,334
Loss on divestiture of license 1,300
--------- --------- ---------
Income from operations 9,850 9,027 8,440
--------- --------- ---------
Other charges (income):
Interest 344 471 727
Loss on foreign currency 190 139 242
Interest income (687) (788) (705)
Loss on sale of stock of subsidiary 135 41 4
--------- --------- ---------
(18) (137) 268
--------- --------- ---------
Income before income taxes 9,868 9,164 8,172
Income taxes 3,978 3,598 2,945
--------- --------- ---------
Income before minority interest 5,890 5,566 5,227
Minority interest in net income of consolidated 1,062 953 720
--------- --------- ---------
Net income $ 4,828 $ 4,613 $ 4,507
======== ======== ========
Net income per share:
Basic $0.64 $0.53 $0.48
Diluted $0.60 $0.52 $0.48
Weighted average number of shares outstanding:
Basic 7,591,923 8,707,290 9,299,401
Diluted 8,103,484 8,898,805 9,397,329
F-4
INTER PARFUMS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
(in thousands except share and per share data)
Accumulated
Additional Other
Common Stock Paid-in Retained Comprehensive Comprehensive Treasury
Shares Amount Capital Earnings Income Income Stock Total
Balance - January 1, 1997 9,602,481 $10 $20,686 $38,223 $ 390 $(5,943) $ 53,366
Comprehensive income:
Net income 4,507 $4,507 4,507
Foreign currency translation
adjustments (2,759) (2,759) (2,759)
-------
Total comprehensive income $1,748
======
Purchased treasury shares (739,700) (1) (4,919) (4,920)
--------- --- ------ ------- ---------- ------- --------
Balance - December 31, 1997 8,862,781 9 20,686 42,730 (2,369) (10,862) 50,194
Comprehensive income:
Net income 4,613 $4,613 4,613
Foreign currency translation
adjustments 1,557 1,557 1,557
------
Total comprehensive income $6,170
======
Shares issued upon exercise of
stock options 7,500 44 44
Purchased treasury shares (407,500) (1) (2,727) (2,728)
--------- --- -------- ------- ---------- ------- --------
Balance - December 31, 1998 8,462,781 8 20,730 47,343 (812) (13,589) 53,680
Comprehensive income:
Net income 4,828 $4,828 4,828
Foreign currency translation
adjustments (3,870) (3,870) (3,870)
Unrealized gain on marketable
securities 392 392 392
------
Total comprehensive income $1,350
======
Shares issued upon exercise of stock
options (including income tax
benefit) 637,700 1 5,792 5,793
Purchased treasury shares (1,212,000) (1) (8,370) (8,371)
Dividends paid (91) (91)
--------- --- -------- ------- ---------- ------- --------
Balance - December 31, 1999 7,888,481 $ 8 $26,522 $52,080 $(4,290) $(21,959)$ 52,361
========== === ======== ======= ======= ======== ========
See notes to financial statements F-5
INTER PARFUMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands except share and per share data)
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
Cash flows from operating activities:
Net income $ 4,828 $ 4,613 $ 4,507
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,415 1,401 1,238
Noncash portion of loss on divestiture of license 854
Loss on sale of stock of subsidiary 135 41 4
Minority interest in net income 1,062 953 720
Deferred tax (benefit) provision (438) 165 771
Changes in:
Accounts receivable (886) (272) 189
Inventories 354 632 90
Other assets (66) (144) 1,426
Accounts payable and accrued expenses 6,873 (449) 790
Income taxes payable (1,719) 419 1,538
------- ------- -------
Net cash provided by operating activities 12,558 7,359 12,127
------- ------- -------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (1,407) (1,604) (1,149)
Cash portion of trademark and license acquisitions (337) (27) (1,009)
Purchase of marketable securities (3,792)
Proceeds from sale of equipment 50
------- ------- -------
Net cash used in investing activities (5,536) (1,631) (2,108)
------- ------- -------
Cash flows from financing activities:
Increase (decrease) in loans payable - banks (2,997) 888 (5,574)
Proceeds from issuance of long-term debt 1,624
Proceeds from sale of stock of subsidiary 214 60 32
Purchase of treasury stock (8,371) (2,728) (4,920)
Proceeds from exercise of options and warrants 5,793 44
Dividends paid (91)
------- ------- -------
Net cash used in financing activities (3,828) (1,736) (10,462)
------- ------- --------
Effect of exchange rate changes on cash (1,614) 642 (1,040)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 1,580 4,634 (1,483)
Cash and cash equivalents - beginning of year 23,356 18,722 20,205
------- ------- -------
Cash and cash equivalents - end of year $24,936 $23,356 $18,722
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 330 $ 560 $ 756
Income taxes $ 4,331 $ 3,028 $ 736
See notes to financial statements F-6
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(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 and cosmetics.
[2] Basis of preparation:
The consolidated financial statements include the accounts of Inter
Parfums, Inc. and its domestic and foreign subsidiaries (the "Company").
All material intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues 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, 1999 and 1998
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] Financial instruments: (continued)
The Company occasionally enters into foreign currency forward exchange
contracts to manage exposure related to certain foreign currency
commitments. Gains and losses on foreign currency transaction hedges are
recognized in income and offset the foreign exchange gains and losses on
the underlying transactions. Gains and losses of foreign currency firm
commitment hedges are deferred and included in the basis of the
transactions underlying the commitment.
[7] Euro conversion:
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 is scheduled to phase in over a period ending
January 1, 2002. The introduction of the Euro and the phasing out of the
other currencies should not have a material impact on the Company's
consolidated financial statements.
[8] Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
[9] Equipment and leasehold improvements:
Equipment and leasehold improvements are stated at cost. 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.
[10] Trademarks and licenses:
Trademarks are stated at cost and are 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.
The Company reviews trademarks and licenses for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be
recoverable.
[11] Revenue recognition:
Revenue is recognized upon shipment of merchandise as sales are final upon
shipment to customers. The Company, at its discretion, permits limited
returns of merchandise and establishes allowances for estimated returns
based upon historic trends.
[12] Issuance of common stock of 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 sold is reflected as a gain or loss in the consolidated
statements of income.
F-8
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[13] Stock-based compensation:
The provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") allow companies
to either expense the estimated fair value of employee stock options or to
continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but to disclose the
pro forma effects on net income had the fair value of the option been
expensed. The Company has elected to continue to apply APB 25 in accounting
for its stock option incentive plans.
[14] Earnings per share:
Basic earnings per share are computed using the weighted average number of
shares outstanding during each year. Diluted earnings per share are
computed using the weighted average number of shares outstanding during
each year, plus the incremental shares outstanding assuming the exercise of
dilutive stock options.
NOTE B - MARKETABLE SECURITIES
Marketable securities represent equity securities classified as
available-for-sale. At December 31, 1999, such securities had a cost of $3,792
and a gross unrealized gain of $850 ($392 net of taxes of $341 and minority
interest of $117). For the year ended December 31, 1999, there were no sales of
marketable securities and, therefore, no gains or losses have been realized.
NOTE C - INVENTORIES
December 31,
----------------
1999 1998
------- -------
Raw materials and component parts $ 8,239 $ 7,571
Finished goods 11,211 14,368
------- -------
$19,450 $21,939
======= =======
NOTE D - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
December 31,
----------------
1999 1998
------- -------
Equipment $6,667 $5,721
Leasehold improvements 383 382
------ ------
7,050 6,103
Less accumulated depreciation and amortization 3,924 3,115
------ ------
$3,126 $2,988
======= =======
F-9
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE E - TRADEMARKS AND LICENSES
December 31,
---------------
1999 1998
------ -------
Trademarks $7,013 $ 7,852
Licenses 2,786 2,880
------ -------
9,799 10,732
Less accumulated amortization 3,955 3,021
------ -------
$5,844 $ 7,711
====== =======
NOTE F - LOANS PAYABLE - BANKS
December 31,
--------------
1999 1998
----- ------
Borrowings by the Company's foreign subsidiaries
under several bank overdraft facilities
bearing interest at 0.6% above the EURIBOR
rate (3.3% and 3% at December 31, 1999 and 1998,
respectively) $ 787 $2,406
Borrowings by the Company's foreign subsidiaries
under a $4,000 credit facility whereby accounts
receivable are sold with recourse and accounted
for as a collateralized loan and bearing interest
at 0.5% above the EURIBOR rate 1,516
Borrowings under a $12,000 unsecured revolving line
of credit. Due on demand, bearing interest at the
bank's prime rate or 1.75% above the LIBOR rate 250
----- ------
$ 787 $4,172
===== ======
NOTE G - LONG-TERM DEBT
As of December 31, 1999, long-term debt represents borrowings by a foreign
subsidiary of $1,531 due in 2004. The debt agreement requires interest payable
monthly at 4.56%, however, the Company entered into a Swap agreement with the
bank effectively converting the interest to a variable rate equal to the EURIBOR
rate.
At December 31, 1998, long-term debt represented borrowings by a foreign
subsidiary of $200, due in 2004. Pursuant to its terms, during 1999, the loan
was converted by the holder into shares of the Company's foreign subsidiary at
approximately $14 per share. Interest was payable quarterly at 7% per annum.
(See Note I[1]).
F-10
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE H - COMMITMENTS
[1] Leases:
The Company leases its office and warehouse facilities under operating
leases expiring through 2003. Rental expense amounted to $1,159, $1,167 in
1998 and $1,255 in 1997. Minimum future rental payments are as follows:
2000 $ 1,157
2001 1,128
2002 964
2003 558
-------
$ 3,807
=======
[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. In connection therewith, the Company is subject to certain minimum
annual royalties as follows:
2000 $ 2,032
2001 2,055
2002 2,450
2003 2,747
2004 3,670
Thereafter 14,413
-------
$27,367
=======
NOTE I - SHAREHOLDERS' EQUITY
[1] Issuance of common stock of subsidiary:
In January 1998, Inter Parfums Holdings, S.A. ("Holdings"), a wholly owned
subsidiary of the Company and direct parent of Inter Parfums, S.A., a
consolidated subsidiary of the Company, exercised its right to convert the
remaining portion of its investment in Inter Parfums, S.A. convertible debt
into 318,000 shares of capital stock of Inter Parfums, S.A. at
approximately 80 French francs per share. In addition, during 1998, certain
minority shareholders exercised their rights to convert approximately $224
of the convertible debt into 16,946 shares of capital stock of Inter
Parfums, S.A. and 5,486 shares of capital stock of Inter Parfums, S.A. were
issued as a result of employees exercising stock options. As a result of
such issuances, the Company's percentage ownership of Inter Parfums, S.A.
was increased from 76.41% to 79% as of December 31, 1998.
During 1999, holders of the remaining $200 of convertible debt, exercised
their rights to convert their investment into 13,732 shares of capital
stock of Inter Parfums, S.A. (82 French francs per share), and 25,531
shares of capital stock of Inter Parfums, S.A. were issued as a result of
employees exercising stock options. As a result of such issuances, the
Company's percentage ownership of Inter Parfums, S.A. decreased from 79% to
77% as of December 31, 1999.
F-11
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE I - SHAREHOLDERS' EQUITY (CONTINUED)
[1] Issuance of common stock of subsidiary: (continued)
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.
[2] Stock option plans:
The Company maintains a stock option program for key employees, executives
and directors. The plans 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.
The Company applies APB 25 in accounting for its stock option incentive
plans and accordingly recognizes compensation expense for the difference
between the fair value of the underlying common stock and the grant price
of the option at the date of grant.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123. Had compensation cost for the Company's stock
option plans been determined based upon the fair value at the grant date,
consistent with the methodology prescribed under SFAS No. 123, the
Company's net income in 1999, 1998 and 1997 would have been approximately
$4.2, $4.3 and $3.9 million, or $0.51, $0.48 and $0.42 per diluted share,
respectively. The weighted average fair values of the options granted
during 1999, 1998 and 1997 are estimated as $1.52, $1.64 and $1.38 per
share, respectively, on the date of grant using the Black-Scholes option
pricing model with the following assumptions: dividend yield 0%, volatility
of 40%, risk-free interest rates at the date of grant, 5.18% in 1999, 5.40%
in 1998 and 6.40% in 1997, and an expected life of the option of two years.
A summary of the Company's stock option activity, and related information
follows:
Year Ended December 31,
----------------------------------------------------------------------
1999 1998 1997
----------------------- -------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------ --------- --------- -------- --------- --------
Shares under option - beginning of year 1,759,200 $6.55 1,675,800 $6.59 1,601,449 $7.18
Options granted 733,000 5.77 375,050 6.79 791,100 5.77
Options exercised (637,700) 6.68 (7,500) 5.84
Options cancelled (86,950) 7.59 (284,150) 7.13 (716,749) 7.00
------------ --------- ---------
Shares under options - end of year 1,767,550 6.13 1,759,200 6.55 1,675,800 6.59
============ ========= =========
Exercise prices for options outstanding as of December 31, 1999 ranged from
$5.69 to $8.88. The weighted average remaining contractual life of those
options is three years.
At December 31, 1999 options for 470,724 shares were available for future
grant under the plans.
F-12
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE J - GEOGRAPHIC AREAS
Information on the Company's operations by geographical areas is as follows:
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
Net sales:
United States $26,826 $30,068 $38,881
Europe 60,414 58,875 50,953
South America 811 2,042
Eliminations (100) (366) (414)
------- ------- -------
$87,140 $89,388 $91,462
======= ======= =======
Net income:
United States $ 1,140 $ 1,503 $ 2,431
Europe 3,788 3,609 2,340
South America (100) (530) (343)
Eliminations 31 79
------- ------- -------
$ 4,828 $ 4,613 $ 4,507
======= ======= =======
Depreciation and amortization expense:
United States $ 595 $ 531 $ 584
Europe 1,819 864 653
South America 1 6 1
------- ------- -------
$ 2,415 $ 1,401 $ 1,238
======= ======= =======
Interest income:
United States $ 408 $ 376 $ 475
Europe 279 409 227
South America 3 3
------- ------- -------
$ 687 $ 788 $ 705
======= ======= =======
F-13
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE J - GEOGRAPHIC AREAS (CONTINUED)
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
Interest expense:
United States $ 59 $ 50 $ 94
Europe 274 377 556
South America 11 44 77
------- ------- -------
$ 344 $ 471 $ 727
======= ======= =======
Total assets:
United States $39,417 $41,330 $44,289
Europe 57,677 55,893 44,975
South America 16 619 589
Eliminations (9,887) (10,103) (9,571)
------- -------- -------
$87,223 $87,739 $80,282
======= ======= =======
Additions to long-lived assets:
United States $ 101 $ 455 $ 684
Europe 1,643 1,165 1,424
South America 11 50
------- ------- -------
$ 1,744 $ 1,631 $ 2,158
======= ======= =======
Total long-lived assets:
United States $ 2,519 $ 3,012 $ 3,150
Europe 6,451 7,686 6,917
South America 1 49
------- ------- -------
$ 8,970 $10,699 $10,116
======= ======= =======
United States export sales were approximately $9,200, $10,000 and $8,500 for the
years ended December 31, 1999, 1998 and 1997, respectively.
F-14
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE K - INCOME TAXES
The components of income before income taxes consist of the following:
Year Ended December 31,
----------------------
1999 1998 1997
------ ------ ------
U.S. operations $1,750 $2,304 $3,850
Foreign operations 8,118 6,806 4,191
Eliminations 54 131
------ ------ ------
$9,868 $9,164 $8,172
====== ====== ======
The provision for current and deferred income tax expense (benefit) consists of
the following:
Year Ended December 31,
----------------------
1999 1998 1997
------ ------ ------
Current:
Federal $ 311 $ 344 $ 765
State and local 142 105 269
Foreign 3,963 2,984 1,140
------ ------ ------
4,416 3,433 2,174
------ ------ ------
Deferred:
Federal 142 283 310
State and local 16 70 76
Foreign (596) (188) 385
------ ------ ------
(438) 165 771
------ ------ ------
Total income tax expense $3,978 $3,598 $2,945
====== ====== ======
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, 1999, the deferred tax assets consist of approximately
i) $593 relating to accounts receivable and inventory writedowns which are not
currently deductible for tax purposes and the difference between the book basis
and tax basis of fixed assets and intangible assets and ii) $265 relating to the
expected benefit from a loss of the Company's investment in its Brazilian
subsidiary. At December 31, 1999, the deferred tax liability of $988 relates
primarily to the difference between the book basis and tax basis of certain
foreign production equipment.
No valuation allowance has been provided on the Company's deferred tax assets as
management believes that it is more likely than not that the asset will be
realized in reduction of future taxable income.
F-15
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE K - 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,
-------------------------
1999 1998 1997
------ ------- --------
Statutory rates 34.0% 34.0% 34.0%
State and local taxes, net of federal benefit 1.1 1.3 2.8
Effect of foreign tax rate in excess of U.S.
statutory rates 5.2 4.0
Other (0.8)
---- ---- ----
Effective rates 40.3% 39.3% 36.0%
==== ==== ====
NOTE L - OTHER MATTERS
[1] On March 27, 1997, Chesebrough Ponds, the licensor of the Cutex trademark,
entered into an agreement to sell the Cutex trademarks to Carson, Inc. At
the request of Carson, Inc., the Company agreed to relinquish its Cutex
nail and lip product license. In connection with the transaction, all of
the Company's Cutex inventory was sold to Carson, Inc. and certain
liabilities were assumed by Carson, Inc. These transactions closed
simultaneously on April 30, 1997. The Company incurred a pre-tax charge of
approximately $1,300,000 in the first quarter of 1997 due to the write-off
of intangible assets and other expenses relating to the relinquishment of
the Cutex license.
[2] As previously reported, Inter Parfums, S.A., the Company's majority owned
French subsidiary, is a party to litigation with Jean Charles Brosseau,
S.A. ("Brosseau"), the licensor of the Ombre Rose trademark. The licensor
has claimed damages of approximately $7,000 and is seeking termination of
the license agreement.
In October 1999, Inter Parfums S.A. received notice of a judgment in favor
of Brosseau, which awarded damages of approximately $600 to Brosseau, 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, and believes that it has a
meritorious defense to such claims. The payment of the judgment has been
stayed, and Inter Parfums, S.A. can continue to operate under the license
agreement during the appeal process. The Company has been advised by its
special litigation counsel that, in its opinion, it is unlikely that the
monetary judgment will be sustained on appeal or that any final,
substantial monetary judgment will be entered against Inter Parfums, S.A.
Management does not believe that such litigation will have any material
adverse effect on the financial condition or operations of the Company and
the Company has set up a reserve of approximately $275 against the
unamortized portion of the license agreement. After such reserve, the
remaining unamortized portion of the license agreement is approximately
$322.
[3] In November 1999, the French Tax Authorities commenced a tax audit of Inter
Parfums, S.A. and issued an assessment of approximately $1,100. Inter
Parfums, S.A. is contesting this assessment. Management and its tax
consultants believe they have sound arguments to support their position and
that the majority of the assessment will be reversed, and therefore, will
not have a material adverse effect on the financial condition or operations
of the Company. The Company has set up a reserve of approximately $260
which it presently believes will be its ultimate exposure.
F-16
INTER PARFUMS, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999 and 1998
(in thousands except share and per share data)
NOTE L - OTHER MATTERS (CONTINUED)
[4] 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. In accordance with the terms of the Stock Purchase
Agreement, LV Capital purchased an aggregate of 849,200 shares of Common
Stock of the Company at $12.00 per share, as follows: 260,000 shares
(inclusive of 50,000 shares acquired upon exercise of an outstanding stock
option) from each of the Chief Executive Officer and the President of the
Company, and an aggregate of 329,200 shares (inclusive of 212,200 shares
issued upon exercise of outstanding stock options) from management and
employees. As the result of such transaction, LV Capital increased its
beneficial ownership of Common Stock of the Company to approximately 20.5%
of the outstanding shares, and the Company received proceeds of
approximately $4,200 as the result of the exercise of the outstanding stock
options.
In addition, in return for LV Capital becoming a strategic partner of the
Company, LV Capital is to be 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 for cash at fair market value upon
issuance of shares to any party other than LV Capital, subject to certain
exceptions, and is to be 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.
F-17
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, 1999:
Allowances for sales returns and doubtful accounts $2,432 $ 988 $ (243) (b) $1,082 (a) $2,095
====== ===== ====== ====== ======
Year ended December 31, 1998:
Allowances for sales returns and doubtful accounts $2,995 $1,597 $2,160 (a) $2,432
====== ====== ====== ======
Year ended December 31, 1997:
Allowances for sales returns and doubtful accounts $2,787 $1,453 $1,245 (a) $2,995
====== ====== ====== ======
(a) Write off of bad debts and sales returns.
(b) Foreign currency translation adjustment.
See notes to financial statements F-18
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 23, 2000
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
- --------------
Jean Madar Chairman of the
Board of Directors and
Chief Executive Officer March 23, 2000
/s/ Russell Greenberg
- ---------------------
Russell Greenberg Chief Financial and
Accounting Officer and
Director March 23, 2000
/s/ Philippe Benacin
- --------------------
Philippe Benacin Director March 27, 2000
- ------------------
Francois Heilbronn Director March ____, 2000
/s/ Joseph A. Caccamo
- ---------------------
Joseph A. Caccamo Director March 23, 2000
/s/ Jean Levy
- -------------
Jean Levy Director March 24, 2000
- ------------------------
Robert Bensoussan-Torres Director March ____, 2000
/s/ Daniel Piette
- -----------------
Daniel Piette Director March 24, 2000
/s/ Jean Cailliau
- -----------------
Jean Cailliau Director March 24, 2000
/s/ Philippe Santi
- ------------------
Philippe Santi Director March 27, 2000
45