NEW YORK--(BUSINESS WIRE)--Inter Parfums, Inc. (NASDAQ GS: IPAR) today reported results for the fourth quarter ended December 31, 2017.
Fourth Quarter 2017 Compared to Fourth Quarter 2016:
- Net sales were $149.5 million, up 10.9% from $134.8 million; at comparable foreign currency exchange rates, net sales increased 6%;
- Net sales by European based operations rose 15.5% to $115.4 million from $99.9 million;
- Net sales by U.S. based operations were $34.1 million, down 2.2% compared to $34.9 million;
- Gross margin was 66.1% compared to 63.7%;
- S,G&A expenses as a percentage of net sales were 61.4% compared to 59.0%;
- Operating income was $4.8 million as compared to $5.4 million;
- Net income attributable to Inter Parfums, Inc. increased 12.0% to $4.4 million compared $3.9 million; and,
- Net income attributable to Inter Parfums, Inc. per diluted share rose 11.1% to $0.14 from $0.13.
Thus for the year as a whole, net sales increased 13.5% to $591.3 million, as compared to $521.1 million in 2016. At comparable foreign currency exchange rates, net sales increased 12%. Net income attributable to Inter Parfums, Inc. increased 24.8% to $41.6 million or $1.33 per diluted share from 2016’s $33.3 million or $1.07 per diluted share.
Jean Madar, Chairman & CEO of Inter Parfums stated, “In 2017, we grew our footprint in all of our markets. North America became our largest market with year-over-year sales gains of 19%. Second place Western Europe grew sales by 8% as did our third largest market, Asia. Central and South America, the Middle East and Eastern Europe achieved comparable year sales growth of 16%, 21% and 20%, respectively. Regarding European based operations, our three largest brands all posted growth for the year, with Montblanc up 4%, Jimmy Choo up 20%, and Lanvin up 5%. In fact, in 2017, Jimmy Choo fragrance sales topped the $100 million mark joining Montblanc in that exclusive club. Our newer brands performed exceptionally well last year, with Coach and Rochas brand sales growing 149% and 34%, respectively, versus one year earlier. Of note, our first Coach fragrance only launched mid-2016, and today that brand is our fourth largest, which was achieved without a legacy fragrance business. As we’ve reported, we have several brand extensions launching this year, including Coach Floral and Lanvin Modern Princess Eau Sensuelle, both of which recently debuted, plus new extensions for Lanvin’s Éclat d’Arpège and Coach for Men.”
Moving on to U.S. based operations, Mr. Madar noted, “Our two largest brands in this group, Dunhill and Oscar de la Renta fragrances, both performed very well. With the recent introduction of Bella Blanca by Oscar de la Renta, our 2018 launch schedule is on track with new products for Abercrombie & Fitch, Hollister, Dunhill, and Anna Sui coming to market throughout the year. A big boost in incremental sales is expected to come from the addition of GUESS legacy fragrances to our sales mix after the license starts on April 1, 2018. We expect that right out of the gate, the GUESS run rate will make it the largest brand in this group.”
Highlighting several key operating factors impacting profitability, Mr. Greenberg stated, “The improvement in gross margin reflects increased sales of higher margin products by our European operations, much of which was through our distribution subsidiaries that sell product directly to retailers. Of special note, sales of Montblanc, Jimmy Choo and Coach products to retailers in the U.S. are conducted by a Company-owned distribution subsidiary, and sales of Rochas brand fragrance are concentrated in France, where we sell directly to retailers, and in Spain, where we sell through our distribution subsidiary. Selling, general and administrative expenses rose 14% compared to 2016, but as a percentage of net sales, were 50% for both 2017 and 2016. Promotion and advertising included selling, general and administrative expenses, generally peaks in the fourth quarter and 2017 was no exception; as a percentage of sales, promotion and advertising was 20.9% in 2017 and 19.0% in 2016.”
Mr. Greenberg pointed out, “For many years, our focus has been on growing our prestige fragrance business and brand portfolio; therefore during the fourth quarter of 2017, we set in motion a plan to discontinue several of our small mass market product lines over the next few years. In that regard, as of December 31, 2017 we recorded an impairment loss of $2.1 million and increased our inventory obsolescence reserves by $0.5 million.”
The Company’s effective income tax rate was 29.2% in 2017 and 35.5% in 2016 noting that in 2017, the French Constitutional Court released a decision declaring that the nation’s 3% tax on dividends or deemed dividends enacted in 2012, was unconstitutional. Inter Parfums has filed a claim for a $3.6 million refund for these taxes paid since 2015 and recorded the refund claim in its 2017 financial statements. Partially offsetting the tax refund was a nonrecurring expense of $1.1 million related to revaluation of deferred tax assets and liabilities caused by the new lower corporate tax rate resulting from the Tax Cuts and Jobs Act.
Mr. Greenberg also pointed out, “In 2017, cash provided by operating activities aggregated $35.9 million and we closed the year with working capital of $382 million, including approximately $278 million in cash, cash equivalents and short-term investments, a working capital ratio of almost 3.3 to 1 and $60.6 million of long-term debt, including current maturities, incurred in connection with the 2015 Rochas brand acquisition.”
2018 Guidance Excluding GUESS Contribution
Mr. Greenberg noted, “Once we purchase the GUESS inventory from the brand’s former licensee and determine how long it will take to build new inventory, we plan to increase our 2018 guidance to factor in the GUESS contribution, which we anticipate will begin in the second quarter of the year. Our target date for announcing the expected increase in our sales and earnings guidance to include GUESS is when we announce 2018 first quarter results in May. Thus for the time being, we are maintaining our previously disclosed 2018 guidance which calls for net sales of approximately $620 million and net income attributable to Inter Parfums, Inc. of approximately $1.44 per diluted share.” Guidance for 2018 assumes the dollar remains at current levels.
The Company’s regular quarterly cash dividend of $0.21 per share is payable on April 13, 2018 to shareholders of record on March 30, 2018.
Management will conduct a conference call to discuss financial results and business developments at 11:00 am ET, on Wednesday, March 14, 2018. Interested parties may participate in the call by dialing (201) 493-6749; please call in 10 minutes before the conference call is scheduled to begin and ask for the Inter Parfums call. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.interparfumsinc.com and click on the Investor Relations section.
Founded more than 30 years ago, Inter Parfums, Inc. is a premier fragrance company with a diverse portfolio of prestige brands that includes Abercrombie & Fitch, Agent Provocateur, Anna Sui, bebe, Boucheron, Coach, Dunhill, GUESS, Hollister, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc, Oscar de la Renta, Paul Smith, Repetto, Rochas, S.T. Dupont and Van Cleef & Arpels. The fragrance products developed, produced and distributed by Inter Parfums are sold in more than 100 countries throughout the world.
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, 2017 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.
See Accompanying Tables
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
Three Months Ended
Twelve Months Ended
|Cost of sales||50,725||48,877||214,965||194,601|
|Selling, general and administrative expenses||91,864||79,503||295,540||258,787|
|Gain on buyout of license||--||(4,652||)||--||(4,652||)|
Income from operations
|Other expenses (income):|
|Loss on foreign currency||241||207||1,549||595|
|Income before income taxes||4,270||5,628||78,065||67,074|
|Less: Net income attributable to the noncontrolling interest||
Net income attributable to Inter Parfums, Inc.
|Net income attributable to Inter Parfums, Inc. common shareholders:|
|Weighted average number of shares outstanding:|
|Dividends declared per share||$||0.21||$||0.17||$||0.72||$||0.62|
|INTER PARFUMS, INC. AND SUBSIDIARIES|
|Consolidated Balance Sheets|
|December 31, 2017 and 2016|
|(In thousands except share and per share data)|
|Cash and cash equivalents||$||208,343||$||161,828|
|Accounts receivable, net||120,749||104,819|
|Other current assets||7,356||6,240|
|Income taxes receivable||3,468||626|
|Total current assets||549,278||472,125|
|Equipment and leasehold improvements, net||10,330||10,076|
|Trademarks, licenses and other intangible assets, net||200,495||183,868|
|Deferred tax assets||9,658||8,090|
|Liabilities and Equity|
|Current portion of long-term debt||24,372||21,498|
|Accounts payable - trade||52,609||49,507|
|Income taxes payable||1,722||3,331|
|Total current liabilities||167,107||142,238|
|Long–term debt, less current portion||36,207||53,064|
|Deferred tax liability||3,821||3,449|
|Inter Parfums, Inc. shareholders’ equity:|
|Preferred stock, $0.001 par value. Authorized 1,000,000 shares;|
|Common stock, $0.001 par value. Authorized 100,000,000 shares;|
|outstanding, 31,241,548 and 31,138,318 shares|
|at December 31, 2017 and 2016, respectively||31||31|
|Additional paid-in capital||66,004||63,103|
|Accumulated other comprehensive loss||(17,832)||(57,982)|
|Treasury stock, at cost, 9,864,805 common shares|
|at December 31, 2017 and 2016||(37,475)||(37,475)|
|Total Inter Parfums, Inc. shareholders’ equity||433,298||370,391|
|Total liabilities and equity||$||777,772||$||682,409|