Market Overview

Inter Parfums, Inc. Reports 2018 Second Quarter Results

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Net Income Increases 61.6% on 15.7% Increase in
Net Sales

Inter Parfums, Inc. (NASDAQ GS: IPAR) today reported results for the
second quarter ended June 30, 2018. Of note, the average dollar/euro
ratio for the current second quarter is 1.19, up 8% from 1.10 in the
second quarter of 2017.

Second Quarter 2018 Compared to Second Quarter 2017:

  • Net sales were $149.4 million, up 15.7% from $129.1 million, at
    comparable foreign currency exchange rates, net sales increased 12.3%;
  • Net sales by European based operations rose 8.3% to $115.6 million
    from $106.7 million;
  • Net sales by U.S. based operations increased 50.8% to $33.8 million,
    compared to $22.4 million;
  • Gross margin was 64.0% compared to 65.0%;
  • S,G&A expenses as a percentage of net sales were 51.5% compared to
    53.8%
  • Operating income increased 29.7% to $18.8 million from $14.5 million;
  • Operating margin rose to 12.6% compared to 11.2%;
  • The effective income tax rate was 30.2% compared to 33.4%;
  • Net income attributable to Inter Parfums, Inc. increased 61.6% to
    $10.9 million from $6.7 million and;
  • Net income attributable to Inter Parfums, Inc. per diluted share rose
    59.1% to $0.35 from $0.22.

Discussing European based operations, Jean Madar, Chairman & CEO of
Inter Parfums, Inc., stated, "As we reported last month, second quarter
sales growth was primarily attributable to recurring sales of
established fragrances and brand extensions by three of our largest
brands, Jimmy Choo, Coach and Lanvin, for which comparable quarter sales
rose 8.2%, 98.5% and 7.1%, respectively. One such brand extension that
took place this spring was the debut of Coach Floral, which
helped elevate Coach into third place among our largest fragrance brands
through the first half of 2018. We also launched Jimmy Choo Man
Blue
this spring, further building upon the Jimmy Choo Man
franchise. We entered the second half with Montblanc brand sales running
12% ahead of the first half of 2017. The 33% first quarter increase in
Montblanc brand sales offset the 9.8% second quarter sales decline. We
are encouraged by the comparable quarter upturn in Karl Lagerfeld brand
sales, due in great part to Les Parfums Matières, a duo launched
in the second half of 2017."

Moving on to U.S. operations, Mr. Madar noted, "Anna Sui fragrance sales
performed extremely well during the second quarter due to the brand's
popularity in the fast-growing Asian market. Dunhill is still a star
performer thanks to the Icon fragrance family, and the recent
launch of Dunhill Century. Oscar de la Renta legacy scents and Bella
Blanca,
which debuted in the first quarter, supported growth in
brand sales. We are also very pleased by the successful launch of two
brand extensions for the Abercrombie & Fitch First Instinct
fragrance family. Lastly, the inclusion of legacy GUESS fragrance sales
toward the end of the second quarter factored into the nearly 51%
increase in net sales."

Highlighting new product launches scheduled for the second half, Mr.
Madar noted, "For European operations, Jimmy Choo Fever debuted
in France in July and will be on U.S. shelves beginning in September.
Also last month, we unveiled Éclat de Nuit for Lanvin. In
addition, we will be introducing two men's scents, Coach Platinum
in September and Rochas Moustache the following month. For U.S.
operations, we are debuting Flight of Fancy Spirit for Anna Sui
and rolling out Century, a new pillar by Dunhill. Also this
summer, Abercrombie & Fitch adds First Instinct Blue for
women to its fragrance portfolio and for Hollister, an entirely new
fragrance duo, Festival Vibes, comes to market."

Mr. Madar concluded, "We are very encouraged by the year-to-date sales
growth across all regions. Through the first half of the year, our three
largest markets, North America, Western Europe and Asia, achieved sales
growth of 17.8%, 9.0% and 31.5%, respectively, compared to the first
half of 2017. Similarly, our next three markets ranked by size, the
Middle East, Central and South America and Eastern Europe, have grown
sales by 22.5%, 13.0% and 24.1%, respectively."

Russell Greenberg, Executive Vice President and CFO of Inter Parfums,
Inc., stated, "The second quarter dollar/euro ratio had less of an
impact on our sales and gross margin than in the first quarter, when the
U.S. dollar/euro exchange rate increased 16% to 1.23, as compared to
1.06 in the first quarter of 2017. The gross margin generated by
European operations in the second quarter of 2018 declined slightly to
68.1% from 68.5% in the prior year's second quarter, while gross margin
for U.S. operations was 50.2%, up from 48.5% in the corresponding period
last year due to increased sales of higher margin prestige products
under licenses."

He continued, "In the current second quarter, two significant swing
items below the operating income line magnified the strong operating
results. Firstly, there was a $1.5 million gain on foreign currency
versus the $0.8 million loss on foreign currency in the second quarter
of 2017. Secondly, our effective tax rate was 30% in the current second
quarter versus 33% in the same period last year."

Mr. Greenberg also pointed out, "We closed the quarter with working
capital of $372 million, including approximately $223 million in cash,
cash equivalents and short-term investments, a working capital ratio of
nearly 3.2 to 1 and $58 million of long-term debt including current
maturities incurred in connection with the 2015 Rochas brand
acquisition."

Affirms 2018 Guidance

Mr. Greenberg concluded, "As we reported last month, we continue to look
for 2018 net sales to approximate $665 million and net income per
diluted share attributable to Inter Parfums, Inc. to come in at $1.59.
Guidance assumes the dollar remains at current levels."

Dividend

The Company's regular quarterly cash dividend of $0.21 per share will be
paid on October 15, 2018 to shareholders of record on September 28, 2018.

Conference Call

Management will conduct a conference call to discuss financial results
and business developments at 11:00 AM ET on Wednesday, August 8, 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. 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.

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, Graff, 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)

(Unaudited)

       
Three Months Ended
June 30,
Six Months Ended
June 30,
2018   2017 2018   2017
 
Net sales $ 149,367 $ 129,136 $ 321,133 $ 272,194
 
Cost of sales   53,713     45,193     119,851     98,181  
 
Gross margin 95,654 83,943 201,282 174,013
 
Selling, general and administrative expenses   76,885     69,468     152,117     133,367  
 
Income from operations   18,769     14,475     49,165     40,646  
 
Other expenses (income):
Interest expense 568 727 1,030 999
(Gain) loss on foreign currency (1,500 ) 817 (1,295 ) 973
Interest income   (729 )   (900 )   (2,474 )   (2,173 )
 
  (1,661 )   644     (2,739 )   (201 )
 
Income before income taxes 20,430 13,831 51,904 40,847
 
Income taxes   6,171     4,620     15,783     13,469  
 
Net income 14,259 9,211 36,121 27,378
 
Less: Net income attributable to the noncontrolling interest  

3,360

   

2,467

   

9,313

   

7,261

 
 
Net income attributable to

Inter Parfums, Inc.

$

10,899

 

$

6,744

 

$

26,808

 

$

20,117

 
 
 
Earnings per share:
 
Net income attributable to Inter Parfums, Inc. common
shareholders:
Basic $ 0.35 $ 0.22 $ 0.86 $ 0.65
Diluted $ 0.35   $ 0.22   $ 0.85   $ 0.64  
 
Weighted average number of shares outstanding:
Basic 31,299 31,169 31,283 31,157
Diluted   31,490     31,281     31,459     31,268  
 
 
Dividends declared per share $ 0.21   $ 0.17   $ 0.42   $ 0.34  
 
 

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)

 

ASSETS
      June 30,

2018

  December 31,
2017
Current assets:
Cash and cash equivalents $ 145,318 $ 208,343
Short-term investments 77,562 69,899
Accounts receivable, net 140,026 120,749
Inventories 169,323 137,058
Receivables, other 2,424 2,405
Other current assets 7,797 7,356
Income taxes receivable   677     3,468  
 
Total current assets 543,127 549,278
 
Equipment and leasehold improvements, net 10,117 10,330
 
Trademarks, licenses and other intangible assets, net 210,677 200,495
Deferred tax assets 10,851 9,658
 
Other assets   7,720     8,011  
 
Total assets $ 782,492   $ 777,772  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Current portion of long-term debt $ 23,610 $ 24,372
Accounts payable – trade 66,047 52,609
Accrued expenses 69,185 81,843
Income taxes payable 6,055 1,722
Dividends payable   6,577     6,561  
 
Total current liabilities   171,474     167,107  
 
Long–term debt, less current portion   34,501     36,207  
 
Deferred tax liability   3,706     3,821  
 
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
31,318,273 and 31,241,548 shares at

June 30, 2018 and December 31, 2017, respectively

 

31

 

31

Additional paid-in capital 67,934 66,004
Retained earnings 436,605 422,570
Accumulated other comprehensive loss (28,146 ) (17,832 )
Treasury stock, at cost, 9,864,805 shares at June 30, 2018 and
December 31, 2017
 

(37,475

)

 

(37,475

)

 
Total Inter Parfums, Inc. shareholders' equity 438,949 433,298
 
Noncontrolling interest   133,862     137,339  
 
Total equity   572,811     570,637  
 
Total liabilities and equity $ 782,492   $ 777,772  
 

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