ITEM 1. BUSINESS
INTRODUCTION
We are Inter Parfums, Inc., a world-wide provider of prestige perfumes and mass market perfumes, cosmetics and health and beauty aids. Organized under the laws of the State of Delaware in May 1985 as Jean Philippe Fragrances, Inc., we changed our name to Inter Parfums, Inc. on July 14, 1999, to better reflect our image as a provider of prestige perfumes. We have also retained the brand name, Jean Philippe Fragrances, for our mass market products.
Our worldwide headquarters and the office of our two (2), wholly-owned New York limited liability companies, Jean Philippe Fragrances, LLC and Inter Parfums USA, LLC, are located at 551 Fifth Avenue, New York, New York 10176 and our telephone number is 212.983.2640. Our consolidated wholly-owned subsidiary, Inter Parfums Holdings, S.A., its majority-owned subsidiary, Inter Parfums, S.A., and its two wholly-owned subsidiaries, Inter Parfums Grand Public, S.A., and Inter Parfums Trademark, S.A., maintain executive offices at 4, Rond Point des Champs Elysees, 75008 Paris, France. Our telephone number in Paris is 331.5377.0000.
Our common stock is listed on The Nasdaq Stock Market (National Market System) and its trading symbol is "IPAR". The common shares of our subsidiary, Inter Parfums S.A., are traded on the Paris Stock Exchange.
We operate in the fragrance and cosmetic industry, specializing in prestige perfumes and mass market perfumes, cosmetics and health and beauty aids:
o Prestige products - For each prestige brand, owned or licensed by us, we develop an original concept for the perfume consistent with world market trends.
o Mass market products - We design, market and distribute inexpensive fragrances and personal care products, including alternative designer fragrances, mass market cosmetics and health and beauty aids.
PRODUCTION AND SUPPLY
The stages of the development and production process for all fragrances are as follows:
o Simultaneous briefing with perfume designers and creators (includes analysis of esthetic and olfactory trends, target clientele and mass market communication approach);
o Concept choice;
o Production of mock-ups for final acceptance of bottles and packaging;
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 Quality control of incoming components; and
o Packaging and inventory control.
Suppliers/vendors who assist us with product development include:
o Independent perfumery design companies (Federico Restrepo, Fabien Baron, Aesthete, Ateliers Dinand);
o Perfumers (IFF, Firmenich, Creations Aromatiques, Robertet, Quest, Wessel Fragrances) which create a fragrance consistent with our expectations and, that of the fragrance designers and creators;
o Contract manufacturers of components such as glassware (Saint Gobain, 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, SDPP, 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 were primarily settled in Euro through 31 December 2001, and for our United States operations, suppliers' accounts are primarily settled in U.S. dollars.
MARKETING AND DISTRIBUTION
PRESTIGE PRODUCTS
For our international distribution of prestige products, we contract with independent distribution companies specializing in luxury goods. In each country, we designate anywhere
from one to three distributors with the status of "exclusive representative" for one or more of our name brands. We also distribute our prestige products through a variety of duty-free operators, such as airports and airlines and select vacation destinations.
Approximately 31% of our prestige fragrance net sales are sold in US dollars. In an effort to reduce our exposure to foreign currency exchange fluctuations, we engage in a program of cautious hedging of foreign currencies to minimize the risk arising from operations. 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 80% of prestige product sales in France are made to approximately 200 customers out of a total of over 1,200 active accounts.
Our distributors vary in size depending on the number of competing brands they represent. This extensive and diverse network provides us with a significant presence in over 100 countries around the world. Approximately 50 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.
International distribution of our FUBU fragrance products is handled in the same manner as that of our other prestige fragrance lines. United States distribution will be the responsibility of our in house sales force who will market FUBU fragrance products to catalog companies, specialty retail stores, retail stores which sell FUBU apparel and mid tier department stores.
MARKETING AND DISTRIBUTION
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 Albertson's o Family Dollar o Dollar General o Dollar Tree Distributors o Consolidated Stores (Big Lot Stores) o 99 Cent Only
o Pathmark
In addition, our mass market products are sold to wholesale distributors, such as Variety Wholesalers, specialty store chains, and to multiple locations of accessory, jewelry and clothing outlets, such as Rainbow Shoppes.
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. 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 retail distribution:
o Selective distribution - perfumeries and specialty sections of department stores, who sell brand name products with a luxury image, and
o Mass distribution - Mass merchandisers, discount stores and supermarkets, who sell low to moderately-priced mass market products for a broad customer base with limited purchasing power.
SELECTIVE DISTRIBUTION
During 2001, the French perfume industry, which accounts for about 30% of the world market, reported a 7.5% growth rate , as compared to a 7% growth rate in 2000 and a 6% growth rate in 1999. (Source: Federation des Industries de la Parfumerie)
The French domestic market for selective distribution had another good year with sales increasing 5.9% in 2001, as compared to 5.4% in 2000.
During 2001, the French export market, which grew at a 9.7% rate, was favorably impacted by the declining value of the Euro, as compared to other currencies:
o The European Union countries, which absorb two thirds of exports, grew at a rate of over 6%.
o North America, which represents the second largest market of the perfume and cosmetic industry, reported a 15% increase in the first six months of 2001 only to give back much of that growth in the aftermath of September 11th.
o Asia increased 9% in 2001, as compared to 26% in 2000 with much variation among individual countries. Japan was up 5% and Hong Kong was up 90%, whereas China was down 24%.
o Eastern Europe, progressed nicely with an increase of 48% in Russia. (Source: Federation des Industries de la Parfumerie)
While our market share is less than 1% in France, in other countries such as the United Kingdom, United States, Italy, Portugal, Saudi Arabia and South Korea, the Company's market share is reportedly between 1% and 4% of French perfumery imports (internal source).
MASS DISTRIBUTION
Our mass market products, which consists of low to moderately-priced fragrances, cosmetics and health and beauty aids are designed for a broad customer base with limited purchasing power. We sell our products both in the United States and abroad. Mass merchandisers, discount stores and supermarkets continued to perform very well during the slowdown of the economy. Our Aziza line of cosmetics has achieved widespread acceptance with distribution in over 12,000 doors and growing. Our new line of health and beauty aids, which consist of shampoos, conditioners and lotions, under our Intimate brand, is currently distributed in over 4,000 doors with new doors being added monthly. We expect sales to continue to grow as our high volume, discount store customers open more stores, and we continue to develop new products for them.
COMPETITION
The market for fragrances and beauty related products is highly competitive and sensitive to changing mass market preferences and demands. The prestige fragrance industry is highly
concentrated around certain major players with resources far greater than ours. We compete with an original strategy -- regular and methodical development of quality fragrances for a growing portfolio of internationally renowned brand names.
Our closest competitors in the prestige market typically do not have mass market products departments. However, they may develop, market and sell prestige cosmetics. We 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 that brand recognition of the Aziza name, together with the quality and competitive pricing of our products, enables us to compete with these companies in the mass market.
The market for health and beauty aids is also highly competitive, and is dominated by large multi-national companies such as Unilever and Proctor and Gamble. We compete primarily with a low price point coupled with the recognition of our brand name, Intimate.
FRAGRANCE AND COSMETIC PRODUCTS
PRESTIGE PERFUMES
Since 1988 we have sought to build a portfolio of luxury brand names through licensing agreements or through direct acquisition of existing brand names. Under license agreements we obtain the right to use the brand name, create new fragrances and packaging, determine positioning and distribution, and market and sell the licensed products, in exchange for the payment of royalties. Our rights under license agreements are also generally subject to certain minimum sales requirements and advertising expenditures.
The creation and marketing of each product line are intimately linked with the brand's name, its past and present positioning, customer base and, more generally, the prevailing market atmosphere. Accordingly, we generally conduct a market study for each proposed product line for almost a full year before we introduce any new product into the market.
This market study is intended to define the general position of the line and more particularly its fragrance, bottle, packaging and appeal to the buyer. In our opinion, the unity of these four elements of the marketing mix makes for a successful product.
Overall spending on marketing and point of sale support aggregated approximately $15.2 million in 2001 with approximately $4.5 million in point of sale support, which is included in cost of sales and $10.7 million in other marketing costs, included in selling expenses. Distributors of our product lines contribute a similar amount for additional marketing support. The cost of launching a new product (molds and tools, start-up costs and communication costs, media, etc.) generally varies from $0.2 million to $2.0 million.
The smooth and consistent operation of our prestige perfume operations requires a thorough knowledge of the market, detailed analysis of the image and potential of each brand name, a "good dose" of creativity, as well as a highly professional approach to international distribution channels. Our prestige fragrances have an average life expectancy of five to ten years, and retail at prices of $30 to $50.
Our brand name portfolio, which has been steadily increasing since 1988, is now made up essentially of seven brand names, each of which has a variety of product lines. Net sales of Burberry products accounted for 40.8%, 37.8% and 37.5% of net sales for the years ended December 31, 2001, 2000 and 1999, respectively.
In addition, we have planned several new product launches for 2002 including:
o FUBU Plush
o Burberry Baby Touch
o Bazar from Christian Lacroix
o Celine bath line
o S.T. Dupont
BURBERRY (BURBERRY OF LONDON, WEEK END, BURBERRY TOUCH)
Burberry is our leading selective brand name and we are operating under the terms of an exclusive worldwide license agreement entered into in 1993. In February 2000, we extended the license agreement until December 31, 2006, and in 2001 we expanded the license to include baby fragrance and toiletry products. Burberry enjoys a very distinctive, upscale-market and classic image, with an undeniable international cachet.
In August 2000, we launched two new Burberry perfume lines, Burberry Touch, for men and Burberry Touch for women, and in 2001, we extended the Burberry Touch line to bath products. These lines are designed with a style intended to be consistent with the new, more
modern and trend-setting Burberry brand image. For 2002, we intend to launch a Burberry Baby Touch line of alcohol free fragrances.
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, two lines launched in September 1998 made a promising start with a strong sell through. A line of bath products introduced during the first half of 1999 further enhanced the image of the brand.
In March 2000 we launched a new S.T. Dupont Signature line of two new highly selective perfumes, designed around the theme of writing for which S.T. Dupont is famous. However, the Signature line has not met our overall expectations, and we are working on the development of a new S.T. Dupont line to be launched in the latter part of 2002 or early in 2003.
PAUL SMITH
We signed a 12-year exclusive license agreement 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. We launched our first line of Paul Smith perfumes in certain international markets beginning in July 2000 and continued the international roll-out throughout 2001.
CHRISTIAN LACROIX (EAU FLORALE, BAZAR)
In March 1999, we entered into an exclusive license agreement with the Christian Lacroix Company, a division of LVMH Moet Hennessy Louis Vuitton S.A. ("LVMH"), for the worldwide development, manufacture and distribution of perfumes. For us, this association with a prestigious fashion label is another key area for growth which we expect will further strengthen our position in the prestige fragrance market. Our first Christian Lacroix line, Eau de Parfum, was launched in Europe during 1999. During 2000, we launched the line in the United States, with an exclusive distribution arrangement with Saks Fifth Avenue, and in South America. During 2001, we launched a lighter eau de toilette fragrance., Eau de Florale.
For 2002, we have developed a new line for Christian Lacroix fragrances called Bazar from Christian Lacroix, which is planned to make its debut in the second quarter of 2002.
CELINE
In May 2000 we entered into an exclusive worldwide license agreement for the development, manufacturing and distribution of fragrance lines under the Celine brand name with Celine, a division of LVMH Moet Hennessy Louis Vuitton S.A. We launched two new fragrance lines the fourth quarter of 2001, and the initial consumer response was very good. We also plan to market a new Celine bath line in the third quarter of 2002.
Celine, a French luxury fashion and accessory company, and part of LVMH, is known throughout the world for its luxury and quality products, as well as the unique designs of Michael Kors. This agreement is an important part of Celine's strategy to develop dynamic brand recognition and to offer a varied range of luxury items to an international clientele. Association with this prestigious fashion label is an important step in the development and expansion of our prestige business. This relationship is expected to add strength to all of our prestige brands and contribute to our continued growth.
FUBU (FUBU PLUSH)
In June 2000 we signed an exclusive worldwide agreement with FUBU The Collection to produce and sell men's and women's fragrances. Our agreement with FUBU will allow us to offer a new, contemporary fragrance to consumers. Everything about the FUBU fragrance lines we are developing, from scent to packaging, advertising and marketing, will complement the lifestyle image of the FUBU collections. Our FUBU Plush fragrance line for men and women will be launched in specialty retail stores and international markets beginning in the second quarter of 2002 with the mid tier department stores launch following in the third quarter 2002.
Founded by four young men in 1992, FUBU exploded onto the young men's fashion scene. Music, movie, television and sport stars have worn the designs all recognizable by the FUBU logos. Today, FUBU product sales exceed $350 million, and encompass men's sportswear-formalwear, ladies, and children's apparel, as well as footwear and accessory items. The exposure FUBU has received has helped to create a loyal brand following from ages 5-55 in both the U.S. and abroad. Today's FUBU customers are both men and women, living in big cities and small towns, and encompass many diverse ethnic, racial and cultural backgrounds.
MOLYNEUX (QUARTZ, QUARTZ POUR HOMME, MODERN QUARTZ)
The Molyneux brand name, which we purchased in March 1994, was originally created at the turn of the century by the fashion designer Edouard Molyneux, and ranks among the
institutional brand names of French perfumery. Molyneux enjoys a very prominent market position in South America, especially through the "Quartz" line for women, which was launched in 1978. The Molyneux brand provides synergies with the Burberry brand name among duty-free operators (joint sales areas, use of the same demonstrators, and enhanced positioning for negotiating with duty-free operators and other customers). The Molyneux name is also well established in France and other Western European countries. In January 2000 we launched a totally new line, called Modern Quartz, by Molyneux, in a modernistic package and in 2001 we launched a men's version, Modern Quartz for Men.
OTHER SELECTIVE BRAND NAMES
We also create, develop and market the following products:
o Parfums Weil, which includes "Eau de Fraichaur" and "Bambou" which are sold predominantly in France and Europe.
o Regine's, whose "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:
PURCHASE PRICE LICENSED DATE (IN BRAND NAME OR OWNED ACQUIRED TERM MILLIONS)
Burberry Licensed July 93 13 years $0.0 S.T. Dupont Licensed July 97 11 years 1.0 Paul Smith Licensed Dec. 98 12 years 0.0 Celine Licensed May 00 11 years from January 2001, 0.0 with an additional 5-year option term Molyneux Owned Mar. 94 N/A 4.2 Weil Owned Mar. 94 N/A 1.8 Regine's Licensed June 88 Year to year 0.0 Christian Lacroix Licensed Mar. 99 11 years 0.0 FUBU Licensed June 00 6 1/2 years with three 0.0 additional 2-year option terms.
MASS MARKET PRODUCTS
MASS MARKET FRAGRANCES
We produce and market a complete line of alternative designer fragrances and personal care products which sell at a substantial discount from their high profile, high retail cost, brand name counterparts. Our alternative designer fragrances, which are produced in the United States, are similar in scent to highly advertised designer fragrances that are marketed at a high retail price. These products are intended to have an upscale image without a high retail price, and typically sell at a price below $5.00 at the mass market retail level, substantially discounted from
the high cost of designer fragrances which typically range from $30.00 to $200.00 at prestige retail locations.
Our alternative designer fragrances encompass a complete and increasing array of fragrances, body sprays, deodorants and perfumed creams. Product line extensions into additional personal care products are ongoing and development of new and innovative product lines is a continuous process.
New designer fragrances are constantly being launched in the marketplace. Substantial expenditure of advertising dollars, selective distribution and a high retail price create a perfect candidate for an alternative designer fragrance. We react to demand by creating a similar scent which, when combined with an innovative packaging design, is ready for sale to mass market merchandisers, chain drug stores, wholesalers and international trading companies. To this end, our strategy is to be among the first to release these new introductions into the market.
Under the terms of a license agreement signed in 1990 with Jordache Enterprises, we have capitalized on the strength and awareness of the Jordache trademark. Our rights under this license agreement, which terminate on 30 June 2005 unless further renewed, are subject to certain minimum sales requirements and the payment of royalties. Recent new introductions in the fragrance category are directed at and focused on the younger, trendy mass market consumer who is the core of the Jordache franchise. New packaging, which utilizes the latest in graphic technology, is both innovative and attractive. We expect to continue this trend with additional line extensions under the Jordache brand name.
MASS MARKET COSMETICS
We purchased the trademark, Aziza, for 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.
During August 1999 we introduced a new Aziza line of low priced eyeshadow kits, mascara, and pencils, which is geared towards the young teen market. This product line, with its low suggested retail prices, is being distributed to mass market retailers and discount chains, including the 99 Cent and Dollar Store markets.
New product development is ongoing with foundation, lipstick, nail polish and implements having recently been added to the line. Aziza is presently distributed in approximately 12,000 mass market outlets throughout the United States.
MASS MARKET HEALTH AND BEAUTY AIDS
During the second quarter of 2001, we introduced a new line of mass market health and beauty aids under our Intimate brand, consisting of shampoo, conditioner, hand lotion and baby oil. We distribute this line to the same mass market retailers and deep discount chains as our Aziza cosmetic line. Intimate health and beauty aids are presently distributed in approximately 4,000 mass market outlets throughout the United States.
INVENTORY
We purchase raw materials and component parts from suppliers based on internal estimates of anticipated need for finished goods, which enables us to meet production requirements for finished goods. We generally deliver product to customers within 72 hours of the receipt of their orders.
PRODUCT LIABILITY
We maintain product liability coverage in an amount of $3,000,000. Based upon our experience, we believe this coverage is adequate and covers substantially all of the exposure we may have with respect to our products. We have never been the subject of any material product liability claims.
GOVERNMENT REGULATION
A fragrance is defined as a "cosmetic" under the Federal Food, Drug and Cosmetics Act. A fragrance must comply with the labeling requirements of this FDC Act as well as the Fair Packaging and Labeling Act and its regulations. Some of our color cosmetic products may contain menthol and are also classified as a "drug". Under U.S. law, a product may be classified as both a cosmetic and a drug. Additional regulatory requirements for products which are "drugs" include additional labeling requirements, registration of the manufacturer and the semi-annual update of a drug list.
Our fragrances are subject to the approval of the Bureau of Alcohol, Tobacco and Firearms as a result of the use of specially denatured alcohol. So far we have not experienced any difficulties in obtaining the required approvals.
TRADEMARKS
Under various license agreements we have the right to use certain registered trademarks throughout the world. These registered trademarks include:
o Burberry o S.T. Dupont o Paul Smith
o Christian Lacroix o Celine o Regine's o Jordache o FUBU
In addition, we are the registered trademark owner of:
o Intimate o Aziza o Parfums Molyneux, Captain, Quartz and Lord o Parfums Weil, Bambou, Antilope, Eau de Fraichaur and Kipling o Beverly o Fire o Fleur de Paris
EMPLOYEES
As of March 1, 2002 we had 99 full-time employees world-wide. Of these, 43 are engaged in sales activities and 56 in administrative and marketing activities.
As of March 1, 2002 we had 37 full-time United States employees. Of these, 10 were engaged in sales activities and 27 in administrative and marketing activities.
We believe that our relationship with our employees is good.
FORWARD LOOKING INFORMATION AND RISK FACTORS
Statements in this document which are not historical in nature are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from projected results. Given these risks, uncertainties and other factors, persons are cautioned not to place undue reliance on the forward-looking statements.
The following is a discussion of some of the material risk factors relating to our business:
THE SUCCESS OF OUR PRODUCTS IS DEPENDENT ON PUBLIC TASTE.
Although we believe we have the ability and experience to recognize valuable fragrances and cosmetic products and gauge trends in the cosmetic and fragrance market, our revenues are substantially dependent on the success of our products, which depends upon, among other matters,
pronounced and rapidly changing public tastes, factors which are difficult to predict and over which we have little, if any, control. In addition, we have to develop successful marketing, promotional and sales programs in order to sell our fragrances and cosmetics. If we are not able to develop successful marketing, promotional and sales programs, then such failure will have a material adverse effect on our business, financial condition and operating results.
WE ARE DEPENDENT UPON MESSRS. JEAN MADAR AND PHILIPPE BENACIN, AND THE LOSS OF THEIR SERVICES COULD HARM OUR BUSINESS.
Jean Madar, our Chief Executive Officer, and Philippe Benacin, our President, are responsible for day-to-day operations as well as major decisions. Termination of their relationships with us, whether through death, incapacity or otherwise, could have a material adverse effect on our operations, and we cannot assure you that qualified replacements can be found. We maintain key man insurance on the lives of both Mr. Madar ($1 million) and Mr. Benacin ($2.8 million), however, we cannot assure you that we would be able to retain suitable replacements for either Mr. Madar or Mr. Benacin.
WE ARE SUBJECT TO EXTREME COMPETITION IN BOTH THE PRESTIGE AND MASS MARKETS.
The market for fragrances and beauty related products is highly competitive and sensitive to changing market preferences and demands. Many of these companies have substantial financial resources and national marketing campaigns.
The prestige fragrance 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.
Mass market fragrances are characterized by competition primarily based upon price. We feel the quality of our fragrance products, competitive pricing, and our ability to quickly and efficiently develop and distribute new products, will enable us to continue to effectively compete with these companies.
The market for name brand and mass market color cosmetics, as well as health and beauty aids, is highly competitive, with several major cosmetic companies marketing similar products. However, we believe that brand recognition of the Aziza and Intimate brand names, together with the quality and competitive pricing of our products, enables us to compete with these companies in the mass market.
We cannot assure you that sufficient demand for our existing fragrances, cosmetics and health and beauty aids will continue or that we will develop future products that will withstand competition.
OUR RELIANCE ON THIRD PARTY MANUFACTURERS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
We rely on outside sources to manufacture our fragrances and cosmetics. Although we enter into agreements with these third party contractors in anticipation of requirements based upon internal estimates, the failure of such third party manufacturers to deliver either components or finished goods on a timely basis could have a material adverse effect on our business. Although we believe there are alternate manufactures available to supply our requirements, we cannot assure you that current or alternative sources will be able to supply all of our demands on a timely basis. We do not intend to develop our own manufacturing capacity. As these are third parties over which we have little or no control, the failure of such third parties to provide components or finished goods on a timely basis could have a material adverse effect on our business, financial condition and operating results.
THE INTERNATIONAL CHARACTER OF OUR BUSINESS RENDERS US SUBJECT TO FLUCTUATION IN FOREIGN CURRENCY EXCHANGE RATES AND INTERNATIONAL TRADE TARIFFS, BARRIERS AND OTHER RESTRICTIONS.
In an effort to reduce our exposure to foreign currency exchange fluctuations, approximately 31% of our Paris subsidiary's net sales are sold in US dollars. We engage in a program of cautious hedging of foreign currencies to minimize the risk arising from operations. Despite such actions, fluctuations in foreign currency exchange rates for the U.S. dollar, particularly with respect to the Euro, could have a material adverse effect on our operating results. Possible import, export, tariff and other trade barriers, which could be imposed by the United States, France, Canada or other countries might also have a material adverse effect on our business.
OUR BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATION, WHICH COULD IMPACT OUR OPERATIONS.
Fragrances and other cosmetics must comply with the labeling requirements of the Federal Food, Drug and Cosmetics Act as well as the Fair Packaging and Labeling Act and their regulations. Some of our color cosmetic products may also be classified as a "drug". Additional regulatory requirements for products which are "drugs" include additional labeling requirements, registration of the manufacturer and the semi-annual update of a drug list.
Our fragrances are subject to the approval of the Bureau of Alcohol, Tobacco and Firearms as a result of the use of specially denatured alcohol. So far we have not experienced any difficulties in obtaining the required approvals.
However, we cannot assure you that, should we develop or market fragrances and cosmetics with different ingredients, or should existing regulations be revised, we would not in the future experience difficulty in obtaining such approvals.
WE MAY BE SUBJECT TO POSSIBLE LIABILITY FOR IMPROPER COMPARATIVE ADVERTISING OR "TRADE DRESS".
Brand name manufacturers and sellers of brand name products may make claims of improper comparative advertising or trade dress (packaging) with respect to the likelihood of confusion between some of our mass market fragrances, cosmetics and health and beauty aids, and those of brand name manufacturers and sellers. They may seek damages for loss of business or injunctive relief to seek to have the use of the improper comparative advertising or trade dress halted. However, we believe that our displays and packaging constitute fair competitive advertising and are not likely to cause confusion between our products and others. Further, we have not experienced to any material degree, any of such problems to date.
ITEM 2.
ITEM 2. PROPERTIES
Our corporate headquarters and United States 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. We are discussing a potential lease extension with our landlord, as well as looking at other potential locations. As we believe there is comparable space available, we do not anticipate having difficulties in finding suitable office space.
Our Paris based subsidiary maintains offices located at 4 Rond Point Des Champs Elysees, Paris, France, in approximately 6,000 square feet of leased office space pursuant to 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 2005, unless terminated 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.
In addition, we have a lease for approximately 2500 square feet of additional office space at 18 avenue Franklin Roosevelt, Paris, France, for a term ending April 2009, at an annual rental of approximately 588,000 French francs per year, which is subject to escalations. We have the right to terminate earlier at three year specified intervals.
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. We are leasing these premises for an eight year term which expires October 2003 and requires monthly rental payments of approximately $57,000. We believe that our distribution center is satisfactory for our present needs and those for the foreseeable future.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
BROSSEAU LAWSUIT
As previously reported, our French subsidiary, Inter Parfums, S.A., is a party to litigation with Jean Charles Brosseau, S.A. ("Brosseau"), the licensor of the Ombre Rose trademark. In October 1999, Inter Parfums, S.A. received notice of a judgment in favor of Brosseau, which awarded damages of approximately $600,000 and which directed Inter Parfums, S.A. to turn over its license to Brosseau within six months.
Inter Parfums, S.A. is appealing the judgment as it vigorously and categorically denies the claims of Brosseau. In June 2000, as a result of certain developments, Inter Parfums, S.A. and its special litigation counsel considered it likely that the judgment would be sustained and therefore took a charge against earnings for $600,000, the full amount of the judgment.
In February 2001, the Court of Appeal confirmed the Brosseau claim with respect to turning over the license. In addition, the Court named an expert to proceed with additional investigations and required Inter Parfums, S.A. to pay $142,000 as an advance for damages claimed by Brosseau.
Inter Parfums, S.A. is continuing its appeal as it still denies the claims of Brosseau. Management does not believe that such litigation will have any further material adverse effect on the financial condition or operations of the Company.
ITEM 4.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our company's common stock, $.001 par value per share, is traded on The Nasdaq Stock Market (National Market System) under the symbol "IPAR". The following table sets forth in dollars, the range of high and low closing prices for the past two fiscal years for our common stock, which has been adjusted to reflect the 3:2 stock splits (50% stock dividends) paid in June 2000 and September 2001.
-------------------- --------------------- ---------------------
Fiscal 2001 High Closing Price Low Closing Price -------------------- --------------------- --------------------- Fourth Quarter $ 8.85 $ 7.05 -------------------- --------------------- --------------------- Third Quarter $ 13.50 $ 7.50 -------------------- --------------------- --------------------- Second Quarter $ 9.60 $ 6.31 -------------------- --------------------- --------------------- First Quarter $ 7.41 $ 5.71 -------------------- --------------------- ---------------------
-------------------- --------------------- --------------------- Fiscal 2000 High Closing Price Low Closing Price -------------------- --------------------- --------------------- Fourth Quarter $ 6.33 $ 5.09 -------------------- --------------------- --------------------- Third Quarter $ 6.00 $ 4.59 -------------------- --------------------- --------------------- Second Quarter $ 6.29 $ 4.69 -------------------- --------------------- --------------------- First Quarter $ 6.00 $ 4.00 -------------------- --------------------- ---------------------
As of March 1, 2002, the number of record holders, which include brokers and broker's nominees, ETC., of the company's common stock was 79. We believe there are in excess of 500 beneficial owners of the company's common stock.
DIVIDENDS
We have not paid cash dividends since inception. However, our Board of Directors has authorized our first cash dividend of $.06 per share, payable $.015 per share quarterly. The first cash dividend of $.015 per share is to be paid on 15 April 2002 to shareholders of record on 31 March 2002.
In addition, our Certificate of Incorporation provides for the requirement of unanimous approval of the members of our board of directors for the declaration or payment of dividends, if the aggregate amount of dividends to be paid by us and our subsidiaries in any fiscal year is more
than thirty percent (30%) of our annual net income for the last completed fiscal year, as indicated by our consolidated financial statements.
SALES OF UNREGISTERED SECURITIES
We did not issue any equity securities which were not registered under the Securities Act of 1933 during the last quarter of the last fiscal year and through the date of this report, other than the grant of stock options.
The following sets forth certain information as to all options granted to purchase our common stock during the last quarter of the last fiscal year and through the date of this report, which were not registered under the Securities Act. In each of the transactions, we granted options to affiliates (executive officers and directors) and employees. The transactions were exempt from the registration requirements of Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities Act. Each option holder agreed that, if the option is exercised, the option holder would purchase his common stock for investment and not for resale to the public.
On 27 November 2001, we granted options to purchase an aggregate of 178,075 shares for a five year period at the exercise price of $7.78 per share, the fair market value at the time of grant, to 32 employees and five executive officers under our 1999 Stock Option Plan.
On 1 February 2002, we granted options to purchase an aggregate of 10,500 shares for a five year period at the exercise price of $7.955 per share, the fair market value at the time of grant, to seven directors under our 2000 Non-Employee Director Stock Option Plan.
ITEM 6.
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)
(1) Includes a nonrecurring charge, after taxes and minority interest, of $0.8 million relating to the divestiture of the Cutex license in 1997.
(2) Includes nonrecurring charges aggregating $0.6 million and a gain of $0.6 million, all after taxes and minority interest. The charges represent an accrual for exposure relating to pending litigation of $0.2 million and a potential tax assessment of $0.4 million. The gain represents a realized gain on the sale of marketable securities.
(3) Adjusted for 3:2 stock splits (50% stock dividends) paid in June 2000 and September 2001.
AS AT DECEMBER 31 (In Thousands Except Share and Per Share Data)
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
INTRODUCTION
We are a leading manufacturer and distributor of fragrances, cosmetics and health and beauty aids. We combine innovation and creativity to produce quality products for our customers around the world.
We operate in the fragrance and cosmetic industry, specializing in prestige perfumes and mass market perfumes, cosmetics and health and beauty aids:
o Prestige products - for each prestige brand, owned or licensed by us, we develop an original concept for the perfume consistent with world market trends.
o Mass market products - we design, market and distribute inexpensive fragrances and personal care products, including alternative designer fragrances, mass market cosmetics and health and beauty aids.
We have entered into two (2) licenses with affiliates of our strategic partner, LV Capital, USA Inc. ("LV Capital"), a wholly-owned subsidiary of LVMH Moet Hennessy Louis Vuitton S.A. In May 2000 we entered into an exclusive worldwide license for prestige fragrances for the Celine brand, and in March 1999 we entered into an exclusive worldwide license for Christian Lacroix fragrances. Both licenses are subject to certain minimum sales requirements, advertising expenditures and royalty payments as are customary in our industry.
2001 COMPARED TO 2000
In 2001 we set another new sales record. Net sales for the year ended December 31, 2001 increased 10.5% to a record $112.2 million, as compared to $101.6 million in 2000. At comparable foreign currency exchange rates, net sales actually rose 12% in 2001 as compared to the prior year. The increase in net sales is attributable to increases in both our prestige and mass market product lines.
Prestige product sales, which were up approximately 13% in 2001, were spurred by the select global roll-out unveiled in the fourth quarter of 2000 of our Burberry Touch fragrance line. The success of the fragrance line supported the launch of our Burberry Touch bath line in March 2001. During the year, we also continued the geographic expansion of our Paul Smith fragrance line, which was initially introduced in the third quarter of 2000. In addition, in October 2001, our Celine fragrance line debuted in the United States and France. The Celine fragrance launch began slowly in the weeks following September 11th. However, the brand has a strong following throughout Western Europe and Japan, and we will be increasing global distribution during 2002 as well as introducing a Celine bath line later this year.
We have a strong line-up of new brands and brand extensions in our 2002 new product pipeline. FUBU Plush, will be available in select specialty stores and certain international markets during the second quarter of 2002. Shortly thereafter, FUBU Plush will mark its official launch in mid tier department stores. Our Burberry baby line is hitting the stores now and we are very enthusiastic about our new Christian Lacroix fragrance line, Bazar, which is scheduled to be launched this spring.
Net sales of mass market products were up 5% for the year ended December 31, 2001, as compared to 2000. This increase is the result of the 2001 launch of our new line of health and beauty aids and the continuing success of our Aziza line of cosmetics. New product development is well under way to enlarge both lines throughout 2002.
In an attempt to gain market share in mass market fragrances, we recently entered into a letter of intent with Tristar Corporation ("Tristar"), a Debtor-in-possession in a Chapter 11 proceeding, to purchase certain of its mass market fragrance brands and certain inventories. Tristar is one of our major competitors in mass market fragrances and the brands contemplated to be purchased are sold in the same distribution channel as that of our current mass market fragrance lines.
The letter of intent provides for us to purchase certain assets for approximately $10 million with the remaining assets of Tristar to be purchased by a new company to be formed by existing management of Tristar together with its unsecured creditors. Our ultimate purchase price depends upon the results of a due diligence investigation of Tristar. In addition, the letter of intent contemplates a manufacturing agreement with this new company together with a non-competition agreement for mass market fragrances and cosmetics.
The proposed acquisition is subject to a number of factors, which could prevent the acquisition from occurring. These factors include: acceptance of the letter of intent by Tristar's creditors, approval of the Bankruptcy Court, negotiation, execution and delivery of a definitive acquisition agreement and a due diligence investigation.
In addition, we are actively pursuing other new business opportunities. However, we cannot assure you that any new license or acquisitions will be consummated.
Gross profit margins held steady at 48.4% of net sales for the year ended December 31, 2001, as compared to 48.9% in 2000. Gross profit margins have remained ahead of our target rates of 45% to 46% primarily as a result of the strong dollar in relation to the Euro. This results from the fact that certain European sales are denominated in US dollars. In addition, our prestige fragrance lines, which have been growing at a faster rate than our mass market lines, generate a higher gross profit margin than our mass market product lines.
Selling, general and administrative expenses increased to $39.6 million for the year ended December 31, 2001, as compared to $37.5 million in 2000 and declined to 35% of sales for the year ended December 31, 2001, as compared to 37% of sales in 2000. Our mass market sales do not require extensive advertising and therefore, more of our selling, general and administrative
expenses are fixed rather than variable. As a result, the increase in mass market sales enables us to spread our fixed costs over a larger net sales base. On the other hand, promotion and advertising are prerequisites for sales of designer products. We develop a complete marketing and promotional plan to support our growing portfolio of prestige fragrance brands and to build upon each brand's awareness. Promotion and advertising expense was approximately 14% of prestige fragrance sales in 2001, as compared to 15% in 2000, a year that included a higher number of new fragrance launches.
As previously reported, our French subsidiary, Inter Parfums, S.A., is a party to litigation with Jean Charles Brosseau, S.A. ("Brosseau"), the licensor of the Ombre Rose trademark. In October 1999, Inter Parfums, S.A. received notice of a judgment in favor of Brosseau, which awarded damages of approximately $600,000 and which directed Inter Parfums, S.A. to turn over its license to Brosseau within six months.
Inter Parfums, S.A. is appealing the judgment as it vigorously and categorically denies the claims of Brosseau. In June 2000, as a result of certain developments, Inter Parfums, S.A. and its special litigation counsel considered it likely that the judgment would be sustained and therefore took a charge against earnings for $600,000, the full amount of the judgment. In February 2001, the Court of Appeal confirmed the Brosseau claim with respect to turning over the license. In addition, the Court named an expert to proceed with additional investigations and required Inter Parfums, S.A. to pay $142,000 as an advance for damages claimed by Brosseau.
Inter Parfums, S.A. is continuing its appeal as it still denies the claims of Brosseau. We do not believe that such litigation will have any further material adverse effect on our financial condition or operations.
During the year ended December 31, 2000 we sold marketable securities and realized a gain of $1.4 million ($645,000 after taxes and minority interest). On occasion, we invest excess cash in marketable securities, which are classified as available-for-sale. These funds are available to support current operations or to take advantage of other investment opportunities. At December 31, 2000, we had no remaining marketable security positions and there were no marketable security transactions in 2001.
Interest expense was $300,000 for the year ended December 31, 2001, as compared to $400,000 in 2000. We use the credit lines available to us, as needed, to finance our working capital needs.
We recognized a gain on foreign currency of $100,000 for the year ended December 31, 2001 as compared to a loss of $200,000 in 2000. Occasionally, we enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency commitments.
Our effective income tax rate was 37% for the year ended December 31, 2001, as compared to 42% in 2000. The effective tax rate for the year ended December 31, 2000 included a $480,000 ($370,000 after minority interest) accrual to cover the potential exposure related to
tax audits of Inter Parfums, S.A. commenced by the French Tax Authorities. Excluding such charge our effective tax rate for 2000 was 38%.
Net income increased 23% to $8.1 million for the year ended December 31, 2001, as compared to $6.6 million in 2000. Net income for the year ended December 31, 2000 includes charges of $630,000 and a gain of $645,000, all after taxes and minority interest. The charges represent an accrual for exposure relating to the Brosseau litigation of $260,000 and a potential tax assessment of $370,000. The gain represents a realized gain on sale of marketable securities.
After giving effect to our 3 for 2 stock split effected in September 2001, diluted earnings per share increased 20% to $0.41 for the year ended December 31, 2001, as compared to $0.34 in 2000. Weighted average shares outstanding aggregated 17.8 million for the year ended December 31, 2001, as compared to 17.6 million in 2000. On a diluted basis, average shares outstanding was 19.9 million for the year ended December 31, 2001, as compared to 19.5 million in 2000.
2000 COMPARED TO 1999
In fiscal year 2000, we set a new sales record. Net sales for the year ended December 31, 2000 increased 17% to $101.6 million, as compared to $87.1 million in 1999. At comparable foreign currency exchange rates, net sales actually rose 30% in 2000 as compared to 1999.
Our sales growth is attributable to across-the-board increases in both our prestige and mass market product lines. However, the precipitous rise of the US dollar in relation to the French franc has masked our true revenue growth.
Growth in net sales of prestige products, which was up approximately 17% in 2000, was fueled in part by the tremendous success of the recent launches of our Paul Smith and "Burberry Touch" fragrance lines. Paul Smith premiered in the United Kingdom in July and is presently being sold in over 450 U.K. doors. Sales ran well ahead of expectations in the initial phase of the roll out. "Burberry Touch", our newest Burberry fragrance, was launched worldwide in late September 2000, and initial consumer reaction has been very favorable. Additional year 2000 launches included our S.T. Dupont "Signature" line, which continues to perform strongly in the Far East, and "Modern Quartz" by Molyneux, which is very successful in France and South America.
In addition to expanding the geographic distribution of products we launched in 2000, we have a large new product and brand extension pipeline in the works. We are leveraging the popularity of "Burberry Touch" by bringing to market a new bath line for men and women, scheduled for introduction later this year. In March 2001, Paul Smith fragrances will be launched in Japan where this designer has a large and loyal fashion following and over 200 standing doors. In February 2001, we unveiled Christian Lacroix "Eau Florale" in the U.S. with an exclusive at Saks Fifth Avenue's 63 stores, to be followed by European distribution later this
spring. Development is going well with Celine, our second LVMH license, and we are on target for the initial launch of two new Celine fragrances in the fourth quarter of 2001.
Net sales of our mass market products were up 17% for the year ended December 31, 2000, as compared to 1999. Sales growth from our wide selection of mass market fragrances continues to exceed our expectations. Our new Aziza line of cosmetics has also achieved widespread acceptance. We expect sales to continue to grow as our high volume, discount store customers open more stores, and we continue to develop new products for them. We are presently developing a line of health and beauty aids, including shampoos and conditioners.
Growing sales within existing product lines, new product launches and an active new business development program are how we plan to continue to grow our business in the year 2001 and beyond. During the year ended December 31, 2000 we signed an exclusive worldwide license agreement with Celine, a division of LVMH Moet Hennessy Louis Vuitton S.A. Our first line of Celine fragrances is expected to debut in October 2001. Also during fiscal 2000, we signed an exclusive worldwide license agreement with FUBU The Collection to produce and sell men's and women's fragrances. We anticipated that the first FUBU fragrance line for men and women will be launched in 2002.
Gross profit margins increased to 49% of net sales for the year ended December 31, 2000, as compared to 48% in 1999. Gross profit margins have continued to increase over the past four years. Part of this improvement is the result of the strength of the US dollar in relation to the Euro, as certain European sales are denominated in US dollars. In addition, our prestige fragrance lines, which have been growing at a faster rate than our mass market lines, generate a higher gross profit margin than our mass market product lines.
Selling, general and administrative expenses increased to $37.5 million for the year ended December 31, 2000, as compared to $32.0 million in 1999 and represented 37% of sales in both 2000 and 1999.
In the United States, selling, general and administrative expenses increased to $9.8 million for the year ended December 31, 2000, as compared to $9.1 million in 1999, but declined to 31% of net sales in 2000, as compared to 34% of net sales in 1999. Our mass market sales do not require extensive advertising and therefore, more of our selling, general and administrative expenses are fixed rather than variable. As a result, the increase in sales has enabled us to spread our fixed costs over a larger net sales base.
Selling, general and administrative expenses incurred by our French subsidiary, Inter Parfums, S.A., increased to $27.7 million for the year ended December 31, 2000, as compared to $22.8 million in 1999. As a percentage of sales, selling, general and administrative expenses represented 39% of sales in 2000, as compared to 38% in 1999. Promotion and advertising are prerequisites for sales of designer products. We develop a complete marketing and promotional plan to support our growing portfolio of prestige fragrance brands and to build upon each brand's awareness.
During the year ended December 31, 2000 we sold marketable securities and realized a gain of $1.4 million ($645,000 after taxes and minority interest). On occasion, we invest excess cash in marketable securities, which are classified as available-for-sale. These funds are available to support current operations or to take advantage of other investment opportunities. At December 31, 2000, we had no remaining marketable security positions.
Interest expense was $400,000 for the year ended December 31, 2000, as compared to $300,000 in 1999. We use the credit lines available to us, as needed, to finance our working capital needs.
We incurred a loss on foreign currency of $200,000 for both of our last two fiscal years. Occasionally, we enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency commitments.
Our effective income tax rate was 42% for the year ended December 31, 2000, as compared to 40% in 1999. The effective tax rate for the year ended December 31, 2000 includes a $480,000 ($370,000 after minority interest) accrual to cover the potential exposure related to tax audits of Inter Parfums, S.A. commenced by the French Tax Authorities. If not for these accruals, the declining tax rates in France would have caused a decline in our overall effective tax rate.
Net income increased 36% to $6.6 million for the year ended December 31, 2000, as compared to $4.8 million in 1999. Net income for the year ended December 31, 2000 includes charges of $630,000 and a gain of $645,000, all after taxes and minority interest. The charges represent an accrual for exposure relating to the Brosseau litigation of $260,000 and a potential tax assessment of $370,000. The gain represents a realized gain on sale of marketable securities.
After giving effect to our 3 for 2 stock split effected in June 2000 and our 3 for 2 stock split effected in September 2001, diluted earnings per share increased 31% to $0.34 for the year ended December 31, 2000, as compared to $0.26 in 1999. Weighted average shares outstanding aggregated 17.6 million for the year ended December 31, 2000, as compared to 17.1 million in 1999. On a diluted basis, average shares outstanding was 19.5 million for the year ended December 31, 2000, as compared to 18.2 million in 1999. Shares repurchased pursuant to our stock repurchase program, offset shares issued upon exercise of stock options. However, the increase in our stock price has increased the dilutive effect of outstanding stock options, thereby increasing diluted shares outstanding.
LIQUIDITY AND FINANCED RESOURCES
Profitable operating results continue to strengthen our financial position. At December 31, 2001, working capital aggregated $68 million and we had a working capital ratio of 3.7 to 1. Cash and cash equivalents aggregated $29 million and our net book value was $3.48 per outstanding share as of December 31, 2001. Furthermore, we had only $1.4 million in long-term debt.
On occasion we use a portion of our cash to make investments in marketable equity securities classified as available-for-sale. These funds are available to support current operations or to take advantage of other investment opportunities. These investments are made to maximize our return on cash. As of December 31, 2000 we had no marketable security positions and we had no marketable security transactions during 2001.
Our short-term financing requirements are expected to be met by available cash at December 31, 2001, cash generated by operations and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2001 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 $7.0 million for the year ended December 31, 2001 as compared to $0.2 million in 2000. At December 31, 2001, accounts receivable and inventories were up 5% and 13%, respectively, from December 31, 2000 after eliminating the effect of changes in foreign currency exchange rates. These increases are in line with our 12% constant dollar sales increase. Our sales growth for the year ended December 31, 2000, of 30%, in constant dollars, was highly concentrated in the latter part of that year as a result of our Paul Smith and Burberry Touch launches. The inventory buildup to support those launches as well as to support the anticipated growth going into 2001, was the primary reason for the relatively low level of cash flow from operations for the year ended December 31, 2000.
In September 2001, the Chief Executive Officer and the President each exercised 899,625 outstanding stock options of the Company's common stock. The aggregate exercise price of $2,334,690 each, was paid by each of them tendering to the Company 233,469 shares of the Company's common stock, previously owned by them, valued at $10.00 per share, the fair market value on the date of exercise. All shares issued pursuant to these option exercises were issued from treasury stock of the Company. In addition, the Chief Executive Officer tendered an additional 149,884 shares for payment of withholding taxes resulting from the option exercises. As a result of this transaction, the Company expects to receive a tax benefit of approximately $4,800,000, which has been reflected as an increase to additional paid-in capital in the accompanying financial statements.
We believe that funds generated from operations, supplemented by our present cash position and available credit facilities, will provide us with sufficient resources to meet all present and reasonably foreseeable future operating needs.
As previously discussed, in an attempt to gain market share in mass market fragrances, we recently entered into a letter of intent with Tristar Corporation ("Tristar"), a Debtor-in-possession in a Chapter 11 proceeding, to purchase certain of its mass market fragrance brands and certain inventories. If we purchase the inventory, then we will pay the purchase price for the inventory in cash. We do not believe that such use of cash will adversely affect our liquidity.
In January 1999, certain member countries of the European Union established permanent fixed rates between their existing currencies and the European Union's common currency, the Euro. The transition period for the introduction of the Euro was completed on January 1, 2002. The introduction of the Euro and the phasing out of other currencies have not had any material impact on our consolidated financial statements.
Inflation rates in the U.S. and foreign countries in which we operate did not have a significant impact on operating results for the year ended December 31, 2001.
FORWARD LOOKING STATEMENTS
Statements in this document, which are not historical in nature, are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from projected results. Given these risks, uncertainties and other factors, persons are cautioned not to place undue reliance on the forward-looking statements.
Such factors include effectiveness of sales and marketing efforts and product acceptance by consumers, dependence upon management, competition, currency fluctuation and international tariff and trade barriers, governmental regulation and possible liability for improper comparative advertising or "Trade Dress".
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
GENERAL
We address certain financial exposures through a controlled program of risk management that primarily consists of the use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts in order to reduce the effects of fluctuating foreign currency exchange rates. We have entered into one (1) interest rate swap in an attempt to take advantage of low variable interest rates as compared to the fixed rate on our long term debt. We do not engage in the trading of foreign currency forward exchange contracts or interest rate swaps.
FOREIGN EXCHANGE RISK MANAGEMENT
We periodically enter into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a foreign currency. We enter into these exchange contracts for periods consistent with our identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the receivables and cash flows of Inter Parfums, S.A., our French subsidiary, whose functional currency is the Euro.
All foreign currency contracts are denominated in currencies of major industrial countries and are with large financial institutions, which are rated as strong investment grade.
All derivative instruments are required to be reflected as either assets or liabilities in the balance sheet measured at fair value. Generally, increases or decreases in fair value of derivative instruments will be recognized as gains or losses in earnings in the period of change. If the derivative is designated and qualifies as a cash flow hedge, the changes in fair value of the derivative instrument will be recorded in other comprehensive income.
Before entering into a derivative transaction for hedging purposes, we determine that a high degree of initial effectiveness exists between the change in the value of the hedged item and the change in the value of the derivative from a movement in foreign currency rates. High effectiveness means that the change in the value of the derivative will effectively offset the change in the fair value of the hedged item. We measure the effectiveness of each hedge throughout the hedged period. Any hedge ineffectiveness is recognized in the income statement.
We believe that our risk of loss as the result of nonperformance by any of such financial institutions is remote and in any event would not be material. The contracts have varying maturities with none exceeding one year. Costs associated with entering into such contracts have not been material to our financial results. At December 31, 2001, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately $6.8 million. The foreign currencies included in these contracts are principally the U.S. dollar.
INTEREST RATE RISK MANAGEMENT
We mitigate interest rate risk by continually monitoring interest rates, and then determining whether fixed interest rates should be swapped for floating rate debt, or if floating rate debt should be swapped for fixed rate debt. We have entered into one (1) interest rate swap to take advantage of declining interest rates. At December 31, 2001 we had (1) interest rate swap agreement outstanding to convert $1.4 million of principal fixed rate debt with an interest rate of 4.56% to floating interest rate debt, at the EURIBOR rate, over the life of our long term debt due in 2005. At December 31, 2001, the EURIBOR rate was 3.3%. If interest rates were to rise 1% per annum over the remaining term of the long term debt, then we would incur a loss of $35,000.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required financial statements commence on page.
SUPPLEMENTARY DATA
QUARTERLY DATA (UNAUDITED) FOR THE YEAR ENDED 31 DECEMBER 2001 (In Thousands Except Share and Per Share Data)
(1) Adjusted for 3:2 stock split (50% stock dividend) paid in September 2001.
(1) Adjusted for 3:2 stock splits (50% stock dividends) paid in June 2000 and September 2001.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT
As of the date of this report, our executive officers and directors were as follows:
- -------------------------------------------------------------------------------- Name Position - -------------------------- ----------------------------------------------------- Jean Madar Chairman of the Board, Chief Executive Officer of Inter Parfums, Inc. and Director General of Inter Parfums, S.A. - -------------------------- ----------------------------------------------------- Philippe Benacin Vice Chairman of the Board, President of Inter Parfums, Inc. and President of Inter Parfums, S.A. - -------------------------- ----------------------------------------------------- Russell Greenberg Director, Executive Vice President and Chief Financial Officer - -------------------------- ----------------------------------------------------- Francois Heilbronn Director - -------------------------- ----------------------------------------------------- Joseph A. Caccamo Director - -------------------------- ----------------------------------------------------- Jean Levy Director - -------------------------- ----------------------------------------------------- Robert Bensoussan-Torres Director - -------------------------- ----------------------------------------------------- Daniel Piette Director - -------------------------- ----------------------------------------------------- Jean Cailliau Director - -------------------------- ----------------------------------------------------- Philippe Santi Director and Director of Finance, Inter Parfums, S.A. - -------------------------- ----------------------------------------------------- Serge Rosinoer Director - -------------------------- ----------------------------------------------------- Bruce Elbilia Executive Vice President - -------------------------- ----------------------------------------------------- Wayne Hamerling Executive Vice President - -------------------------- ----------------------------------------------------- Eric de Labouchere Director of Operations, Inter Parfums, S.A. - -------------------------- ----------------------------------------------------- Frederic Garcia-Pelayo Director of Export 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. LV Capital USA, Inc. and Messrs. Jean Madar and Philippe Benacin have entered into a Shareholders' Agreement relating to certain corporate governance issues, including increasing the number of Board members from seven to ten, granting two seats on the Board of directors to designees of LV Capital USA, Inc. LV Capital USA, Inc. and Messrs. Jean Madar and Philippe Benacin have each agreed to vote for each others nominees for directors. The number of members of our Board of Directors was increased to 11 by the addition of Serge Rosinoer in December 2000 by the unanimous vote of our board.
With the exception of Mr. Benacin, the officers are elected annually by the directors and serve at the discretion of the board of directors. There are no family relationships between executive officers or directors of our company.
The following sets forth biographical information as to the business experience of each executive officer and director of our company for at least the past five years.
JEAN MADAR
Jean Madar, age 41, a Director, has been the Chairman of the Board of Directors since the Company's inception, and is a co-founder of the Company with Mr. Benacin. From inception until December 1993 he was the President of the Company; in January 1994 he became Director
General of Inter Parfums, S.A., the Company's subsidiary; and in January 1997 he became Chief Executive Officer of the Company. Mr. Madar was previously the managing director of Inter Parfums, S.A., from September 1983 until June 1985. At such subsidiary, he had the 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 43, a Director, has been the Vice Chairman of the Board since September 1991, and is a co-founder of the Company with Mr. Madar. He was elected the Executive Vice President in September 1991, Senior Vice President in April 1993, and President of the Company in January 1994. In addition, he has been the President of Inter Parfums, S.A. for more than the past five years. Mr. Benacin graduated from The French Higher School of Economic and Commercial Sciences (ESSEC) in 1983.
RUSSELL GREENBERG
Mr. Greenberg, age 45, the Chief Financial Officer, was Vice-President, Finance when he joined the Company in June 1992; became Executive Vice President in April 1993; and was appointed to the Board of Directors in February 1995. He is a certified public accountant licensed in the State of New York, and is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. After graduating from The Ohio State University in 1980, he was employed in public accounting until he joined the Company in June 1992.
FRANCOIS HEILBRONN
Mr. Heilbronn, age 41, a Director since 1988 and a member of the audit, stock option and executive compensation committees, is a graduate of Harvard Business School with a Master of Business Administration degree and is currently the managing partner of the consulting firm of M.M. Friedrich, Heilbronn & Fiszer. He was formerly employed by The Boston Consulting Group, Inc. from 1988 through 1992 as a manager. Mr. Heilbronn graduated from Institut D' Etudes Politiques De Paris in June 1983. From 1984 to 1986, he worked as a financial analyst for Lazard Freres & Co.
JOSEPH A. CACCAMO
Mr. Caccamo, age 46, a Director since 1992, is an attorney with the law firm of Becker & Poliakoff, P.A., our general counsel. A member of both the New York and Florida bars, Mr. Caccamo has been a practicing attorney since 1981, concentrating in the areas of corporate and securities law, and in September 1991 he became counsel to us. From August 1992 through September 1997, he was a director of and general counsel to, Hydron Technologies, Inc., a publicly traded company primarily engaged in the development of cosmetic and personal care products.
JEAN LEVY
Jean Levy, age 69, a Director since August 1996 and a member of the audit, stock option and executive compensation committees, worked for twenty-seven years at L'Oreal, and was the President and Chief Executive Officer of Cosmair, the exclusive United States licensee of L'Oreal, from 1983 through June 1987. In addition, he is the former President and Chief Executive Officer of Sanofi Beaute (France). For the more than the past five years, Mr. Levy has been an independent advisor as well as a consultant for economic development to local governments in France. A graduate of "l'Institut d'Etudes Politiques de Paris," he also attended Yale Graduate School and was a recipient of a Fulbright Scholarship. He was also a Professor at "l'Institut d'Etudes Politiques de Paris". Mr. Levy is also a director of the following foreign public companies: Escada Beaute Worldwide (a subsidiary of Escada Group), Rallye, S.A. and Zannier Group. In addition, Mr. Levy is also a director (Chairman of the Board until he resigned in October 2001) of Financiere d'Or, and its subsidiary, Histoire d'Or which is in the retail jewelry business.
ROBERT BENSOUSSAN-TORRES
Robert Bensoussan-Torres, age 44, has been a Director since March 1997. In November 2001, he became the Chief Executive Officer of Jimmy Choo Ltd., a luxury shoe and ready to wear accessory company. From 1999 to December 2000, he was the Managing Director of Gianfranco Ferre fashion group, based in Milano, Italy. Mr. Bensoussan-Torres is a Director of Towers Consulting Europe, Ltd. Towers Consulting Europe, Ltd. is a consulting company based in London, which specializes in strategic advise in connection with mergers and acquisitions in the luxury goods business. Mr. Bensoussan-Torres was the Chief Executive Officer of Christian Lacroix, Paris, a subsidiary of LVMH Group, from February 1993 until May 1998. Christian Lacroix is a French Haute Couture House and has activities in the field of apparel, accessories and fragrances. From December 1990 through January 1993 he was based in Munich, Germany, as the International Sales Director of The Escada Group.
DANIEL PIETTE
Mr. Piette, age 57 and a director since December 1999, is also a member of the executive compensation committee of the Board of Directors. Mr. Piette is the 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. Mr. Piette is the President of L Capital Management, a new private equity fund sponsored by LVMH. For the past ten (10) years, he has been a Group Executive Vice President of LVMH. Mr. Piette is also a non-executive director of D.S. Smith Holdings PLC (London) as well as a member of the Board of Overseers of ESSEC (Paris) and Columbia Business School (New York).
JEAN CAILLIAU
Mr. Cailliau, age 39 and a director since December 1999, is also a member of the audit and the stock option committees of the Board of Directors. Through June 2001, Mr. Cailliau was the Deputy General Manager of LV Capital SA, the investment arm of LVMH. He is the CEO of LV Capital USA Inc., its United States vehicle. In January 2001 he became a Directeur of L Capital Management, a new private equity fund sponsored by LVMH. For the past 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.
SERGE ROSINOER
Mr. Rosinoer, age 69, was appointed to the Board of Directors in December 2000. Mr. Rosinoer has devoted most of his career to the personal care, cosmetics and fragrance industry. In 1978, Mr. Rosinoer joined the Clarins Group as Vice President and Chief Operating Officer where he was largely responsible for its rapid international expansion. As COO, then CEO since 1978, Mr. Rosinoer oversaw the transformation of Clarins into a major force in cosmetics, skin care and fragrance, with annual sales of 4 billion French francs and more than 4,000 employees. He retired from active duty in June of 2000, but continues to serve on the board of directors of Clarins. Earlier in his career he was President of Parfums Corday. He also held senior level executive positions at Max Factor, where he had full supervision of that cosmetics company's European production and sales. Mr. Rosinoer has served several terms as President of the French Prestige Cosmetics Association and currently serves as Conseiller du Commerce Exterieur de la France.
BRUCE ELBILIA
Mr. Elbilia, age 43, Executive Vice President, joined the Company in June 1986 as the National Sales Director, and from that time until 1994, he was in charge of the Company's marketing efforts. From 1994 to 2001, Mr. Elbilia was head of international sales and marketing for United States operations, and had expanded export sales to South America, the Middle East and Eastern Europe. In 2001, Mr. Elbilia became head of our FUBU marketing team. Mr. Elbilia received a Bachelor of Business Administration degree, with a major in International Business/Marketing from George Washington University in Washington, D.C.
WAYNE C. HAMERLING
Mr. Hamerling, age 45, was Vice President, Sales, from May 1987 through April 1993, when he became Executive Vice President. Mr. Hamerling has over twenty (20) years experience in the fragrance and cosmetic business. Mr. Hamerling, who attended Rutgers University, has also been actively involved in marketing of our United States mass market business for the past three (3) years, and helped develop our Aziza line and our new health and beauty aid line.
PHILIPPE SANTI
Philippe Santi, age 40 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 47, 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 43, has been the Director of Export Sales of Inter Parfums, S.A. since September 1994. Prior to September 1994, Mr. Garcia-Pelayo was the Export Manager for Benetton Perfumes for seven (7) years.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and any amendments to such forms furnished to us, and written representations from various reporting persons furnished to us, except as set forth below, we are not aware of any reporting person who has failed to file the reports required to be filed under Section 16(a) of the Securities Exchange Act of 1934 on a timely basis. Mr. Philippe Santi filed a Form 5 late, which disclosed the grant of one stock option.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded to, earned by or paid to, our Chief Executive Officer and each of the four most highly compensated executive officers of our company whose compensation exceeded $100,000 per annum for services rendered in all capacities to our company and its subsidiaries during fiscal years ended 31 December 2001, 31 December 2000 and 31 December 1999:
[Footnotes to Table] - -------------------- (1) Adjusted to reflect 3:2 stock splits (50% stock dividends) paid in June 2000 and September 2001. (2) Consists of lodging expenses of $48,000 and $6,661,215 realized upon exercise of options. (3) Consists of lodging expenses of $48,000 and $225,000 realized upon exercise of options. (4) Options to purchase 5,334 shares of Inter Parfums, S.A. were granted. (5) Consists of lodging expenses of $ 48,000 and $708,500 realized upon exercise of options. (6) Compensation figures for Mr. Benacin are approximate, as he was paid in French francs, and conversion into U.S. dollars was made at the average exchange rates prevailing during the respective periods. (7) Consists of lodging expenses of $38,000, $15,000 for automobile expenses and $6,661,215 realized upon exercise of options. (8) Consists of lodging expenses of $38,000, $15,000 for automobile expenses and $225,000 realized upon exercise of options. (9) Consists of lodging expenses of $42,000, $15,000 for automobile expenses and $708,500 and realized upon exercise of options. (10) Consists of $2,214 for automobile expenses and $68,161 realized upon exercise of options. (11) Consists of $2,214 for automobile expenses and $67,500 realized upon exercise of options. (12) Consists of $2,214 for automobile expenses and $223,605 realized upon the exercise of options. (13) Consists of selling commissions. (14) Consists of selling commissions. (15) Consists of $27,985 selling commissions and $234,482 realized upon the exercise of options. (16) Consists of selling commissions of $61,063; non cash compensation of $4,500 equal to the value of personal use of a company leased automobile; and $9,954 realized upon the exercise of options. (17) Consists of selling commissions of $54,438; non cash compensation of $4,500 equal to the value of personal use of a company leased automobile; and $52,500 realized upon the exercise of options.
(18) 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.
The following table sets forth certain information relating to stock option grants during Fiscal 2001 to our Chief Executive Officer and each of the four most highly compensated executive officers of the company whose compensation exceeded $100,000 per annum for services rendered in all capacities to our company and its subsidiaries during Fiscal 2001:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information relating to option exercises effected during Fiscal 2001, and the value of options held as of December 31, 2001 by each of our Chief Executive Officer and the four most highly compensated executive officers of our company whose compensation exceeded $100,000 per annum for services rendered in all capacities to our company and its subsidiaries during Fiscal 2001:
AGGREGATE OPTION EXERCISES FOR FISCAL 2001 AND YEAR END OPTION VALUES
(1) Total value of unexercised options is based upon the fair market value of the common stock as reported by the Nasdaq Stock Market of $7.51 on 31 December 2001.
(2) Value realized in dollars is based upon the difference between the fair market value of the common stock on the date of exercise, and the exercise price of the option, or the fair market value of the net amount of shares received upon exercise of options.
(3) Each of Messrs. Madar and Benacin exercised options to purchase 899,625 shares of Common Stock by tendering to the Company 233,469 shares of Common Stock that they held. In addition, Mr. Madar tendered an additional 149,884 shares of Common Stock to the Company in payment of withholding taxes.
EMPLOYMENT AGREEMENTS
As part of our acquisition in 1991 of the controlling interest in Inter Parfums, S.A., now a subsidiary, we entered into an employment agreement with Philippe Benacin. The agreement provides that Mr. Benacin will be employed as Vice Chairman of the Board and President and Chief Executive Officer of Inter Parfums Holdings and its subsidiary, Inter Parfums. The initial term expired on September 2, 1992, and has subsequently been automatically renewed for additional annual periods. The agreement provides for automatic annual renewal terms, unless either party terminates the agreement upon 120 days notice. Mr. Benacin presently receives an annual salary of 135,000 Euros, which is approximately US$120,000, together with annual lodging expenses of approximately $38,000 and automobile expenses of approximately $15,000, which are subject to increase in the discretion of the Board of Directors. The agreement also provides for indemnification and a covenant not to compete for one year after termination of employment.
COMPENSATION OF DIRECTORS
All nonemployee directors receive $1,000 for each board meeting at which they participate. Mr. Caccamo's board fees are paid to his law firm.
In March 1997 our Board of Directors adopted our 1997 Nonemployee Stock Option Plan. This plan was approved by our stockholders at the annual meeting of shareholders held in July 1997. The purpose of this plan is to assist us in attracting and retaining key directors who are responsible for continuing the growth and success of our company
Our 1997 Nonemployee Stock Option Plan provides for the grant of nonqualified stock options to nonemployee directors to purchase an aggregate of 25,000 shares of common stock. Options to purchase 1,000 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date except for Joseph A. Caccamo, who is granted options to purchase 4,000 shares. Options to purchase 2,000 shares are granted to each nonemployee director upon his initial election or appointment to our board.
In December 2000 our Board of Directors adopted our 2000 Nonemployee Stock Option Plan, as substantially all of the shares reserved under our 1997 Nonemployee Stock Option Plan had been allocated to outstanding options. This plan was approved by our stockholders at the
annual meeting of shareholders held in July 2001. The purpose of this plan is to assist us in attracting and retaining key directors who are responsible for continuing the growth and success of our company.
Our 2000 Nonemployee Stock Option Plan provides for the grant of nonqualified stock options to nonemployee directors to purchase an aggregate of 30,000 shares of common stock. Options to purchase 1,000 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date except for Joseph A. Caccamo, who is granted options to purchase 4,000 shares. Options to purchase 2,000 shares are granted to each nonemployee director upon his initial election or appointment to our board.
On 1 February 2002, options to purchase 1,000 shares were granted to each of Francois Heilbronn, Jean Levy, Robert Bensoussan-Torres, Daniel Piette and Jean Cailliau, and an option to purchase 4,000 shares was granted to Joseph A. Caccamo at the exercise price of $7.955 per share under the 2000 plan. The options held by Mr. Caccamo are held as nominee for his past and present law firms.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 15, 2002 with respect to the beneficial ownership of our common stock by (a) each person we know to be the beneficial owner of more than five percent of our outstanding common stock, (b) our executive officers and directors and (c) all of our directors and officers as a group:
- ------------------------------------- ---------------------- ------------------- Name and Address Amount of Beneficial Approximate Percent of Beneficial Owner Ownership(1) of Class - ------------------------------------- ---------------------- ------------------- Jean Madar c/o Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008 Paris, France 6,670,983(2) 34.0% - ------------------------------------- ---------------------- ------------------- Philippe Benacin c/o Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008 Paris, France 6,500,017(3) 33.1% - ------------------------------------- ---------------------- -------------------
(1) All shares of common stock are directly held with sole voting power and sole power to dispose, unless otherwise stated. Jean Madar, the Chairman of the Board and Chief Executive Officer of Inter Parfums, Inc. (the "Company"), Philippe Benacin, the Vice Chairman of the Board and President of the Company, and LV Capital USA, Inc., an indirect subsidiary of LVMH Moet Hennessy Louis Vuitton, S.A., have entered into a Shareholders' Agreement dated 22 November 1999 relating to certain corporate governance issues, including the agreement to vote for Jean Madar, Philippe Benacin and six (6) nominees of Messrs. Madar and Benacin, and two (2) designees of LV Capital USA, Inc., as directors of the Company.
(2) Consists of 5,802,733 shares held directly and 868,250 shares of common stock underlying options.
(3) Consists of 5,631,757 shares held directly and 868,250 shares of common stock underlying options.
- ------------------------------------- ---------------------- ------------------- Russell Greenberg c/o Inter Parfums, Inc. 551 Fifth Avenue New York, NY 10176 87,750(4) Less than 1% - ------------------------------------- ---------------------- ------------------- Francois Heilbronn 60 Avenue de Breteuil 75007 Paris, France 19,375(5) Less than 1% - ------------------------------------- ---------------------- ------------------- Joseph A. Caccamo, Esq. Becker & Poliakoff, P.A. 3111 Stirling Road Ft. Lauderdale, FL 33312 10,000(6) Less than 1% - ------------------------------------- ---------------------- ------------------- Jean Levy 29 rue du Colisee 75008 Paris, France 9,250(7) Less than 1% - ------------------------------------- ---------------------- ------------------- Robert Bensoussan-Torres 48, Boulevard Raspail 75006 Paris, France 9,250(8) Less than 1% - ------------------------------------- ---------------------- ------------------- Bruce Elbilia c/o Inter Parfums, Inc. 551 Fifth Avenue New York, NY 10176 36,000(9) Less than 1% - ------------------------------------- ---------------------- ------------------- Wayne C. Hamerling c/o Inter Parfums, Inc. 551 Fifth Avenue New York, NY 10176 77,750(10) Less than 1% - ------------------------------------- ---------------------- ------------------- Daniel Piette LV Capital 30 Avenue Hoche 75008, Paris, France 7,000(11) Less than 1% - ------------------------------------- ---------------------- ------------------- Jean Cailliau LV Capital 30 Avenue Hoche 75008, Paris, France 7,000(12) Less than 1% - ------------------------------------- ---------------------- -------------------
(4) Consists of shares of common stock underlying options.
(5) Consists of 10,125 shares held directly and 9,250 shares of common stock underlying options.
(6) Consists of shares of common stock underlying options, which are held as nominee for his employer. Beneficial ownership of such shares is disclaimed.
(7) Consists of shares of common stock underlying options.
(8) Consists of shares of common stock underlying options.
(9) Consists of shares of common stock underlying options.
(10) Consists of shares of common stock underlying options.
(11) Consists of shares of common stock underlying options. Beneficial ownership of shares of common stock held by LV Capital USA, Inc. is disclaimed.
(12) Consists of shares of common stock underlying options. Beneficial ownership of shares of common stock held by LV Capital USA, Inc. is disclaimed.
- ------------------------------------- ---------------------- ------------------- Philippe Santi Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008, Paris France 7,500(13) Less than 1% - ------------------------------------- ---------------------- ------------------- Serge Rosinoer 14 rue LeSueur 75116 Paris, France 4,000(14) Less than 1% - ------------------------------------- ---------------------- ------------------- Eric de Labouchere Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008, Paris France -0- NA - ------------------------------------- ---------------------- ------------------- Frederic Garcia-Pelayo Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008, Paris France -0- NA - ------------------------------------- ---------------------- ------------------- LV Capital USA, Inc. 19 East 57th Street New York, NY 10022 3,653,550 19.5% - ------------------------------------- ---------------------- ------------------- Dimensional Fund Advisors, Inc. 1299 Ocean Avenue, 11th Fl. Santa Monica, CA 90401 1,228,051(15) 6.5% - ------------------------------------- ---------------------- ------------------- Cannell Capital LLC 150 California Street San Francisco, Ca 94111 1,009,275(16) 5.4% - ------------------------------------- ---------------------- ------------------- All Directors and Officers as a Group (15 Persons) 17,119,940(17) 82.4% - ------------------------------------- ---------------------- -------------------
The following table sets forth certain information as of the end of our last fiscal year regarding all equity compensation plans that provide for the award of equity securities or the grant of options, warrants or rights to purchase our equity securities.
(13) Consists of shares of common stock underlying options.
(14) Consists of shares of common stock underlying options.
(15) Information is derived from a Schedule 13G filed on 12 February 2002 of Dimensional Fund Advisor Inc., which may be deemed to be the beneficial owner of our common stock which is owned by its advisory clients. Dimensional Fund Advisor disclaims beneficial ownership of all of such shares.
(16) Information is derived from a Schedule 13G filed on 14 February 2002 by (i) Cannell Capital, LLC, a registered investment adviser ("IA"), (ii) J. Carlo Cannell ("Managing Member"), and certain of its investment advisory clients. IA has discretionary authority to buy, sell, and vote shares of our common stock for its investment advisory clients. Managing Member's beneficial ownership of our common stock is indirect as a result of Managing Member's ownership and management of IA.
(17) Consists of 11,444,615 shares held directly, and options to purchase 2,021,774 shares. It also includes 3,653,550 shares held by LV Capital USA, Inc., an affiliate of LVMH Moet Hennessy Louis Vuitton, S.A.
EQUITY COMPENSATION PLAN INFORMATION ================================================================================ Plan category Number of Weighted-average Number of securities to exercise price of securities be issued outstanding remaining upon options, warrants available for exercise of and rights future issuance outstanding under equity options, compensation warrants and plans rights (excluding securities reflected in column (a)) (a) (b) (c) ================================================================================ Equity compensation plans approved by security holders 2,198,075 $3.35 728,429 ================================================================================ Equity compensation plans not approved by security holders -0- N/A -0- ================================================================================ Total 2,198,075 $3.35 728,429 ================================================================================
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH FRENCH SUBSIDIARIES
In connection with the acquisitions by our subsidiary, Inter Parfums, S.A., of the world-wide rights under the Burberry license agreement and the Paul Smith license agreement, we guaranteed the obligations of Inter Parfums, S.A. under the Burberry and Paul Smith license agreements.
OPTION EXERCISE PAID WITH TENDER OF SHARES
In September 2001, the Chief Executive Officer and the President each exercised 899,625 outstanding stock options of our common stock. The aggregate exercise price of $2,334,690 each, was paid by each of them tendering to us 233,469 shares of our common stock, previously owned by them, valued at $10.00 per share, the fair market value on the date of exercise. All shares issued pursuant to these option exercises were issued from our treasury stock. In addition, the Chief Executive Officer tendered an additional 149,884 shares for payment of withholding taxes resulting from the option exercises. As a result of this transaction, we expect to receive a tax benefit of approximately $4,800,000, which has been reflected as an increase to additional paid-in capital in the accompanying financial statements.
REMUNERATION OF COUNSEL
Joseph A. Caccamo, a director, was a partner of Nason, Yeager, Gerson, White & Lioce, P.A., our prior general counsel. He presently works for the law firm of Becker & Poliakoff, P.A., our general counsel. In Fiscal 2001, we paid Mr. Caccamo's prior firm an aggregate of $8,400, and we paid Becker & Poliakoff, P.A. an aggregate of $102,075, for legal fees and
reimbursement of disbursements incurred on our behalf. Also during Fiscal 2001, Mr. Caccamo's prior firm received approximately $24,106 from the sale of shares underlying an outstanding option.
On 1 February 2002 in accordance with the terms of our 2000 Nonemployee Stock Option Plan, Mr. Caccamo was granted an option with a term of five years to purchase 4,000 shares at $7.955 per share, the fair market value at the time of grant. He holds this option as nominee for his firm.
TRANSACTIONS WITH LVMH MOET HENNESSY LOUIS VUITTON S.A.
ACQUISITION OF COMMON STOCK AND SHAREHOLDERS' AGREEMENT
In November 1999, LV Capital, USA Inc. ("LV Capital"), a wholly-owned subsidiary of LVMH Moet Hennessy Louis Vuitton S.A., purchased shares of our common stock from management and employees, and increased its beneficial ownership of our common stock to approximately 20% of our outstanding shares. Further, in return for LV Capital becoming our strategic partner, LV Capital was granted the right to buy additional shares in order to maintain its percentage ownership upon issuance of shares to third parties, subject to certain exceptions, and was granted demand registrations rights for all of its shares. In addition, LV Capital has agreed to a standstill agreement, which limits the amount of shares of common stock that LV Capital can hold to twenty-five percent (25%) of our outstanding shares.
CELINE
In May 2000 we entered into an exclusive worldwide license agreement with Celine, S.A., a division of LVMH Moet Hennessy Louis Vuitton S.A., for the development, manufacturing and distribution of prestige fragrance lines under the Celine brand name. The term of the License Agreement is for eleven (11) years, beginning as of 1 January 2001, with an optional five (5) year renewal term, which is subject to certain minimum sales requirements, advertising expenditures and royalty payments as are customary in our industry.
CHRISTIAN LACROIX
In March 1999, we entered into an exclusive license agreement with the Christian Lacroix Company, a division of LVMH Moet Hennessy Louis Vuitton S.A., for the worldwide development, manufacture and distribution of perfumes. The license agreement has an 11 year term, and is subject to certain minimum sales requirements, advertising expenditures and royalty payments as are customary in our industry.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements annexed hereto PAGE NO.
Independent Auditors' Reports
Consolidated Balance Sheets as at December 31, 2001 and December 31, 2000
Consolidated Statements of Income for the Years ended December 31, 2001, December 31, 2000, and December 31, 1999
Consolidated Statements of Changes in Shareholders' Equity for the Years ended December 31, 2001, December 31, 2000 and December 1999
Consolidated Statements of Cash Flows for the Years ended December 31, 2001, December 31, 2000 and December 31, 1999
Notes to Financial Statements
(a)(2) Financial Statement Schedules annexed hereto:
Schedule II - Valuation and Qualifying Accounts and Reserves
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.
(a)(3) Exhibits
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - January 18, 1990), as follows:
EXHIBIT NO. AND DESCRIPTION
10.13 License Agreement between the Company and Jordache dated January 18, 1990 (as no. 10.1 therein).
10.16 Letter Agreement from Jordache to the Company regarding foreign license rights dated January 18, 1990 (as no. 10.4 therein).
The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991:
EXHIBIT NO. AND DESCRIPTION
10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991
The following documents heretofore filed with the Commission is incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-48811):
EXHIBIT NO. AND DESCRIPTION
10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992:
EXHIBIT NO. AND DESCRIPTION
4.10 Amendment to 1992 Stock Option Plan
4.11 1993 Stock Option Plan
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1993), as follows:
EXHIBIT NO. AND DESCRIPTION
10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter Parfums, S.A. and Jean Philippe Fragrances, Inc. (excised form)
10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (French, excised form)
10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (English translation, excised form)
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - February 28, 1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux)
10.37 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
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)
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:
EXHIBIT NO. AND DESCRIPTION
10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993:
EXHIBIT NO. AND DESCRIPTION
3.3 Articles of Incorporation of Inter Parfums Holding, S.A.
3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums Holding, S.A.
3.4 Articles of Incorporation of Inter Parfums, S.A.
3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter Parfums, S.A.
4.15 1994 Nonemployee Director Stock Option Plan
10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993
10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993
10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994
10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994:
4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no. 4.15 therein)
10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance Company and Jean Philippe Fragrances, Inc.
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995:
EXHIBIT NO. AND DESCRIPTION
10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July 10, 1995
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997:
EXHIBIT NO. AND DESCRIPTION
10.67 Second Modification of Lease made as of the 30th day of April, 1997 between Metropolitan Life Insurance Company as landlord and Jean Philippe Fragrances, Inc. as tenant.
10.68 Amendment I to License Agreement dated September 3, 1997 between Jordache Enterprises, Inc. as Licensor and Jean Philippe Fragrances, Inc. as Licensee.
10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter Parfums (English translation, excised form)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998:
EXHIBIT NO. AND DESCRIPTION
3.2 Amended and Restated By-laws
4.17 1997 Nonemployee Director Stock Option Plan
10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and Jean-Philippe Fragrances, Inc. (excised form)
10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and Inter Parfums, S.A (English translation, excised form)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's current report on Form 8-K (date of event - November 22, 1999):
EXHIBIT NO. AND DESCRIPTION
4.2 Shareholder's Agreement among LV Capital USA, Inc., Jean Madar and Philippe Benacin dated November 22, 1999.
99.1 Stock Purchase Agreement among LV Capital USA, Inc., Jean Madar and Philippe Benacin dated November 22, 1999.
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999:
EXHIBIT NO. AND DESCRIPTION
3.1.4 Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 13, 1999 (listed therein as 3.1(d))
10.73 Burberry Confidential Treatment Agreement dated 8 February, 2000
10.74 Burberry Licence Amendment dated February, 2000 (excised form)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's current report on Form 8-K/A no. 1 (date of event - 18 May 2000):
10.76 Celine License Agreement (French, excised form).
10.76.1 Celine License Agreement (English translation, excised form).
The following document heretofore filed with the Commission is incorporated by reference to the Company's current report on Form 8-K/A no. 1 (date of event - 23 June 2000):
10.77 Sublicense Agreement for FUBU Fragrances, dated June 22, 2000 (excised form).
The following document heretofore filed with the Commission is incorporated by reference to the Company's quarterly report on Form 10-Q for the period ending 30 June 2000:
3.1.5 Amendment to the Company's Restated Certificate of Incorporation, as amended, dated 12 July 2000 (listed therein as 3.1(e))
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended 31 December 2000:
EXHIBIT NO. AND DESCRIPTION
3.1.1 Restated Certificate of Incorporation dated September 3, 1987
3.1.2 Amendment to the Company's Restated Certificate of Incorporation dated July 31, 1992
3.1.3 Amendment to the Company's Restated Certificate of Incorporation dated July 9, 1993
4.19 2000 Nonemployee Director Stock Option Plan
10.78 Revolving Credit Agreement dated June 1, 2000 between HSBC Bank USA and Inter Parfums, Inc.
10.79 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris France [French Original]
10.79.1 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris France [English Translation]
10.80 Credit Lyonnais Letter Agreement dated 22 March 2001 - [French Original]
10.80.1 Credit Lyonnais Letter Agreement dated 22 March 2001 - [English Translation]
10.81 Barclays Bank Letter Agreement dated 4 June 1998 - [French Original]
10.81.1 Barclays Bank Letter Agreement dated 4 June 1998 - [English Translation]
10.82 Banque OBC Odier Bungener Courvoisier Letter Agreement one dated 31 July 1998 - [French Original]
10.82.2 Banque OBC Odier Bungener Courvoisier Letter Agreement one dated 31 July 1998 - [English Translation]
10.83 Banque OBC Odier Bungener Courvoisier Letter Agreement two dated 31 July 1998 - [French Original]
10.83.2 Banque OBC Odier Bungener Courvoisier Letter Agreement two dated 31 July 1998 - [English Translation]
10.84 Banque Worms Letter Agreement dated 22 December 1997 - [French Original]
10.84.1 Banque Worms Letter Agreement dated 22 December 1997 - [English Translation]
10.85 Credit Agricole D'Lile de France Letter Agreement dated 19 June 1996 - [French Original]
10.85.1 Credit Agricole D'Lile de France Letter Agreement dated 19 June 1996 - [English Translation]
The following documents are filed herewith:
EXHIBIT NO. AND DESCRIPTION
3.2 Amended and Restated By-laws
4.20 1999 Stock Option Plan, as amended
10.86 Revolving Credit Agreement dated 21 September 2001 between HSBC Bank USA and Inter Parfums, Inc.
10.87 Burberry Licence Amendment effective 1 October 2001
21 List of Subsidiaries
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of KPMG Audit, a division of KPMG S.A.
(b) Reports on Form 8-K:
Current report on Form 8-K, date of event - 1 March 2002, reporting Items 5 and 7.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders Inter Parfums, Inc. New York, New York
We have audited the accompanying consolidated balance sheets of Inter Parfums, Inc. and subsidiaries (the "Company") as of December 31, 2001 and 2000, 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, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Inter Parfums Holdings, S.A. and subsidiaries, consolidated foreign subsidiaries of the Company, which statements reflect total assets and net sales constituting 63% and 71% for 2001 and 68% and 69% for 2000 and net sales constituting 69% for 1999. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts for Inter Parfums Holdings, S.A. and subsidiaries, is based solely on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the financial statements enumerated above present fairly, in all material respects, the consolidated financial position of Inter Parfums, Inc. and subsidiaries as of December 31, 2001 and 2000, and the consolidated results of their operations and their consolidated cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
In connection with our audits of the financial statements enumerated above, we audited Schedule II for each of the years in the three-year period ended December 31, 2001. In our opinion, Schedule II, when considered in relation to the financial statements taken as a whole, presents fairly, in all material respects, the information stated therein.
Richard A. Eisner & Company, LLP
New York, New York March 7, 2002
With respect to accounts for foreign subsidiaries March 25, 2002
INTER PARFUMS HOLDING, S.A. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Inter Parfums Holding S.A. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for the year ended December 31, 2001, 2000 and 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in the United States. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements enumerated above present fairly, in all material respects, the financial position of Inter Parfums Holding S.A. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for the years ended December 31, 2001, 2000 and 1999 in conformity with accounting principles generally accepted in the United States.
Paris La DeFense, March 25, 2002
KPMG Audit, A division of KPMG S.A.
Rene Amirkhanian
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands except share and per share data)
DECEMBER 31, 2001 2000 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 28,562 $ 27,599 Accounts receivable, net of allowances of $1,914 and $2,067 in 2001 and 2000, respectively 31,223 30,844 Inventories (Notes A and C) 27,645 25,340 Receivables, other 944 497 Other current assets 1,362 1,808 Income tax receivable 2,633 Deferred tax asset (Note K) 1,360 435 --------- ---------
Total current assets 93,729 86,523
Equipment and leasehold improvements, net (Notes A and D) 3,896 3,162 Trademarks and licenses, net (Notes A, E and L) 3,842 4,539 Other assets 305 347 Deferred tax asset 767 --------- ---------
$ 102,539 $ 94,571 ========= =========
LIABILITIES Current liabilities: Loans payable - banks (Note F) $ 1,308 $ 2,542 Accounts payable 15,510 18,224 Accrued expenses 7,960 6,961 Income taxes payable 747 1,108 --------- ---------
Total current liabilities 25,525 28,835 --------- ---------
Deferred tax liability (Note K) 739 684 --------- ---------
Long-term debt (Note G) 1,366 1,417 --------- ---------
Minority interest 9,818 8,574 --------- ---------
Commitments and contingencies (Notes H and L)
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 18,692,269 and 17,514,416 shares, in 2001 and 2000, respectively 19 18 Additional paid-in capital 32,470 27,722 Retained earnings 66,788 58,669 Accumulated other comprehensive loss (8,043) (6,574) Treasury stock, at cost 7,492,463 and 8,604,608 shares in 2001 and 2000, respectively (26,143) (24,774) --------- ---------
Total shareholders' equity 65,091 55,061 --------- ---------
$ 102,539 $ 94,571 ========= =========
SEE NOTES TO FINANCIAL STATEMENTS
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (in thousands except share and per share data)
YEAR ENDED DECEMBER 31, ========================================= 2001 2000 1999 =========== =========== =========== Net sales $ 112,233 $ 101,582 $ 87,140 Cost of sales 57,887 51,873 45,325 ----------- ----------- -----------
Gross margin 54,346 49,709 41,815
Selling, general and administrative 39,624 37,509 31,965 Litigation expense 556 ----------- ----------- -----------
Income from operations 14,722 11,644 9,850 ----------- ----------- -----------
Other charges (income): Interest 347 363 344 (Gain) loss on foreign currency (53) 185 190 Interest income (1,115) (1,065) (687) Realized gain on sale of marketable securities (1,396) Loss on subsidiary's issuance of stock 87 18 135 ----------- ----------- -----------
(734) (1,895) (18) ----------- ----------- -----------
Income before income taxes 15,456 13,539 9,868 Income taxes 5,659 5,631 3,978 ----------- ----------- -----------
Income before minority interest 9,797 7,908 5,890 Minority interest in net income of consolidated subsidiary 1,678 1,319 1,062 ----------- ----------- -----------
NET INCOME $ 8,119 $ 6,589 $ 4,828 =========== =========== ===========
NET INCOME PER SHARE: BASIC $ 0.46 $ 0.37 $ 0.28 DILUTED $ 0.41 $ 0.34 $ 0.26
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC 17,834,945 17,590,106 17,081,828 DILUTED 19,935,534 19,500,648 18,232,839
SEE NOTES TO FINANCIAL STATEMENTS
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands except share data)
SEE NOTES TO FINANCIAL STATEMENTS
INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
YEAR ENDED DECEMBER 31, -------------------------------- 2001 2000 1999 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,119 $ 6,589 $ 4,828 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,134 2,362 2,415 Realized gain on sale of marketable securities (1,396) Loss on subsidiary's issuance of stock 87 18 135 Minority interest in net income of consolidated subsidiary 1,678 1,319 1,062 Deferred tax (benefit) provision 2 476 (438) Changes in: Accounts receivable (1,535) (6,173) (886) Inventories (3,282) (6,872) 354 Other assets (78) (252) (66) Accounts payable and accrued expenses (663) 3,753 6,873 Income taxes payable 494 412 (1,719) -------- -------- --------
Net cash provided by operating activities 6,956 236 12,558 -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment and leasehold improvements (2,453) (1,580) (1,407) Cash portion of trademark and license acquisitions (337) Purchase of marketable securities (3,671) (3,792) Proceeds from sale of marketable securities 8,325 -------- -------- --------
Net cash provided by (used in) investing activities (2,453) 3,074 (5,536) -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in loans payable - banks (1,130) 1,788 (2,997) Proceeds from issuance of long-term debt 1,624 Proceeds from sale of stock of subsidiary 112 67 214 Purchase of treasury stock (1,925) (2,815) (8,371) Proceeds from exercise of options and warrants 224 1,210 5,793 Dividends paid to minority shareholders (197) (135) (91) -------- -------- --------
Net cash provided by (used in) financing activities (2,916) 115 (3,828) -------- -------- --------
Effect of exchange rate changes on cash (624) (762) (1,614) -------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 963 2,663 1,580 Cash and cash equivalents - beginning of year 27,599 24,936 23,356 -------- -------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 28,562 $ 27,599 $ 24,936 ======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest $ 409 $ 404 $ 330 Income taxes $ 4,235 $ 2,683 $ 4,331
SEE NOTES TO FINANCIAL STATEMENTS
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
[1] BUSINESS OF THE COMPANY:
The Company is a manufacturer and distributor of prestige brand name fragrances and mass market fragrances, cosmetics and personal care products.
[2] BASIS OF PREPARATION:
The consolidated financial statements include the accounts of Inter Parfums, Inc. and its domestic and foreign subsidiaries (the "Company") including, majority-owned Inter Parfums, S.A. ("IPSA"), a subsidiary whose stock is publicly traded in France. All material intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
[3] FOREIGN CURRENCY TRANSLATION:
For foreign subsidiaries that operate in a foreign currency, assets and liabilities are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the year. Gains and losses from translation adjustments are accumulated in a separate component of shareholders' equity. In instances where the financial statements of foreign entities are remeasured into their functional currency (U.S. dollars), the remeasurement adjustment is recorded in operations.
[4] CASH EQUIVALENTS:
All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents.
[5] MARKETABLE SECURITIES:
All marketable securities are classified as available-for-sale and are available to support current operations or to take advantage of other investment opportunities. These securities are stated at fair value based upon market quotes. Unrealized holding gains and losses, net of deferred taxes, are computed on the basis of specific identification and are reported as a separate component of shareholders' equity. Realized gains and losses, and decreases in value, judged to be other than temporary, are included in other charges (income). The cost of securities sold is based on the specific identification method and interest and dividend income is recognized when earned.
[6] FINANCIAL INSTRUMENTS:
The carrying amount of accounts receivable, other receivables, accounts payable and accrued expenses approximates fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable and long-term debt approximates fair value as the interest rates on the Company's indebtedness approximate current market rates.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] FINANCIAL INSTRUMENTS: (CONTINUED)
Effective January 1, 2001 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended. SFAS No. 133 requires the recognition of all derivative instruments as either assets or liabilities on the balance sheet measured at fair value. Generally, increases or decreases in the fair value of derivative instruments will be recognized as gains or losses in earnings in the period of change. If the derivative instrument is designated and qualifies as a cash flow hedge, the changes in fair value of the derivative instrument will be recorded in a separate component of shareholders' equity.
The Company occasionally enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the value of the derivative instrument will effectively offset the change in the fair value of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period. Any hedge ineffectiveness as defined by SFAS No. 133 is recognized in the income statement. On January 1, 2001, the transition adjustment for derivatives in cash flow hedges was to record an asset in the amount of $274 and was recognized as a cumulative-effect-type adjustment in a separate component of shareholders' equity.
The Company also is a party to an interest rate swap agreement which is accounted for as a fair value hedge in accordance with SFAS No. 133 (see Note G).
[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 ended January 1, 2002. The introduction of the Euro and the phasing out of the other currencies does not have a material impact on the presentation of data in 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 less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method and the declining-balance method over the estimated useful asset lives for equipment, which range between three and ten years and the shorter of the lease term or estimated useful asset lives for leasehold improvements.
[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 (see Note A[15] for information on SFAS No. 142 "Goodwill and Other Intangible Assets").
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
The Company reviews trademarks and licenses for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[11] REVENUE RECOGNITION:
Revenue is recognized upon delivery of merchandise as sales are final upon delivery. 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 deemed sold is reflected as a gain or loss in the consolidated statements of income.
[13] STOCK-BASED COMPENSATION:
The provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" allow companies to either expense the estimated fair value of employee stock options or to follow the intrinsic value method set forth in Accounting Principles Board Opinion No. 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 is 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 using the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per share:
YEAR ENDED DECEMBER 31, ------------------------------------- 2001 2000 1999 ----------- ----------- ----------- Numerator: Net income $ 8,119 $ 6,589 $ 4,828 =========== =========== ===========
Denominator: Weighted average shares 17,834,945 17,590,106 17,081,828 Effect of dilutive securities: Stock options 2,100,589 1,910,542 1,151,011 ----------- ----------- -----------
Denominator for diluted earnings per share 19,935,534 19,500,648 18,232,839 =========== =========== ===========
Not included in the above computations are anti-dilutive potential common shares which consist of options to purchase 9,000, 2,000 and 106,500 shares of common stock for 2001, 2000 and 1999, respectively.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[15] RECENT ACCOUNTING PRONOUNCEMENTS:
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations after June 30, 2001 to be accounted for using the purchase method. In addition, companies are required to review goodwill and intangible assets reported in connection with prior acquisitions, possibly disaggregate and report separately previously identified intangible assets and possibly reclassify certain intangible assets into goodwill. SFAS No. 142 establishes new guidelines for accounting for goodwill and other intangible assets. In accordance with SFAS No. 142, goodwill and intangible assets with an indeterminate life associated with acquisitions consummated after June 30, 2001 are not amortized. The Company is implementing the remaining provisions of SFAS No. 142 on January 1, 2002. Since adoption, existing intangible assets with an indeterminate life are no longer amortized but instead will be assessed for impairment at least annually. The Company does not believe that the adoption of SFAS No. 142 will have any material effect on the Company's financial statements. Intangible asset amortization for the year ended December 31, 2001 was $377.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143, addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for fiscal years beginning after June 15, 2002. The Company does not believe that the adoption of SFAS No. 143 will have any material effect on the Company's financial statements.
In July 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of Long-Lived Assets," which is effective for fiscal years beginning after December 15, 2001. The provisions of this statement provide a single accounting model for impairment of long-lived assets. The Company does not believe that the adoption of SFAS No. 144 will have any material effect on the Company's financial statements.
NOTE B - MARKETABLE SECURITIES
Marketable securities represent equity securities classified as available-for-sale. During the year ended December 31, 2000 all marketable securities were sold and a gain of $1,396 was realized.
NOTE C - INVENTORIES
DECEMBER 31, ------------------- 2001 2000 ------- ------- Raw materials and component parts $ 8,823 $ 8,775 Finished goods 18,822 16,565 ------- -------
$27,645 $25,340 ======= =======
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE D - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
DECEMBER 31, ------------------- 2001 2000 ------- ------- Equipment $ 9,122 $ 7,998 Leasehold improvements 382 382 ------- -------
9,504 8,380 Less accumulated depreciation and amortization 5,608 5,218 ------- -------
$ 3,896 $ 3,162 ======= =======
NOTE E - TRADEMARKS AND LICENSES
DECEMBER 31, ------------------- 2001 2000 ------- ------- Trademarks $ 6,396 $ 6,628 Licenses 2,452 2,577 ------- -------
8,848 9,205 Less accumulated amortization 5,006 4,666 ------- -------
$ 3,842 $ 4,539 ======= =======
NOTE F - LOANS PAYABLE - BANKS
Loans payable - banks consist of the following:
Borrowings by the Company's foreign subsidiaries under several bank overdraft facilities bearing interest at 0.6%% above the EURIBOR rate (3.3% and 4.9% at December 31, 2001 and 2000, respectively). Outstanding amounts totaled $808 and $2,542 at December 31, 2001 and 2000, respectively.
Borrowings under a $12,000 unsecured revolving line of credit due on demand and bearing interest at the banks prime rate or 1.75% above the LIBOR rate. Outstanding amounts totaled $500 at December 31, 2001.
NOTE G - LONG-TERM DEBT
As of December 31, 2001 and 2000, long-term debt represents borrowings by a foreign subsidiary of $1,366 and $1,417, respectively, 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 (3.3% at December 31, 2001).
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (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 2004. Rental expense amounted to $1,263 in 2001 and 2000 and $1,159 in 1999. Minimum future rental payments are as follows:
2002 $ 1,127 2003 735 2004 177 -------
$ 2,039 =======
[2] LICENSE AGREEMENTS:
The Company is obligated under a number of license agreements for the use of trademarks and rights in connection with the manufacture and sale of its products. One such license which expires in December 2006, subject to renewal, corresponded to 40.8%, 37.8% and 37.5% of net sales for the years ended December 31, 2001, 2000 and 1999, respectively. In connection therewith, the Company is subject to certain minimum annual royalties as follows:
2002 $ 2,550 2003 2,843 2004 4,091 2005 4,366 2006 4,526 Thereafter 8,929 -------
$27,305 =======
NOTE I - SHAREHOLDERS' EQUITY
[1] COMMON STOCK SPLIT:
On August 6, 2001, the Company's Board of Directors authorized a three-for-two stock split effected in the form of a 50% stock dividend distributed on September 14, 2001 to shareholders of record as of August 31, 2001. As a result of the stock split, the accompanying consolidated financial statements reflect an increase in the number of outstanding shares of common stock and the transfer of the par value of these additional shares from paid-in capital. All share and per share amounts have been restated for all periods to reflect the retroactive effect of the stock split.
[2] ISSUANCE OF COMMON STOCK OF SUBSIDIARY:
During 1999, holders of the remaining $200 of convertible debt, originally issued in 1994 by IPSA, converted their investment into 20,598 shares of capital stock of IPSA and employees exercising stock options were issued 38,296 shares of capital stock of IPSA. As a result of such issuances, the Company's percentage ownership of IPSA decreased from approximately 79% to 78% as of December 31, 1999.
During 2000 and 2001, an additional 6,658 and 13,670 shares, respectively, of capital stock of IPSA were issued as a result of employees exercising stock options. At December 31, 2001, the Company's percentage ownership of IPSA was approximately 77%.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE I - SHAREHOLDERS' EQUITY (CONTINUED)
[2] 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.
[3] STOCK OPTION PLANS:
The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically vest immediately and are exercisable for a period of five to six years.
The Company applies APB No. 25 in accounting for its stock option incentive plans and accordingly recognizes employee 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 2001, 2000 and 1999 would have been approximately $7.9, $6.5 and $4.2 million, or $0.40, $0.33 and $0.23 basic and per diluted share, respectively. The weighted average fair values of the options granted during 2001, 2000 and 1999 are estimated as $1.94, $1.93 and $1.52 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, 3.05% in 2001, 5.88% in 2000 and 5.18% in 1999, and an expected life of the option of two years.
A summary of the Company's stock option activity, and related information follows:
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE I - SHAREHOLDERS' EQUITY (CONTINUED)
[3] STOCK OPTION PLANS: (CONTINUED)
The following table summarizes stock option information as of December 31, 2001:
OPTIONS OUTSTANDING NUMBER WEIGHTED AVERAGE REMAINING OPTIONS EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
$2.56 - $2.89 1,636,725 2.81 Years 1,636,725 $3.10 - $3.94 200,275 1.37 Years 200,275 $4.06 - $4.53 39,600 3.02 Years 39,600 $5.08 - $5.81 98,400 3.83 Years 98,400 $6.50 - $6.92 28,500 4.17 Years 28,500 $7.08 - $7.78 185,575 4.88 Years 185,575 $9.60 9,000 4.66 Years 9,000 --------- ---------
Totals 2,198,075 2.93 Years 2,198,075 ========= =========
At December 31, 2001 options for 728,429 shares were available for future grant under the plans.
In September 2001, the Chief Executive Officer and the President each exercised 899,625 of their outstanding stock options. The aggregate purchase price of $2,335 each, was paid by each of them tendering to the Company 233,469 shares of the Company's common stock, previously owned by them, valued at $10 per share, the fair market value on the date of exercise. The shares issued pursuant to the options exercised were issued from treasury stock of the Company. In addition, the Chief Executive Officer tendered an additional 149,884 shares for payment of withholding taxes resulting from the exercise of the options. As a result of this transaction, the Company expects to receive tax benefits aggregating $4,800, which has been reflected as an increase to additional paid-in capital in the accompanying financial statements.
[4] TREASURY STOCK:
The Board of Directors of the Company has authorized a stock repurchase program whereby the Company purchases shares of its stock to be held in treasury. As of December 31, 2001, the Company is authorized to purchase an additional 404,350 treasury shares.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE J - GEOGRAPHIC AREAS
Information on the Company's operations by geographical areas is as follows. The European operations represent the sales of the prestige brand name fragrances.
YEAR ENDED DECEMBER 31, ------------------------------- 2001 2000 1999 -------- -------- ------- Net sales: United States $ 33,103 $ 31,268 $26,826 Europe 79,270 70,434 60,414 Eliminations (140) (120) (100) -------- -------- -------
$112,233 $101,582 $87,140 ======== ======== =======
Net income: United States $ 2,411 $ 1,977 $ 1,140 Europe 5,708 4,616 3,788 South America (4) (100) -------- -------- -------
$ 8,119 $ 6,589 $ 4,828 ======== ======== =======
Depreciation and amortization expense: United States $ 394 $ 632 $ 595 Europe 1,740 1,730 1,819 South America 1 -------- -------- -------
$ 2,134 $ 2,362 $ 2,415 ======== ======== =======
Interest income: United States $ 523 $ 647 $ 408 Europe 592 418 279 -------- -------- -------
$ 1,115 $ 1,065 $ 687 ======== ======== =======
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE J - GEOGRAPHIC AREAS (CONTINUED)
YEAR ENDED DECEMBER 31, --------------------------------- 2001 2000 1999 -------- -------- --------
Interest expense: United States $ 24 $ 38 $ 59 Europe 323 325 274 South America 11 -------- -------- --------
$ 347 $ 363 $ 344 ======== ======== ========
Total assets: United States $ 47,024 $ 39,305 $ 39,417 Europe 64,553 64,294 57,677 South America 16 Eliminations (9,038) (9,028) (9,887) -------- -------- --------
$102,539 $ 94,571 $ 87,223 ======== ======== ========
Additions to long-lived assets: United States $ 437 $ 86 $ 101 Europe 2,016 1,494 1,643 -------- -------- --------
$ 2,453 $ 1,580 $ 1,744 ======== ======== ========
Total long-lived assets: United States $ 2,016 $ 1,973 $ 2,519 Europe 5,722 5,728 6,451 -------- -------- --------
$ 7,738 $ 7,701 $ 8,970 ======== ======== ========
United States export sales were approximately $9,800, $11,000 and $9,200 for the years ended December 31, 2001, 2000 and 1999, respectively. Consolidated net sales for the year ended December 31, 2001 by region is as follows:
North America 31% Europe 37% Central and South America 11% Middle East 9% Asia 11% Other 1%
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (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, ----------------------------- 2001 2000 1999 ------- ------- -------
U.S. operations $ 3,601 $ 3,096 $ 1,750 Foreign operations 11,855 10,443 8,118 ------- ------- -------
$15,456 $13,539 $ 9,868 ======= ======= =======
The provision for current and deferred income tax expense (benefit) consists of the following:
YEAR ENDED DECEMBER 31, ----------------------------- 2001 2000 1999 ------- ------- ------- Current: Federal $ 1,103 $ 796 $ 311 State and local 257 170 142 Foreign 4,297 4,189 3,963 ------- ------- -------
5,657 5,155 4,416 ------- ------- -------
Deferred: Federal (138) 172 142 State and local (31) (19) 16 Foreign 171 323 (596) ------- ------- -------
2 476 (438) ------- ------- -------
Total income tax expense $ 5,659 $ 5,631 $ 3,978 ======= ======= =======
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, 2001, the deferred tax assets which aggregate $2,127, consist of accounts receivable and inventory writedowns which are not currently deductible for tax purposes, the future tax benefit of domestic net operating loss carryforwards and foreign net operating loss carryforwards and the difference between the book basis and tax basis of fixed assets. At December 31, 2001, the deferred tax liability of $739 relates primarily to the difference between the book basis and tax basis of intangible assets and certain foreign production equipment. At December 31, 2001 the Company has federal net operating loss carryforwards of $3,300 which expire in 2021.
The Company has provided a valuation allowance of $125, representing the full amount of the deferred tax assets arising from foreign net operating loss carryforwards. No allowance has been provided on the balance of the Company's deferred tax assets, as management believes that it is more likely than not that the asset will be realized in reduction of future taxable income.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (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, ----------------------- 2001 2000 1999 ---- ---- ---- Statutory rates 34.0% 34.0% 34.0% State and local taxes, net of federal benefit 0.8 0.7 1.1 Effect of foreign taxes in excess of U.S. statutory rates 2.8 6.9 5.2 Other (1.0) ---- ---- ----
Effective rates 36.6% 41.6% 40.3% ==== ==== ====
NOTE L - OTHER MATTERS
[1] As previously reported, IPSA is a party to litigation with Jean Charles Brosseau, S.A. ("Brosseau"), the licensor of the Ombre Rose trademark. In October 1999, IPSA received notice of a judgment in favor of Brosseau, which awarded damages of approximately $600 to Brosseau, and which directed IPSA to turn over its license to Brosseau within six months.
IPSA is appealing the judgment as it vigorously and categorically denies the claims of Brosseau. In June 2000, as a result of certain developments, IPSA and its special litigation counsel considered it likely that the judgment would be sustained and therefore, in June 2000, the Company recorded a charge against earnings for $600, the full amount of the judgment.
In February 2001, the Court of Appeal confirmed the Brosseau claim with respect to turning over the license. In addition, the Court named an expert to proceed with additional investigations and required IPSA to pay $142 as an advance for damages claimed by Brosseau.
IPSA is continuing its appeal as it still denies the claims of Brosseau. Management does not believe that such litigation will have any further material adverse effect on the financial condition or results of operations of the Company. As of December 31, 2000 the Company had fully reserved the unamortized portion of the license cost.
[2] IPSA is the subject of tax audits commenced by the French Tax Authorities. Assessments have been issued aggregating $2,300. IPSA is contesting these assessments. Management and its tax consultants believe they have sound arguments to support their position and that the majority of these assessments will be reversed, and therefore, will not have a material adverse effect on the financial condition or results of operations of the Company. The Company has reserves of approximately $760, which it presently believes will be its ultimate exposure.
INTER PARFUMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 (in thousands except share and per share data)
NOTE L - OTHER MATTERS (CONTINUED)
[3] On November 22, 1999, the Chief Executive Officer and the President of the Company entered into and closed a Stock Purchase Agreement with LV Capital, USA Inc. ("LV Capital"), a wholly-owned subsidiary of LVMH Moet Hennessy Louis Vuitton, S.A. ("LVMH"). As a result, LV Capital owns approximately 20% of the outstanding common stock of the Company. In accordance with the terms of the Stock Purchase Agreement and in return for LV Capital becoming a strategic partner of the Company, LV Capital was granted the right to maintain its percentage ownership of the outstanding shares of Common Stock, by receiving an option to purchase shares of the Company's common stock for cash upon issuance of shares to any party other than LV Capital at the price paid by the purchaser, subject to certain exceptions such as the exercise of stock options previously granted and the grant of new stock options up to a certain limit. There have been no common stock or option transactions through December 31, 2001 which effected the LVMH option. LVMH was also granted demand registration rights for all shares of common stock it holds. Finally, LV Capital has agreed to a standstill agreement, which includes a limitation on the amount of shares that LV Capital can hold equal to 25% of the outstanding shares of common stock of the Company.
In March 1999 and May 2000, the Company entered into two eleven year license agreements with Christian Lacroix Company and Celine S.A., divisions of LVMH, respectively. Both agreements have minimum sales and advertising requirements and require the Company to pay royalties as are customary in the industry.
INTER PARFUMS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands)
(a) Write off of bad debts and sales returns.
(b) Foreign currency translation adjustment.
SEE NOTES TO FINANCIAL STATEMENTS
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: 26 March 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ JEAN MADAR Chairman of the Board of Directors 26 March 2002 - ------------------------ and Chief Executive Officer Jean Madar
/s/ RUSSELL GREENBERG Chief Financial and Accounting 25 March 2002 - ------------------------ Officer and Director Russell Greenberg
/s/ PHILIPPE BENACIN Director 20 March 2002 - ------------------------ Philippe Benacin
/s/ FRANCOIS HEILBRONN Director 25 March 2002 - ------------------------ Francois Heilbronn
/s/ JOSEPH A. CACCAMO Director 27 March 2002 - ------------------------ Joseph A. Caccamo
/s/ JEAN LEVY Director 25 March 2002 - ------------------------ Jean Levy
/s/ ROBERT BENSOUSSAN-TORRES Director 28 March 2002 - ---------------------------- Robert Bensoussan-Torres
/s/ DANIEL PIETTE Director 22 March 2002 - ------------------------ Daniel Piette
/s/ JEAN CAILLIAU Director 28 March 2002 - ------------------------ Jean Cailliau
/s/ PHILIPPE SANTI Director 20 March 2002 - ------------------------ Philippe Santi
Director __ March 2002 - ------------------------ Serge Rosinoer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
EXHIBIT INDEX TO REPORT ON FORM 10-K
(Mark one)
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended 31 DECEMBER 2001 or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______________ to ______________.
Commission File No. 0-16469
INTER PARFUMS, INC. (Exact name of registrant as specified in its charter)
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - January 18, 1990), as follows:
EXHIBIT NO. AND DESCRIPTION
10.13 License Agreement between the Company and Jordache dated January 18, 1990 (as no. 10.1 therein).
10.16 Letter Agreement from Jordache to the Company regarding foreign license rights dated January 18, 1990 (as no. 10.4 therein).
The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991:
EXHIBIT NO. AND DESCRIPTION
10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991
The following documents heretofore filed with the Commission is incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-48811):
EXHIBIT NO. AND DESCRIPTION
10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992:
EXHIBIT NO. AND DESCRIPTION
4.10 Amendment to 1992 Stock Option Plan
4.11 1993 Stock Option Plan
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1993), as follows:
EXHIBIT NO. AND DESCRIPTION
10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter Parfums, S.A. and Jean Philippe Fragrances, Inc. (excised form)
10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (French, excised form)
10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (English translation, excised form)
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - February 28, 1994), as follows:
EXHIBIT NO. AND DESCRIPTION
10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux)
10.37 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
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)
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:
EXHIBIT NO. AND DESCRIPTION
10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993:
EXHIBIT NO. AND DESCRIPTION
3.3 Articles of Incorporation of Inter Parfums Holding, S.A.
3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums Holding, S.A.
3.4 Articles of Incorporation of Inter Parfums, S.A.
3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter Parfums, S.A.
4.15 1994 Nonemployee Director Stock Option Plan
10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993
10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993
10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994
10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994:
4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no. 4.15 therein)
10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance Company and Jean Philippe Fragrances, Inc.
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995:
EXHIBIT NO. AND DESCRIPTION
10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July 10, 1995
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997:
EXHIBIT NO. AND DESCRIPTION
10.67 Second Modification of Lease made as of the 30th day of April, 1997 between Metropolitan Life Insurance Company as landlord and Jean Philippe Fragrances, Inc. as tenant.
10.68 Amendment I to License Agreement dated September 3, 1997 between Jordache Enterprises, Inc. as Licensor and Jean Philippe Fragrances, Inc. as Licensee.
10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter Parfums (English translation, excised form)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998:
EXHIBIT NO. AND DESCRIPTION
3.2 Amended and Restated By-laws
4.17 1997 Nonemployee Director Stock Option Plan
10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and Jean-Philippe Fragrances, Inc. (excised form)
10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and Inter Parfums, S.A (English translation, excised form)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's current report on Form 8-K (date of event - November 22, 1999):
EXHIBIT NO. AND DESCRIPTION
4.2 Shareholder's Agreement among LV Capital USA, Inc., Jean Madar and Philippe Benacin dated November 22, 1999.
99.1 Stock Purchase Agreement among LV Capital USA, Inc., Jean Madar and Philippe Benacin dated November 22, 1999.
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999:
EXHIBIT NO. AND DESCRIPTION
3.1.4 Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 13, 1999 (listed therein as 3.1(d))
10.73 Burberry Confidential Treatment Agreement dated 8 February, 2000
10.74 Burberry Licence Amendment dated February, 2000 (excised form)
The following documents heretofore filed with the Commission are incorporated by reference to the Company's current report on Form 8-K/A no. 1 (date of event - 18 May 2000):
10.76 Celine License Agreement (French, excised form).
10.76.1 Celine License Agreement (English translation, excised form).
The following document heretofore filed with the Commission is incorporated by reference to the Company's current report on Form 8-K/A no. 1 (date of event - 23 June 2000):
10.77 Sublicense Agreement for FUBU Fragrances, dated June 22, 2000 (excised form).
The following document heretofore filed with the Commission is incorporated by reference to the Company's quarterly report on Form 10-Q for the period ending 30 June 2000:
3.1.5 Amendment to the Company's Restated Certificate of Incorporation, as amended, dated 12 July 2000 (listed therein as 3.1(e))
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended 31 December 2000:
EXHIBIT NO. AND DESCRIPTION
3.1.1 Restated Certificate of Incorporation dated September 3, 1987
3.1.2 Amendment to the Company's Restated Certificate of Incorporation dated July 31, 1992
3.1.3 Amendment to the Company's Restated Certificate of Incorporation dated July 9, 1993
4.19 2000 Nonemployee Director Stock Option Plan
10.78 Revolving Credit Agreement dated June 1, 2000 between HSBC Bank USA and Inter Parfums, Inc.
10.79 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris France [French Original]
10.79.1 Bail [Lease] for 18 avenue Franklin Roosevelt, Paris France [English Translation]
10.80 Credit Lyonnais Letter Agreement dated 22 March 2001 - [French Original]
10.80.1 Credit Lyonnais Letter Agreement dated 22 March 2001 - [English Translation]
10.81 Barclays Bank Letter Agreement dated 4 June 1998 - [French Original]
10.81.1 Barclays Bank Letter Agreement dated 4 June 1998 - [English Translation]
10.82 Banque OBC Odier Bungener Courvoisier Letter Agreement one dated 31 July 1998 - [French Original]
10.82.2 Banque OBC Odier Bungener Courvoisier Letter Agreement one dated 31 July 1998 - [English Translation]
10.83 Banque OBC Odier Bungener Courvoisier Letter Agreement two dated 31 July 1998 - [French Original]
10.83.2 Banque OBC Odier Bungener Courvoisier Letter Agreement two dated 31 July 1998 - [English Translation]
10.84 Banque Worms Letter Agreement dated 22 December 1997 - [French Original]
10.84.1 Banque Worms Letter Agreement dated 22 December 1997 - [English Translation]
10.85 Credit Agricole D'Lile de France Letter Agreement dated 19 June 1996 - [French Original]
10.85.1 Credit Agricole D'Lile de France Letter Agreement dated 19 June 1996 - [English Translation]
The following documents are filed herewith:
- -------------------------------------------------------------------- ----------- EXHIBIT NO. AND DESCRIPTION Page No.
- -------------------------------------------------------------------- ----------- 3.2 Amended and Restated By-laws 87
- -------------------------------------------------------------------- ----------- 4.20 1999 Stock Option Plan, as amended 100
- -------------------------------------------------------------------- ----------- 10.86 Revolving Credit Agreement dated 21 September 2001 between HSBC Bank USA and Inter Parfums, Inc. 108 - -------------------------------------------------------------------- ----------- 10.87 Burberry Licence Amendment effective 1 October 2001 113
- -------------------------------------------------------------------- ----------- 21 List of Subsidiaries 118
- -------------------------------------------------------------------- ----------- 23.1 Consent of Richard A. Eisner & Company, LLP 119
- -------------------------------------------------------------------- ----------- 23.2 Consent of KPMG Audit, a Division of KPMG S.A. 120 - -------------------------------------------------------------------- -----------