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