Inter Parfums(US:IPAR)2020-05-11 20:41Sales Performance - Total net sales for the three months ended March 31, 2020, declined 18.7% to $144.8 million, compared to $178.2 million for the same period in 2019[97]. - European based product sales decreased 20.6% to $114.1 million, while United States based product sales decreased 10.9% to $30.7 million for the three months ended March 31, 2020[98][100]. - Approximately $34 million in sales were lost in the three months ended March 31, 2020, due to the COVID-19 pandemic, with $28 million from European operations and $6 million from U.S. operations[85]. - The Montblanc and Jimmy Choo brands experienced sales declines of 33.4% and 28.3%, respectively, for the three months ended March 31, 2020[98]. - Net sales for the three months ended March 31, 2020, were $144.8 million, a decline of 18.7% compared to $178.2 million for the same period in 2019[102]. Financial Metrics - Gross profit margin was 61.5% of net sales for the three months ended March 31, 2020, slightly down from 61.6% in the prior year[103]. - Income from operations decreased 46.6% to $17.8 million for the three months ended March 31, 2020, compared to $33.3 million for the same period in 2019[109]. - Net income decreased 46.8% to $13.3 million for the three months ended March 31, 2020, down from $25.0 million in the prior year[119]. - Selling, general and administrative expenses decreased 6.9% to $71.3 million for the three months ended March 31, 2020, but represented 49.2% of net sales compared to 42.9% in 2019[106]. - Cash used in operating activities was $25.1 million for the three months ended March 31, 2020, compared to $14.6 million in the same period of 2019[125]. Cash and Debt Position - As of March 31, 2020, the company had $204 million in cash and cash equivalents, with only $9.8 million in long-term debt[89]. - As of March 31, 2020, the company had $204 million in cash, cash equivalents, and short-term investments, with long-term debt of only $9.8 million[122]. - The company believes that its current cash position and available credit facilities will meet all present and foreseeable future operating needs[133]. - The company had no short-term borrowings outstanding and had access to a $20.0 million unsecured revolving line of credit and approximately $27.0 million in credit lines from international financial institutions[130]. Marketing and Promotions - Advertising and promotional expenses for the three months ended March 31, 2020, totaled $28.5 million, representing 19.7% of net sales, compared to $27.3 million or 15.4% for the same period in 2019[85]. - The company has postponed the launch of several programs originally scheduled for 2020 until 2021, including launches for Kate Spade New York, Jimmy Choo, Anna Sui, and GUESS brands[101]. - The company plans to postpone several promotional programs originally scheduled for 2020 until 2021 due to the COVID-19 pandemic[107]. Tax and Interest Rates - The effective tax rate for the three months ended March 31, 2020, was 29.0%, up from 27.4% in the prior year[114]. - An interest rate swap was entered into in June 2015 on €100 million of debt, effectively converting the variable interest rate to a fixed rate of approximately 1.2%[140]. Strategic Initiatives - The company plans to continue investments in fast-growing markets and channels to grow market share despite the challenges posed by the COVID-19 pandemic[80]. - The company is exploring opportunities for external growth through potential acquisitions or licensing agreements, although no assurances can be made regarding the consummation of such agreements[124]. - The company agreed to pay $15.0 million in annual installments of $1.1 million related to a license agreement, with interest imputed at 4.1%[129]. Currency and Inflation - The average U.S. dollar/euro exchange rate for the first quarter of 2020 was 1.10, compared to 1.14 in the first quarter of 2019, impacting net sales[97]. - The company does not engage in trading foreign currency forward exchange contracts or interest rate swaps, focusing instead on risk management through hedging[135]. - Inflation rates in the U.S. and other operating countries did not significantly impact operating results for the three-month period ended March 31, 2020[133]. - The company periodically enters into foreign currency forward exchange contracts to hedge exposure related to foreign currency receivables and future sales[136]. - The company has foreign currency contracts totaling approximately U.S. $40.0 million, GB £1.0 million, and JPY ¥170.0 million, all maturing in less than one year[139]. Employee Compensation - The purchase of subsidiary shares from noncontrolling interest is expected to be issued to employees under the Free Share Plan[131].