x |
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act
of
1934 for the quarterly period ended June 30,
2006.
|
o |
Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act
of 1934
for the transition period from ___________to
________.
|
Delaware
|
13-3275609
|
(State
or other jurisdiction
of
incorporation
or organization)
|
(I.R.S.
Employer
Identification No.) |
551
Fifth Avenue, New York, New
York
|
10176
|
(Address
of Principal Executive
Offices)
|
(Zip
Code)
|
Page
Number
|
|||
Part I. |
Financial
Information
|
||
Item
1.
|
Financial
Statements
|
1
|
|
Consolidated
Balance Sheets
|
|||
as
of June 30, 2006 (unaudited)
|
|||
and
December 31, 2005
|
2
|
||
Consolidated
Statements of Income
|
|||
for
the Three and Six Months Ended
|
|||
June
30, 2006 (unaudited)
|
|||
and
June 30, 2005 (unaudited)
|
3
|
||
Consolidated
Statements of Cash Flows
|
|||
for
the Six Months Ended
|
|||
June
30, 2006 (unaudited) and
|
|||
June
30, 2005 (unaudited)
|
4
|
||
Notes
to Consolidated Financial Statements
|
5
|
||
Item
2.
|
Management's
Discussion and Analysis of
|
||
Financial
Condition and Results of Operations
|
11
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures
|
||
About
Market Risk
|
20
|
||
Item
4.
|
Controls
and Procedures
|
21
|
|
Part II. |
Other
Information
|
||
Item 4. |
Submission
of Matters to a Vote of Security Holders
|
22
|
|
Item 6. |
Exhibits
|
23
|
|
Signatures
|
23
|
||
Exhibits
|
June
30,
2006
|
December
31,
2005
|
||||||
(unaudited)
|
|||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
44,197
|
$
|
42,132
|
|||
Short-term
investments
|
14,600
|
17,400
|
|||||
Accounts
receivable, net
|
94,104
|
82,231
|
|||||
Inventories
|
70,983
|
48,631
|
|||||
Receivables,
other
|
4,223
|
2,119
|
|||||
Other
current assets
|
5,561
|
4,213
|
|||||
Income
tax receivable
|
104
|
104
|
|||||
Deferred
tax assets
|
3,819
|
3,011
|
|||||
Total
current assets
|
237,591
|
199,841
|
|||||
Equipment
and leasehold improvements, net
|
6,842
|
5,835
|
|||||
Trademarks,
licenses and other intangible assets, net
|
30,765
|
30,136
|
|||||
Goodwill
|
4,810
|
4,476
|
|||||
Other
assets
|
600
|
622
|
|||||
$
|
280,608
|
$
|
240,910
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Loans
payable - banks
|
$
|
9,331
|
$
|
989
|
|||
Current
portion of long-term debt
|
4,068
|
3,775
|
|||||
Accounts
payable
|
48,386
|
40,359
|
|||||
Accrued
expenses
|
26,588
|
21,555
|
|||||
Income
taxes payable
|
471
|
1,269
|
|||||
Dividends
payable
|
813
|
810
|
|||||
Total
current liabilities
|
89,657
|
68,757
|
|||||
Long-term
debt, less current portion
|
8,136
|
9,437
|
|||||
Deferred
tax liability
|
2,036
|
1,783
|
|||||
Put
option
|
1,177
|
743
|
|||||
Minority
interest
|
37,627
|
32,463
|
|||||
Shareholders’
equity:
|
|||||||
Preferred
stock, $.001 par; authorized 1,000,000
shares; none issued
|
|||||||
Common
stock, $.001 par; authorized 100,000,000 shares; outstanding
20,317,810 and 20,252,310 shares at June
30, 2006 and December 31, 2005, respectively
|
20
|
20
|
|||||
Additional
paid-in capital
|
37,214
|
36,640
|
|||||
Retained
earnings
|
119,036
|
112,802
|
|||||
Accumulated
other comprehensive income
|
11,014
|
3,574
|
|||||
Treasury
stock, at cost, 6,302,768 common shares
at June 30, 2006 and December 31, 2005
|
(25,309
|
)
|
(25,309
|
)
|
|||
141,975
|
127,727
|
||||||
$
|
280,608
|
$
|
240,910
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales
|
$
|
70,285
|
$
|
61,343
|
$
|
141,185
|
$
|
132,430
|
|||||
Cost
of sales
|
30,615
|
26,748
|
61,219
|
57,258
|
|||||||||
Gross
margin
|
39,670
|
34,595
|
79,966
|
75,172
|
|||||||||
Selling,
general and administrative
|
33,337
|
27,598
|
64,400
|
59,162
|
|||||||||
Income
from operations
|
6,333
|
6,997
|
15,566
|
16,010
|
|||||||||
Other
expenses (income):
|
|||||||||||||
Interest
expense
|
318
|
384
|
519
|
599
|
|||||||||
(Gain)
loss on foreign currency
|
(220
|
)
|
(75
|
)
|
(381
|
)
|
4
|
||||||
Interest
and dividend (income)
|
(501
|
)
|
(448
|
)
|
(1,015
|
)
|
(694
|
)
|
|||||
Loss
(gain) on subsidiary’s issuance of stock
|
61
|
14
|
(12
|
)
|
14
|
||||||||
(342
|
)
|
(125
|
)
|
(889
|
)
|
(77
|
)
|
||||||
Income
before income taxes and minority
interest
|
6,675
|
7,122
|
16,455
|
16,087
|
|||||||||
Income
taxes
|
2,293
|
2,819
|
5,635
|
5,975
|
|||||||||
Income
before minority interest
|
4,382
|
4,303
|
10,820
|
10,112
|
|||||||||
Minority
interest in net income of
consolidated subsidiary
|
1,190
|
1,089
|
3,208
|
2,494
|
|||||||||
Net
income
|
$
|
3,192
|
$
|
3,214
|
$
|
7,612
|
$
|
7,618
|
|||||
Net
income per share:
|
|||||||||||||
Basic
|
$
|
0.16
|
$
|
0.16
|
$
|
0.38
|
$
|
0.38
|
|||||
Diluted
|
$
|
0.16
|
$
|
0.16
|
$
|
0.37
|
$
|
0.37
|
|||||
Weighted
average number of shares outstanding:
|
|||||||||||||
Basic
|
20,315
|
20,179
|
20,291
|
19,940
|
|||||||||
Diluted
|
20,564
|
20,478
|
20,554
|
20,449
|
Six
months ended
June
30,
|
|||||||
2006
|
2005
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
7,612
|
$
|
7,618
|
|||
Adjustments
to reconcile net income to net
cash provided by (used in) operating activities:
|
|||||||
Depreciation
and amortization
|
2,539
|
2,104
|
|||||
Provision
for doubtful accounts
|
26
|
45
|
|||||
Noncash
stock compensation
|
313
|
—
|
|||||
Loss
on sale of trademark
|
239
|
—
|
|||||
Minority
interest in net income of consolidated subsidiary
|
3,208
|
2,494
|
|||||
Deferred
tax (benefit)
|
(542
|
)
|
(377
|
)
|
|||
Change
in fair value of put options
|
363
|
187
|
|||||
(Gain)
loss on subsidiary’s issuance of stock
|
(12
|
)
|
14
|
||||
Changes
in:
|
|||||||
Accounts
receivable
|
(5,859
|
)
|
(9,730
|
)
|
|||
Inventories
|
(18,870
|
)
|
(8,240
|
)
|
|||
Other
assets
|
(1,502
|
)
|
(3,631
|
)
|
|||
Accounts
payable and accrued expenses
|
8,547
|
17,842
|
|||||
Income
taxes payable, net
|
(863
|
)
|
(1,803
|
)
|
|||
Net
cash provided by (used in) operating activities
|
(4,801
|
)
|
6,523
|
||||
Cash
flows from investing activities:
|
|||||||
Purchases
of short-term investments
|
—
|
(1,400
|
)
|
||||
Proceeds
from sale of short-term investments
|
2,800
|
1,000
|
|||||
Purchase
of equipment and leasehold improvements
|
(1,887
|
)
|
(1,496
|
)
|
|||
Payment
for licenses, trademarks and other intangible assets
|
(1,381
|
)
|
(262
|
)
|
|||
Proceeds
from sale of trademark
|
1,106
|
—
|
|||||
Net
cash provided by (used in) investing activities
|
638
|
(2,158
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
Increase
in loans payable - bank
|
8,100
|
4,873
|
|||||
Repayment
of long-term debt
|
(1,966
|
)
|
(2,058
|
)
|
|||
Proceeds
from sale of stock of subsidiary
|
574
|
431
|
|||||
Proceeds
from stock-based compensation transactions
|
509
|
119
|
|||||
Dividends
paid
|
(1,622
|
)
|
(1,389
|
)
|
|||
Dividends
paid to minority interest
|
(1,218
|
)
|
(1,106
|
)
|
|||
Purchases
of treasury stock
|
—
|
(150
|
)
|
||||
Net
cash provided by financing activities
|
4,377
|
720
|
|||||
Effect
of exchange rate changes on cash
|
1,851
|
(2,867
|
)
|
||||
Net
increase in cash and cash equivalents
|
2,065
|
2,218
|
|||||
Cash
and cash equivalents - beginning of period
|
42,132
|
23,372
|
|||||
Cash
and cash equivalents - end of period
|
$
|
44,197
|
$
|
25,590
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
526
|
$
|
430
|
|||
Income
taxes
|
7,200
|
5,515
|
(In
thousands except per share data)
|
Three
months ended
June
30,
2005
|
Six
months ended
June
30,
2005
|
|||||
Reported
net income
|
$
|
3,214
|
$
|
7,618
|
|||
Less:
Stock-based employee compensation determined under SFAS 123, net
of
taxes
|
(882
|
)
|
(1,033
|
)
|
|||
Pro
forma net income
|
$
|
2,332
|
$
|
6,585
|
|||
Income
per share, as reported:
|
|||||||
Basic
|
$
|
0.16
|
$
|
0.38
|
|||
Diluted
|
$
|
0.16
|
$
|
0.37
|
|||
Pro
forma net income per share:
|
|||||||
Basic
|
$
|
0.12
|
$
|
0.33
|
|||
Diluted
|
$
|
0.11
|
$
|
0.32
|
Shares
|
Weighted
Average Exercise Price
|
||||||
Outstanding
at January 1, 2006
|
985,550
|
$
|
14.03
|
||||
Granted
|
12,000
|
18.56
|
|||||
Exercised
|
(65,500
|
)
|
7.77
|
||||
Forfeited
or expired
|
(11,050
|
)
|
15.90
|
||||
Outstanding
at June 30, 2006
|
921,000
|
$
|
14.51
|
June
30,
2006
|
June
30,
2005
|
||||||
Cash
proceeds from stock options exercised
|
$
|
508,720
|
$
|
119,258
|
|||
Tax
benefits
|
0
|
0
|
|||||
Intrinsic
value of stock options exercised
|
686,081
|
11,598,016
|
(In
thousands)
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Comprehensive
income (loss):
|
|||||||||||||
Net
income
|
$
|
3,192
|
$
|
3,214
|
$
|
7,612
|
$
|
7,618
|
|||||
Other
comprehensive income, net of tax:
|
|||||||||||||
Foreign
currency translation adjustment
|
4,870
|
(6,059
|
)
|
7,437
|
(10,661
|
)
|
|||||||
Change
in fair value of derivatives
|
23
|
(4
|
)
|
2
|
(139
|
)
|
|||||||
Comprehensive
income (loss)
|
$
|
8,085
|
$
|
(2,849
|
)
|
$
|
15,051
|
$
|
(3,182
|
)
|
The
Company manages its business in two segments, European based operations
and United States based operations. The European assets are located,
and
operations are conducted, in France. European operations primarily
represent the sales of the prestige brand name fragrances and United
States operations primarily represent the sale of mass-market and
specialty retail products. Information on the Company’s operations by
geographical areas is as follows.
|
(In
thousands)
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
Sales:
|
|||||||||||||
United
States
|
$
|
9,544
|
$
|
8,183
|
$
|
17,550
|
$
|
17,773
|
|||||
Europe
|
60,776
|
55,293
|
124,282
|
117,222
|
|||||||||
Eliminations
|
(35
|
)
|
(2,133
|
)
|
(647
|
)
|
(2,565
|
)
|
|||||
$
|
70,285
|
$
|
61,343
|
$
|
141,185
|
$
|
132,430
|
||||||
Net
Income (Loss):
|
|||||||||||||
United
States
|
$
|
(500
|
)
|
$
|
(88
|
)
|
$
|
(1,323
|
)
|
$
|
155
|
||
Europe
|
3,659
|
3,564
|
8,945
|
7,737
|
|||||||||
Eliminations
|
33
|
(262
|
)
|
(10
|
)
|
(274
|
)
|
||||||
$
|
3,192
|
$
|
3,214
|
$
|
7,612
|
$
|
7,618
|
(In
thousands)
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Numerator:
|
|||||||||||||
Net
income
|
$
|
3,192
|
$
|
3,214
|
$
|
7,612
|
$
|
7,618
|
|||||
Denominator:
|
|||||||||||||
Weighted
average shares
|
20,315
|
20,179
|
20,291
|
19,940
|
|||||||||
Effect
of dilutive securities:
|
|||||||||||||
Stock
options
|
249
|
299
|
263
|
509
|
|||||||||
20,564
|
20,478
|
20,554
|
20,449
|
(In
thousands)
|
June
30,
2006
|
December
31,
2005
|
|||||
Raw
materials and component parts
|
$
|
28,091
|
$
|
19,529
|
|||
Finished
goods
|
42,892
|
29,102
|
|||||
$
|
70,983
|
$
|
48,631
|
Item 2: |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
|
Net
sales
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||||||||
(In
millions)
|
2006
|
%
Change
|
2005
|
2006
|
%
Change
|
2005
|
|||||||||||||
European
based product sales
|
$
|
60.8
|
14
|
%
|
$
|
53.1
|
$
|
123.6
|
8
|
%
|
$
|
114.6
|
|||||||
United
States based product sales
|
9.5
|
17
|
%
|
8.2
|
17.6
|
(
1%
|
)
|
17.8
|
|||||||||||
Total
net sales
|
$
|
70.3
|
15
|
%
|
$
|
61.3
|
$
|
141.2
|
7
|
%
|
$
|
132.4
|
Gross
margins
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||
(In
millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Net
sales
|
$
|
70.3
|
$
|
61.3
|
$
|
141.2
|
$
|
132.4
|
|||||
Cost
of sales
|
30.6
|
26.7
|
61.2
|
57.2
|
|||||||||
Gross
margin
|
$
|
39.7
|
$
|
34.6
|
$
|
80.0
|
$
|
75.2
|
|||||
Gross
margin as a
percent
of net sales
|
56
|
%
|
56
|
%
|
57
|
%
|
57
|
%
|
Selling,
general & administrative expense
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||
(In
millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
Selling,
general & administrative expense
|
$
|
33.3
|
$
|
27.6
|
$
|
64.4
|
$
|
59.2
|
|||||
Selling,
general & administrative expense as a percent of net
sales
|
47
|
%
|
45
|
%
|
46
|
%
|
45
|
%
|
Item 3: |
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Nominee
|
Votes
For
|
Votes
Withheld
|
|||||
Jean
Madar
|
17,041,127
|
1,618,817
|
|||||
Philippe
Benacin
|
17,041,127
|
1,618,817
|
|||||
Russell
Greenberg
|
16,961,304
|
1,698,640
|
|||||
Philippe
Santi
|
18,481,044
|
178,900
|
|||||
Francois
Heilbronn
|
16,971,604
|
1,688,340
|
|||||
Joseph
A. Caccamo
|
18,562,140
|
97,804
|
|||||
Jean
Levy
|
18,562,240
|
97,704
|
|||||
Robert
Bensoussan-Torres
|
18,651,627
|
8,317
|
|||||
Jean
Cailliau
|
17,041,127
|
1,618,817
|
|||||
Serge
Rosinoer
|
18,651,727
|
9,217
|
|||||
Patrick
Choël
|
18,651,627
|
8,317
|
Exhibit
No.
|
Description
|
|
4.21.1
|
Amendment
to the Company’s 2004 Nonemployee Director Stock Option
Plan
|
|
31.1
|
Certifications
required by Rule 13a-14(a) of Chief Executive Officer
|
|
31.2
|
Certifications
required by Rule 13a-14(a) of Chief Financial Officer
|
|
32
|
Certification
required by Section 906 of the Sarbanes-Oxley
Act
|
INTER PARFUMS, INC. | ||
|
|
|
By: | /s/ Russell Greenberg | |
Executive Vice President and Chief Financial Officer |
||