Inter Parfums, Inc. Reports 2014 Third Quarter Results

Diluted EPS up 44% to $0.36 from $0.25

NEW YORK--()--Inter Parfums, Inc. (NASDAQ GS: IPAR) today reported results for the third quarter ended September 30, 2014.

Third Quarter 2014 Compared to Third Quarter 2013:

  • Net sales increased 6.0% to $134.2 million from $126.8 million; at comparable foreign currency exchange rates, net sales increased 5.1%;
  • European-based operations generated sales of $103.4 million, up 5.7% from $98.1 million;
  • Sales by U.S.-based operations were $30.8 million, up 6.9% compared to $28.7 million;
  • Gross margin was 56.1% of net sales, up from 55.2%;
  • S, G & A expense as a percentage of net sales was 42.2% compared to 43.7%;
  • Operating income increased 28% to $18.7 million compared to $14.6 million;
  • Operating margin was 13.9% of net sales compared to 11.6% of net sales;
  • Net income attributable to Inter Parfums, Inc. was $11.1 million compared to $7.9 million; and,
  • Diluted earnings per share were $0.36 compared to $0.25.

Jean Madar, Chairman & CEO of Inter Parfums commented, “New product launches and the continued popularity of many of our established scents produced the 6.0% increase in third quarter sales, especially our three largest. As we reported last month, the successful launch of Jimmy Choo Man and the continued strength of the brand’s signature women’s scent drove the 23% increase in Jimmy Choo brand sales. Montblanc brand sales rose 10% for the quarter and 40% through the first nine months spurred by the rollout of the new men’s line, Emblem, and the staying power of the brand’s Legend fragrances. After a slow start in the first half, Lanvin brand sales increased 9% with the broader distribution of Lanvin Me L’Eau and the perennially strong performance by the brand favorite, Éclat d’Arpège. The introduction of our first Karl Lagerfeld fragrances for men and women added $3.7 million in incremental third quarter sales and $20.9 million for the first nine months.”

Mr. Madar further noted, “Our U.S.-based operations performed well during the third quarter, posting a 7% increase in sales. It is worth noting that the more recent addition of prestige names, including Agent Provocateur, Dunhill and Oscar de la Renta, has been an important sales driver.”

Discussing the more than 14% increase in year-to-date sales of ongoing brands (excluding Burberry brand sales), Mr. Madar stated, “We have seen strength in our business in nearly all geographic markets this year. Net sales of ongoing brands in Western Europe and North America, our two largest markets, were up 17% and 13%, respectively. Sales in Central and South America came in nearly 48% ahead and in the Middle East, they were up 20%. While Asian sales improved modestly through the first three quarters, Eastern Europe, which represents a small portion of our business, was the only down market for the first nine months of this year, primarily reflecting a difficult Russian market and its depreciating currency.”

Mr. Madar concluded by saying, “In the fourth quarter, we will have a sneak preview of our first Shanghai Tang fragrance collection in the Hong Kong namesake store followed by a broader rollout in 2015. Also next year, we have men’s scents launching for Dunhill, Lanvin and Balmain and women’s scents for Montblanc, Van Cleef & Arpels, and Oscar de la Renta, plus a men’s and women’s fragrance duo for Boucheron. While growing our existing business, we are diligently, judiciously and methodically seeking out new brands and related opportunities that could accelerate our growth rate.”

Russell Greenberg, Executive Vice President and Chief Financial Officer stated, “Income from operations rose 28% from last year’s third quarter due to several factors. The 90 basis point improvement in gross margin was due to better product mix for our European-based operations and the addition of several prestige brand names to our U.S. brand portfolio. In general, prestige brand fragrances generate a higher gross margin than specialty retail product lines. Selling, general and administrative expenses in the third quarter of 2014 declined 150 basis points to 42.2%, primarily the result of lower promotional spending.”

He went on to say, “Our bottom line also benefitted from foreign currency gains aggregating $1.1 million and a 32% effective tax rate in the current third quarter, as compared to a $100,000 foreign currency loss and a 35% effective tax rate in last year’s third quarter.”

Mr. Greenberg continued, “Our financial position remains very strong. We entered the fourth quarter with $392 million in working capital, including approximately $247 million in cash, cash equivalents and short-term investments, but no long-term debt.”

2014 Guidance

On the subject of guidance, Mr. Greenberg pointed out, “Despite the recent strength of the U.S. dollar versus the Euro, we remain confident in our ability to achieve our 2014 guidance. As previously reported, we are looking for net sales to reach $495 million, which represents nearly 15% growth of our ongoing brands, resulting in net income attributable to Inter Parfums, Inc. in the range of $0.93 to $0.95 per diluted share. Our guidance assumes the dollar remains at current levels and recognizes that a significant portion of our 2014 advertising spend is once again budgeted for the final quarter of the year. Later this month, we will release our initial guidance for 2015.”

Dividend

The Company’s regular quarterly cash dividend of $0.12 per share will be paid on January 15, 2015 to shareholders of record on December 31, 2014.

Conference Call

Management will conduct a conference call to discuss financial results and business developments at 11:00 AM ET on Tuesday, November 11, 2014. Interested parties may participate in the call by dialing (201) 493-6749; please call in 10 minutes before the conference call is scheduled to begin and ask for the Inter Parfums call. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.interparfumsinc.com and click on the Investor Relations section. Please go to the website at least 15 minutes early to register, and download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days at Inter Parfums’ website.

In the more than 30 years since its founding, Inter Parfums, Inc. has been selected as the fragrance and beauty partner for a growing list of brands that include Lanvin, Montblanc, Jimmy Choo, Boucheron, Van Cleef & Arpels, Karl Lagerfeld, Paul Smith, S.T. Dupont, Balmain, Repetto, Agent Provocateur, Alfred Dunhill, Anna Sui, Shanghai Tang, Oscar de la Renta, Gap, Banana Republic, and bebe. Inter Parfums is known for innovation, quality and its ability to capture the genetic code of each brand in the products it develops, manufactures and distributes in over 100 countries worldwide.

Statements in this release which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases you can identify forward-looking statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would," or similar words.

You should not rely on forward-looking statements, because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and “Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2013 and the reports Inter Parfums files from time to time with the Securities and Exchange Commission. Inter Parfums does not intend to and undertakes no duty to update the information contained in this press release.

Regulation G, “Conditions for Use of Non-GAAP Financial Measures,” prescribes the conditions for use of non-GAAP financial information in public disclosures. The Company believes that our presentation of the non-GAAP financial information included in this release constitutes important supplemental measures of operating performance, because it provides readers with more complete disclosure and facilitates a more accurate comparison of current results to historic results.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share data)

(Unaudited)

     
Three Months Ended
September 30,
Nine Months Ended
September 30,
  2014       2013     2014       2013  
 
Net sales $ 134,206 $ 126,753 $ 374,129 $ 458,048
 
Cost of sales   58,878     56,746     161,455     189,791  
 
Gross margin 75,328 70,007 212,674 268,257
 
Selling, general and administrative expenses   56,647     55,360     163,720     178,735  
 
Income from operations   18,681     14,647     48,954     89,522  
 
Other expenses (income):
Interest expense 554 354 1,402 1,228
(Gain) loss on foreign currency (1,129 ) 176 (1,057 ) 1,158
Interest income   (915 )   (1,218 )   (2,974 )   (3,472 )
 
  (1,490 )   (688 )   (2,629 )   (1,086 )
 
Income before income taxes 20,171 15,335 51,583 90,608
 
Income taxes   6,407     5,432     18,003     33,242  
 
Net income 13,764 9,903 33,580 57,366
 
Less: Net income attributable to the noncontrolling interest  

2,651

   

2,049

   

7,465

   

14,001

 
 
Net income attributable to

Inter Parfums, Inc.

$

11,113

 

$

7,854

 

$

26,115

 

$

43,365

 
 
 
Earnings per share:
 
Net income attributable to Inter Parfums, Inc. common shareholders:
Basic $ 0.36 $ 0.26 $ 0.84 $ 1.41
Diluted $ 0.36   $ 0.25   $ 0.84   $ 1.40  
 
Weighted average number of shares outstanding:
Basic 30,941 30,796 30,927 30,743
Diluted   31,054     30,986     31,060     30,928  
 
 
Dividends declared per share $ 0.12   $ 0.12   $ 0.36   $ 0.36  

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)

 
ASSETS
  September 30,

2014

  December 31,
2013
Current assets:
Cash and cash equivalents $ 50,185 $ 125,650
Short-term investments 196,619 181,677
Accounts receivable, net 122,217 79,932
Inventories 112,863 117,347
Receivables, other 1,663 2,418
Other current assets 6,194 4,775
Income tax receivable 437 6,435
Deferred tax assets   7,375     7,257  
 
Total current assets 497,553 525,491
 
Equipment and leasehold improvements, net 9,624 10,444
 
Trademarks, licenses and other intangible assets, net 103,148 116,243
 
Other assets   10,106     11,880  
 
Total assets $ 620,431   $ 664,058  
 
LIABILITIES AND EQUITY
Current liabilities:
Loans payable – banks $ 239 $ 6,104
Accounts payable, trade 51,020 56,736
Accrued expenses 42,269 58,333
Income taxes payable 7,889 1,270
Dividends payable   3,713     3,704  
 
Total current liabilities   105,130     126,147  
 
Deferred tax liability   2,319     2,555  
 
Equity:
Inter Parfums, Inc. shareholders’ equity:

Preferred stock, $.001 par; authorized

1,000,000 shares; none issued

Common stock, $.001 par; authorized 100,000,000 shares;

outstanding 30,942,868 and 30,863,421 shares at

September 30, 2014 and December 31, 2013,

respectively

 

31

 

31

Additional paid-in capital 59,123 57,877
Retained earnings 374,516 359,459
Accumulated other comprehensive income (loss) (4,464 ) 25,860

Treasury stock, at cost, 9,924,500 and 9,940,977 common

shares at September 30, 2014 and December 31, 2013,

respectively

 

(36,266

)

 

(36,016

)

 
Total Inter Parfums, Inc. shareholders’ equity 392,940 407,211
 
Noncontrolling interest   120,042     128,145  
 
Total equity   512,982     535,356  
 
Total liabilities and equity $ 620,431   $ 664,058  

Contacts

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

Contacts

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