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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 Date of Report (Date of Earliest Event Reported):
May 11, 2020

 

Inter Parfums, Inc.
(Exact name of Registrant as specified in its charter)

 

Delaware   0-16469   13-3275609
(State or other jurisdiction of
incorporation or organization)
  Commission File Number   (I.R.S. Employer
Identification No.)

 

551 Fifth Avenue, New York, New York 10176

(Address of Principal Executive Offices)

212. 983.2640

(Registrant’s Telephone number, including area code)

  

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2 below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 280.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 280.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 280.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§280.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

 Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $.001 par value per share   IPAR   The Nasdaq Stock Market

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition

 

Certain portions of our press release dated May 11, 2020, a copy of which is annexed hereto as Exhibit no. 99.1, are incorporated by reference herein and are filed pursuant to this Item 2.02. They are as follows:

 

The 1st through 5th paragraphs and the 10th paragraph relating to results of operations for the first quarter of 2020

 

Portions of the 7th paragraph relating to our hiring freeze

 

The 9h through 11th paragraphs relating to results of operations for the first quarter of 2020

 

The 12th balance sheet items for the first quarter of 2020

 

The consolidated statements of income and consolidated balance sheets

 

Item 7.01 Regulation FD Disclosure

 

Certain portions of our press release dated May 11, 2020, a copy of which is annexed hereto as Exhibit no. 99.1, are incorporated by reference herein and are filed pursuant to this Item 7.01 and Regulation FD. They are as follows:

 

The 6th paragraph relating to plans to reduce advertising and promotional expense for 2020, and postponement of both 2020 advertising and promotional programs and 2020 new product launches until 2021

 

Portions of the 7th paragraph relating to estimated favorable impact on cash flow from the temporary suspension of our dividend and cost cutting measures

 

The 8th paragraph relating to expected precipitous decline in second quarter sales, expected measured improvement in the second half of 2020 and anticipated loss of travel retail business for the foreseeable future

 

The 13th paragraph relating to the conference call to be held on May 12, 2020

 

The 15th paragraph relating to forward looking information

 

The balance of such press release not otherwise incorporated by reference in Item 2.02

 

Item 9.01 Financial Statements and Exhibits.

 

99.1   Our press release dated May 11, 2020

 

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused and authorized this report to be signed on its behalf by the undersigned.

 

Dated: May 11, 2020

 

  Inter Parfums, Inc.
   
  By:  /s/ Russell Greenberg
    Russell Greenberg,
    Executive Vice President
    and Chief Financial Officer

 

 

2

 

 

Exhibit 99.1

 

 

 

FOR IMMEDIATE RELEASE

 

INTER PARFUMS, INC. REPORTS 2020 FIRST QUARTER RESULTS

 

PROVIDES COVID-19 BUSINESS UPDATE

 

New York, New York, May 11, 2020: Inter Parfums, Inc. (NASDAQ GS: IPAR) today reported results for the first quarter ended March 31, 2020. The average dollar/euro ratio for the current first quarter was 1.10 compared to 1.14 in the first quarter of 2019.

 

First Quarter 2020 Compared to First Quarter 2019:

 

Net sales were $144.8 million or 18.7% lower than $178.2 million, at comparable foreign currency exchange rates, net sales declined 17.8%;

 

Sales by European based operations declined 20.6% to $114.1 million from $143.7 million;

 

Sales by U.S. based operations declined 10.9% to $30.7 million from $34.5 million;

 

Gross margin was 61.5% of net sales compared to 61.6% of net sales;

 

S,G&A expense as a percentage of net sales was 49.2% compared to 42.9%;

 

Operating income decreased 46.6% to $17.8 from $33.3 million;

 

Operating margin was 12.3% compared to 18.7%;

 

The effective income tax rate was 29.0% compared to 27.4%;

 

Net income attributable to Inter Parfums, Inc. declined 46.8% to $10.1 million from $18.9 million; and,

 

Net income attributable to Inter Parfums, Inc. per diluted share declined 46.7% to $0.32 from $0.60.

 

Jean Madar, Chairman & CEO of Inter Parfums, Inc. noted, “As we reported last month, two of our largest brands performed exceptionally well in the first quarter. The launch of Coach Dreams early in the year factored prominently in the 35.9% increase in Coach brand sales. GUESS brand sales rose 28.9% on the strength of existing scents and brand extensions launched in 2019. Comparable quarter sales declined for our other major brands following the closure of virtually all points of sale throughout the world by the middle of March due to the global COVID-19 pandemic. Also, as we pointed out last month, our first and second largest brands, Montblanc and Jimmy Choo, recorded increases of 9.9% and 25.8%, respectively for the 2019 first quarter, setting a high bar for 2020.”

 

COVID-19 Update and Plan of Action

 

Mr. Madar went on to say, “During most of the 2020 first quarter, the COVID-19 global pandemic triggered a never seen before interruption in our operations as various national, state, and local governments where we, our suppliers, and our customers operate, issued decrees closing certain businesses and prohibited certain classes of workers from reporting to work. While most of our employees are equipped to work from home and carry on business, our distribution facilities have experienced a short-term suspension of operations for employee health concerns. The closure of the retail outlets where are products are sold throughout much of the world coupled with supply chain disruption have been major business obstacles.”

 

 

 

 

Mr. Madar noted that sales performance by region has been evolving since the first quarter. “The impact of COVID-19 was most severe in the Middle East and Asia, where first quarter net sales declined 44% and 37%, respectively, compared to last year’s first quarter. In North America and Western Europe, where shelter-in-place and store closings were implemented later in the period, first quarter net sales declined 1% and 11%, respectively, compared to the corresponding period of the prior year. Towards the end of March and into April 2020, large parts of the Asia market have opened, with China taking the lead. For example, after a poor performance in January and February, our best-selling brand in China, Anna Sui, made a dramatic improvement in March, with sales at retail about double those of February. Anna Sui fragrance sales are in great part conducted through e-commerce, therefore we believe that this favorable trend will continue. Several countries in Europe are moving forward with store reopening plans and are targeting later this month as a goal. We see the same thing happening in the Middle East. Thus far, several states within the U.S. have begun the reopening process, on a limited basis, but not enough to move the needle as yet.”

 

Mr. Madar continued, “We have taken action on many fronts to position our business for a strong rebound in sales and profitability next year. In past years, advertising and promotion accounted for approximately 21% of net sales; that percentage will be reduced in 2020. In that regard, as we reported last month, we have postponed the launch of several major programs, including those for the Kate Spade New York, Jimmy Choo, Anna Sui and GUESS brands, until 2021. Similarly, corresponding advertising and promotion expenses will be deferred until 2021.”

 

Mr. Madar further stated, “While we have not terminated nor furloughed any employees, we have instituted a hiring freeze and plan on significantly reducing bonuses for 2020. Travel and other non-essential business expenses have been cut sharply. With the temporary suspension of our cash dividend, our Company will retain approximately $10.4 million per quarter. Building upon our already strong financial position, these actions are expected to have a favorable impact on cash flow and fixed expenditures, which are expected to come in at under $25 million per quarter. As such, we do not anticipate any short-term liquidity problems.”

 

Mr. Madar concluded, “While we expect a precipitous decline in second quarter sales, compared to both the current first quarter and last year’s second quarter, we look for measured improvement in the second half. On the plus side, stay-at-home and store closure regulations are slowly lifting in a number of geographic markets where the crisis is receding. We do not, however, see a resumption of normal air travel happening any time soon, resulting in the loss of our travel retail business for the foreseeable future. In addition, in a recessionary environment, fragrance is generally a lower priority than essential purchases. We will continue to monitor the impact of COVID-19 and adjust our plans and activities accordingly as the situation evolves.”

 

Reviewing the Company’s performance in the first quarter, Russell Greenberg, Executive Vice President and CFO, pointed out, “Gross profit margin for European operations was 63.9% of sales for the first quarter of 2020, as compared to 63.2% for the corresponding period of the prior year. The strong U.S. dollar had a positive effect on our gross profit margin because over 45% of net sales of our European operations are denominated in dollars, while almost all costs of our European operations are incurred in euro. For U.S. operations, gross profit margin was 52.6% compared to 55.1% in the first quarter of 2019 with the decline primarily the result of product sales mix. Notably, sales of Anna Sui products, which are primarily sold in Asia and generate some of our highest gross margins, were down significantly in the first quarter of 2020, primarily in January and February.”

 

2

 

 

Mr. Greenberg went on to say, “Total S,G&A expenses decreased 6.9% for the first quarter; however, as a percentage of sales, S,G&A expenses were 49.2% and 42.9% for the current and prior year’s first quarter, respectively. Our entire operational budgets in Europe and the United States for the first quarter were based on our originally projected sales levels. With respect to advertising and promotional expenses, we had campaigns well underway. As a result, promotion and advertising included in S,G&A expenses approximated 19.7% of net sales in the current first quarter, up from 15.4% of net sales in last year’s first quarter. For European operations, with sales down 20.6%, S,G&A expenses declined 6.4% in 2020, as compared to 2019 and represented 50.1% and 42.5% of 2020 and 2019 first quarter sales, respectively. For U.S. operations where sales dropped 10.9%, comparable quarter S,G&A expenses decreased 8.8% and represented 45.8% and 44.7% of net sales in 2020 and 2019, respectively. The loss of fixed cost absorption was most responsible for the steep decline in operating income and margin.”

 

Mr. Greenberg also pointed out that pre-tax income in the current first quarter benefitted from a $0.9 million gain on foreign currency versus a $0.2 million loss in last year’s first quarter.

 

Mr. Greenberg continued, “Our conservative financial tradition leaves us in a strong financial position. We closed the first quarter with working capital of $386 million, including approximately $204 million in cash, cash equivalents and short-term investments, a working capital ratio of over 3.7 to 1 and only $9.8 million of long-term debt. We also have $47 million available in untapped credit facilities. Nonetheless, as mentioned above, we have taken several actions to minimize expenses and protect our cash flows during this crisis.”

 

Conference Call

 

Management will conduct a conference call to discuss financial results and business developments at 11:00 am ET on Tuesday, May 12, 2020. Interested parties may participate in the call by dialing (201) 493-6749; please call in 10 minutes before the conference call is scheduled to begin and ask for the Inter Parfums call. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.interparfumsinc.com and click on the Investor Relations section.

  

Founded in 1982, Inter Parfums, Inc. develops, manufactures and distributes prestige perfumes and cosmetics as the exclusive worldwide licensee for Abercrombie & Fitch, Anna Sui, Boucheron, Coach, Dunhill, Graff, GUESS, Hollister, Jimmy Choo, Karl Lagerfeld, Kate Spade New York, MCM, Montblanc, Oscar de la Renta, Paul Smith, Repetto, S.T. Dupont and Van Cleef & Arpels.  Inter Parfums is also the owner of Lanvin fragrances and the Rochas brand.  Through its global distribution network, the Company’s products are sold in over 120 countries.

 

Statements in this release which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and “would,” or similar words. You should not rely on forward-looking statements, because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and “Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2019, the Quarterly Report on Form 10-Q filed for the first quarter of 2020 and the additional reports Inter Parfums files from time to time with the Securities and Exchange Commission. Inter Parfums does not intend to and undertakes no duty to update the information contained in this press release.

 

Contact at Inter Parfums, Inc.  -or-   Investor Relations Counsel
Russell Greenberg, Exec. VP & CFO      The Equity Group Inc.
(212) 983-2640      Fred Buonocore (212) 836-9607/fbuonocore@equityny.com
rgreenberg@interparfumsinc.com      Linda Latman (212) 836-9609/llatman@equityny.com
www.interparfumsinc.com      www.theequitygroup.com

 

See Accompanying Tables

 

3

 

 

Inter Parfums, Inc. News Release Page 4
May 11, 2020

 

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share data)

(Unaudited)

 

   Three months ended
March 31,
 
   2020   2019 
         
Net sales  $144,824   $178,242 
           
Cost of sales   55,783    68,401 
           
Gross margin   89,041    109,841 
           
Selling, general and administrative expenses   71,262    76,552 
           
Income from operations   17,779    33,289 
           
Other expenses (income):          
Interest expense   1,001    626 
(Gain) loss on foreign currency   (954)   151 
Interest income   (1,007)   (1,906)
           
    (960)   (1,129)
           
Income before income taxes   18,739    34,418 
           
Income taxes   5,440    9,440 
           
Net income   13,299    24,978 
           
Less: Net income attributable to the noncontrolling interest   3,240    6,084 
           
Net income attributable to Inter Parfums, Inc.  $10,059   $18,894 
           
Net income attributable to Inter Parfums, Inc. common shareholders:          
Basic  $0.32   $0.60 
Diluted  $0.32   $0.60 
           
Weighted average number of shares outstanding:          
Basic   31,530    31,431 
Diluted   31,708    31,679 
           
Dividends declared per share  $0.33   $0.28 

 

 

 

 

Inter Parfums, Inc. News Release Page 5

May 11, 2020

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)

 

ASSETS
   March 31,
2020
   December 31,
2019
 
Current assets:          
Cash and cash equivalents  $142,557   $192,417 
Short-term investments   61,539    60,714 
Accounts receivable, net   133,640    133,010 
Inventories   169,477    167,809 
Receivables, other   2,936    2,054 
Other current assets   21,630    17,123 
Income taxes receivable   137    169 
           
Total current assets   531,916    573,296 
           
Equipment and leasehold improvements, net   11,194    11,107 
Right-of-use assets, net   27,174    28,359 
Trademarks, licenses and other intangible assets, net   196,813    201,983 
Deferred tax assets   8,285    8,004 
Other assets   6,050    6,083 
           
Total assets  $781,432   $828,832 
           
LIABILITIES AND EQUITY          
Current liabilities:          
Current portion of long-term debt  $6,555   $12,326 
Current portion of lease liabilities   4,960    5,356 
Accounts payable – trade   46,355    54,098 
Accrued expenses   69,343    96,421 
Income taxes payable   7,894    5,865 
Dividends payable   10,406    10,399 
           
Total current liabilities   145,513    184,465 
           
Long–term debt, less current portion   9,781    10,734 
           
Lease liabilities, less current portion   23,849    24,635 
           
Equity:          
Inter Parfums, Inc. shareholders’ equity:          
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued   --    -- 
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 31,531,958 and 31,513,018 shares at  March 31, 2020 and December 31, 2019, respectively   31    31 
Additional paid-in capital   73,618    70,664 
Retained earnings   473,947    474,637 
Accumulated other comprehensive loss   (48,097)   (39,853)
Treasury stock, at cost, 9,864,805 shares at March 31, 2020 and December 31, 2019   (37,475)   (37,475)
           
Total Inter Parfums, Inc. shareholders’ equity   462,024    468,004 
           
Noncontrolling interest   140,265    140,994 
           
Total equity   602,289    608,998 
           
Total liabilities and equity  $781,432   $828,832 

 

 

 

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