x |
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934 for the quarterly period ended September 30,
2008.
|
¨ |
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
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
551
Fifth Avenue, New York, New York
|
10176
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Large
accelerated Filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
(Do not check if a smaller reporting company)
|
Smaller
reporting company ¨
|
Page Number
|
|
Part
I. Financial Information
|
|
Item
1. Financial Statements
|
1
|
Consolidated
Balance Sheets
as
of September 30, 2008 (unaudited)
and
December 31, 2007
|
2
|
Consolidated
Statements of Income
for
the Three and Nine Month Periods Ended
September
30, 2008 (unaudited)
and
September 30, 2007 (unaudited)
|
3
|
Consolidated
Statements of Cash Flows
for
the Nine Months Ended
September
30, 2008 (unaudited) and
September
30, 2007 (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
|
22
|
Item
5. Other Information
|
22
|
Item
6. Exhibits
|
22
|
Signatures
|
22
|
Part I. |
Financial
Information
|
Item 1: |
FINANCIAL
STATEMENTS
|
September 30,
2008
|
December 31,
2007
|
||||||
(unaudited)
|
|||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
31,981
|
$
|
90,034
|
|||
Accounts
receivable, net of allowance for doubtful accounts of $1,769 and
$2,357 at
September 30, 2008 and December 31, 2007,
respectively
|
140,893
|
118,140
|
|||||
Inventories
|
134,287
|
106,022
|
|||||
Receivables,
other
|
3,470
|
5,928
|
|||||
Other
current assets
|
4,677
|
5,253
|
|||||
Income
tax receivable
|
1,619
|
168
|
|||||
Deferred
tax assets
|
4,182
|
4,300
|
|||||
Total
current assets
|
321,109
|
329,845
|
|||||
Equipment
and leasehold improvements, net
|
7,042
|
7,262
|
|||||
Trademarks,
licenses and other intangible assets, net
|
109,275
|
101,577
|
|||||
Goodwill
|
6,529
|
6,715
|
|||||
Other
assets
|
687
|
653
|
|||||
$
|
444,642
|
$
|
446,052
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Loans
payable – banks
|
$
|
27,061
|
$
|
7,217
|
|||
Current
portion of long-term debt
|
14,815
|
16,215
|
|||||
Accounts
payable – trade
|
66,190
|
88,297
|
|||||
Accrued
expenses
|
44,533
|
35,507
|
|||||
Income
taxes payable
|
259
|
3,023
|
|||||
Dividends
payable
|
1,011
|
1,026
|
|||||
Total
current liabilities
|
153,869
|
151,285
|
|||||
Long-term
debt, less current portion
|
31,312
|
43,518
|
|||||
Deferred
tax liability
|
8,831
|
4,664
|
|||||
Minority
interest
|
48,850
|
53,925
|
|||||
Shareholders’
equity:
|
|||||||
Preferred
stock, $.001 par; authorized 1,000,000 shares; none issued
|
|||||||
Common
stock, $.001 par; authorized 100,000,000 shares; outstanding 30,637,076
and 30,798,212 shares at September 30, 2008 and December 31, 2007,
respectively
|
31
|
31
|
|||||
Additional
paid-in capital
|
41,052
|
40,023
|
|||||
Retained
earnings
|
163,867
|
147,995
|
|||||
Accumulated
other comprehensive income
|
25,380
|
30,955
|
|||||
Treasury
stock, at cost, 9,498,242 and 9,303,956 common shares at September
30,
2008 and December 31, 2007, respectively
|
(28,550
|
)
|
(26,344
|
)
|
|||
201,780
|
192,660
|
||||||
$
|
444,642
|
$
|
446,052
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Net
sales
|
$
|
123,531
|
$
|
102,320
|
$
|
345,772
|
$
|
270,205
|
|||||
Cost
of sales
|
56,206
|
42,254
|
148,385
|
110,057
|
|||||||||
Gross
margin
|
67,325
|
60,066
|
197,387
|
160,148
|
|||||||||
Selling,
general and administrative
|
56,039
|
47,682
|
160,124
|
129,189
|
|||||||||
Income
from operations
|
11,286
|
12,384
|
37,263
|
30,959
|
|||||||||
Other
expenses (income):
|
|||||||||||||
Interest
expense
|
1,418
|
945
|
2,865
|
2,160
|
|||||||||
(Gain)
loss on foreign currency
|
77
|
(20
|
)
|
262
|
104
|
||||||||
Interest
income
|
(446
|
)
|
(184
|
)
|
(1,611
|
)
|
(1,773
|
)
|
|||||
Gain
on subsidiary’s issuance of stock
|
—
|
(113
|
)
|
—
|
(639
|
)
|
|||||||
1,049
|
628
|
1,516
|
(148
|
)
|
|||||||||
Income
before income taxes and minority interest
|
10,237
|
11,756
|
35,747
|
31,107
|
|||||||||
Income
taxes
|
2,358
|
3,967
|
12,241
|
10,415
|
|||||||||
Income
before minority interest
|
7,879
|
7,789
|
23,506
|
20,692
|
|||||||||
Minority
interest in net income of
consolidated subsidiary
|
1,691
|
2,129
|
4,838
|
5,490
|
|||||||||
Net
income
|
$
|
6,188
|
$
|
5,660
|
$
|
18,668
|
$
|
15,202
|
|||||
Net
income per share:
|
|||||||||||||
Basic
|
$
|
0.20
|
$
|
0.18
|
$
|
0.61
|
$
|
0.50
|
|||||
Diluted
|
$
|
0.20
|
$
|
0.18
|
$
|
0.60
|
$
|
0.49
|
|||||
Weighted
average number of shares outstanding:
|
|||||||||||||
Basic
|
30,632
|
30,656
|
30,660
|
30,655
|
|||||||||
Diluted
|
30,886
|
31,018
|
30,869
|
31,012
|
|||||||||
Dividends
declared per share
|
$
|
0.033
|
$
|
0.033
|
$
|
0.099
|
$
|
0.099
|
Nine months ended
September 30,
|
|||||||
2008
|
2007
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
18,668
|
$
|
15,202
|
|||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
7,666
|
6,076
|
|||||
Provision
for doubtful accounts
|
323
|
461
|
|||||
Noncash
stock compensation
|
868
|
840
|
|||||
Minority
interest in net income of consolidated subsidiary
|
4,838
|
5,490
|
|||||
Deferred
tax benefit
|
(709
|
)
|
(3,796
|
)
|
|||
Gain
on subsidiary’s issuance of stock
|
—
|
(639
|
)
|
||||
Changes
in:
|
|||||||
Accounts
receivable
|
(27,707
|
)
|
(3,881
|
)
|
|||
Inventories
|
(32,239
|
)
|
(26,920
|
)
|
|||
Other
assets
|
2,601
|
(1,422
|
)
|
||||
Accounts
payable and accrued expenses
|
(10,966
|
)
|
(2,634
|
)
|
|||
Income
taxes payable
|
(4,452
|
)
|
2,553
|
||||
Net
cash used in operating activities
|
(41,109
|
)
|
(8,670
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchases
of short-term investments
|
(5,312
|
)
|
(300
|
)
|
|||
Proceeds
from sales of short-term investments
|
5,312
|
13,100
|
|||||
Purchases
of equipment and leasehold improvements
|
(2,301
|
)
|
(1,835
|
)
|
|||
Payment
for intangible assets acquired
|
(1,015
|
)
|
(57,127
|
)
|
|||
Payment
for acquisition of minority interests
|
(18,405
|
)
|
(4,673
|
)
|
|||
Proceeds
from sale of stock of subsidiary
|
2,094
|
2,588
|
|||||
Net
cash used in investing activities
|
(19,627
|
)
|
(48,247
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from loans payable – bank, net
|
20,572
|
5,709
|
|||||
Proceeds
from issuance of long-term debt
|
—
|
53,808
|
|||||
Repayment
of long-term debt
|
(12,637
|
)
|
(6,510
|
)
|
|||
Proceeds
from exercise of options including tax benefits
|
479
|
20
|
|||||
Dividends
paid
|
(3,058
|
)
|
(2,857
|
)
|
|||
Dividends
paid to minority interest
|
(1,735
|
)
|
(1,594
|
)
|
|||
Purchase
of treasury stock
|
(2,206
|
)
|
—
|
||||
Net
cash provided by financing activities
|
1,415
|
48,576
|
|||||
Effect
of exchange rate changes on cash
|
1,268
|
3,928
|
|||||
Net
decrease in cash and cash equivalents
|
(58,053
|
)
|
(4,413
|
)
|
|||
Cash
and cash equivalents - beginning of period
|
90,034
|
58,247
|
|||||
Cash
and cash equivalents - end of period
|
$
|
31,981
|
$
|
53,834
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
2,866
|
$
|
2,334
|
|||
Income
taxes
|
12,346
|
10,248
|
1.
|
Significant
Accounting Policies:
|
2.
|
New
Accounting
Pronouncements:
|
3. |
Shareholders’
Equity:
|
4. |
Share-Based
Payments:
|
Shares
|
Weighted
Average
Exercise Price
|
||||||
Outstanding
at January 1, 2008
|
1,206,600
|
$
|
12.29
|
||||
Granted
|
165,000
|
11.30
|
|||||
Exercised
|
(33,150
|
)
|
8.22
|
||||
Forfeited
or expired
|
(18,375
|
)
|
12.71
|
||||
Outstanding
at September 30, 2008
|
1,320,075
|
$
|
12.26
|
||||
Options
exercisable at September 30, 2008
|
824,648
|
$
|
12.17
|
||||
Options
available for future grants
|
1,031,669
|
4. |
Share-Based
Payments (continued):
|
(In
thousands)
|
September 30,
2008
|
September 30,
2007
|
|||||
Cash
proceeds from stock options exercised
|
$
|
272
|
$
|
20
|
|||
Tax
benefits
|
207
|
—
|
|||||
Intrinsic
value of stock options exercised
|
136
|
29
|
5. |
Comprehensive
Income (Loss):
|
(In
thousands)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Comprehensive
income (loss):
|
|||||||||||||
Net
income
|
$
|
6,188
|
$
|
5,660
|
$
|
18,668
|
$
|
15,202
|
|||||
Other
comprehensive income, net of tax:
|
|||||||||||||
Foreign
currency translation adjustment
|
(17,134
|
)
|
6,863
|
(5,436
|
)
|
10,062
|
|||||||
Change
in fair value of derivatives
|
—
|
(9
|
)
|
(140
|
)
|
—
|
|||||||
Comprehensive
income (loss)
|
$
|
(10,946
|
)
|
$
|
12,514
|
$
|
13,092
|
$
|
25,264
|
6. |
Segment
and Geographic Areas:
|
We
manufacture and distribute one product line, fragrances and fragrance
related products and we manage our business in two segments, European
based operations and United States based operations. The European
assets
are primarily located, and operations are primarily conducted, in
France.
European operations primarily represent the sale of prestige brand
name
fragrances and United States operations primarily represent the sale
of
specialty retail and mass market fragrances. Information on the Company’s
operations by geographical areas is as
follows:
|
(In
thousands)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Net
Sales:
|
|||||||||||||
United
States
|
$
|
14,714
|
$
|
14,170
|
$
|
42,467
|
$
|
36,059
|
|||||
Europe
|
109,479
|
89,352
|
304,983
|
235,772
|
|||||||||
Eliminations
of Intercompany sales
|
(662
|
)
|
(1,202
|
)
|
(1,678
|
)
|
(1,626
|
)
|
|||||
$
|
123,531
|
$
|
102,320
|
$
|
345,772
|
$
|
270,205
|
||||||
Net
Income (Loss):
|
|||||||||||||
United
States
|
$
|
189
|
$
|
466
|
$
|
412
|
$
|
(444
|
)
|
||||
Europe
|
5,980
|
5,237
|
18,252
|
15,638
|
|||||||||
Eliminations
|
19
|
(43
|
)
|
4
|
8
|
||||||||
$
|
6,188
|
$
|
5,660
|
$
|
18,668
|
$
|
15,202
|
September 30,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Total
Assets:
|
|||||||
United
States
|
$
|
64,090
|
$
|
52,571
|
|||
Europe
|
391,340
|
403,351
|
|||||
Eliminations
of Investment in Subsidiary
|
(10,788
|
)
|
(9,870
|
)
|
|||
$
|
444,642
|
$
|
446,052
|
7.
|
Earnings
Per Share:
|
7.
|
Earnings
Per Share (continued):
|
(In thousands)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Numerator:
|
|||||||||||||
Net
income
|
$
|
6,188
|
$
|
5,660
|
$
|
18,668
|
$
|
15,202
|
|||||
Effect
of dilutive stock options of consolidated subsidiary
|
(35
|
)
|
—
|
(122
|
)
|
—
|
|||||||
$
|
6,153
|
$
|
5,660
|
$
|
18,546
|
$
|
15,202
|
||||||
Denominator:
|
|||||||||||||
Weighted
average shares
|
30,632
|
30,656
|
30,660
|
30,655
|
|||||||||
Effect
of dilutive stock options and warrants
|
254
|
362
|
209
|
357
|
|||||||||
30,886
|
31,018
|
30,869
|
31,012
|
Not
included in the above computations is the effect of antidilutive
potential
common shares which consist of outstanding options to purchase 283,000
and
364,000 shares of common stock for the three and nine month periods
ended
September 30, 2008, respectively, and 535,500 and 445,500 shares
of common
stock for the three and nine month periods ended September 30, 2007,
respectively, as well as outstanding warrants to purchase 150,000
shares
of common stock for all periods presented.
|
8. |
Inventories:
|
(In
thousands)
|
September 30,
2008
|
December 31,
2007 |
|||||
Raw
materials and component parts
|
$
|
47,850
|
$
|
41,109
|
|||
Finished
goods
|
86,437
|
64,913
|
|||||
$
|
134,287
|
$
|
106,022
|
9.
|
Short-term
Investments:
|
From
time to time the Company has short-term investments which consist
of
certificates of deposit with maturities of greater than three
months.
|
10.
|
Acquisition
of Minority Interests:
|
Trademarks
|
$
|
15,385
|
||
Minority
interest
|
8,316
|
|||
Deferred
tax liability
|
(5,296
|
)
|
||
Total
|
$
|
18,405
|
11.
|
Entry
Into Definitive
Agreements:
|
12.
|
Fair
Value Measurement:
|
13.
|
Income
Taxes:
|
Item2: |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
|
Net
sales
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|||||||||||||||
(In
millions)
|
|
2008
|
|
%
Change
|
|
2007
|
|
2008
|
|
%
Change
|
|
2007
|
|||||||
|
|||||||||||||||||||
European
based product sales
|
$
|
108.8
|
23%
|
|
$
|
88.1
|
$
|
303.3
|
30%
|
|
$
|
234.1
|
|||||||
United
States based product sales
|
14.7
|
4%
|
|
14.2
|
42.5
|
18%
|
|
36.1
|
|||||||||||
Total
net sales
|
$
|
123.5
|
21%
|
|
$
|
102.3
|
$
|
345.8
|
28%
|
|
$
|
270.2
|
Gross margin
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Net
sales
|
$
|
123.5
|
$
|
102.3
|
$
|
345.8
|
$
|
270.2
|
|||||
Cost
of sales
|
56.2
|
42.2
|
148.4
|
110.1
|
|||||||||
Gross
margin
|
$
|
67.3
|
$
|
60.1
|
$
|
197.4
|
$
|
160.1
|
|||||
Gross
margin as a percent
of net sales
|
55
|
%
|
59
|
%
|
57
|
%
|
59
|
%
|
Selling, general & administrative expenses
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||
(In millions)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Selling,
general & administrative expenses
|
$
|
56.0
|
$
|
47.7
|
$
|
160.1
|
$
|
129.2
|
|||||
Selling,
general & administrative expenses as a percent of net
sales
|
45
|
%
|
47
|
%
|
46
|
%
|
48
|
%
|
Exhibit
No.
|
Description
|
|
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
|