Inter Parfums(IPAR) - 2023 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited consolidated financial statements for the three months ended March 31, 2023, detailing financial position, performance, and cash flows with accompanying notes Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $851,601 | $787,724 | | Total Assets | $1,380,206 | $1,308,542 | | Total Current Liabilities | $362,169 | $344,567 | | Total Liabilities | $530,599 | $520,931 | | Total Equity | $849,607 | $788,146 | Consolidated Statements of Income Q1 2023 vs Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Sales | $311,723 | $250,678 | | Gross Margin | $202,957 | $158,658 | | Income from Operations | $90,279 | $61,217 | | Net Income | $70,908 | $46,291 | | Net Income Attributable to Inter Parfums, Inc. | $54,068 | $35,299 | | Diluted EPS | $1.68 | $1.10 | | Dividends Declared per Share | $0.625 | $0.50 | Consolidated Statements of Cash Flows Q1 2023 vs Q1 2022 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,358) | ($23,944) | | Net cash provided by (used in) investing activities | $61,644 | ($11,803) | | Net cash used in financing activities | ($12,555) | ($20,032) | | Net increase (decrease) in cash | $44,342 | ($58,265) | | Cash and cash equivalents - end of period | $149,055 | $110,122 | Notes to Consolidated Financial Statements - The company continues to experience significant strains on its supply chain, affecting component procurement, transportation, and costs, with disruptions not expected to ease until the second half of 2023[30] - Key licensing updates include a new exclusive worldwide license with Lacoste effective January 2024, the non-renewal and expiration of the Dunhill license on September 30, 2023, and new fragrance launches under the Donna Karan and DKNY brands planned for 2024[31][32][33] Net Sales by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | European Operations | $230,269 | $182,182 | | United States Operations | $81,454 | $68,502 | | Total Net Sales | $311,723 | $250,678 | - In Q1 2023, the company initiated a share repurchase program, buying back 43,060 shares for $5.58 million, with plans to continue repurchasing shares throughout 2023[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strong Q1 2023 financial performance, highlighting sales growth, improved margins, and a robust liquidity position Overview - The company operates in two segments: European based operations (74% of Q1 2023 sales) and United States based operations (26% of Q1 2023 sales), achieving business growth by adding new brands and introducing new products[77][78][79] Sales Percentage by Largest Brands | Brand | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Montblanc | 20% | 19% | | Jimmy Choo | 20% | 15% | | Coach | 15% | 15% | | GUESS | 9% | 11% | Results of Operations - Net sales for Q1 2023 increased 24.4% to $311.7 million, or 29% at comparable foreign currency rates, with European operations sales growing 26.4% and U.S. operations sales growing 18.9%[93][94] - Sales growth was strong across major brands, with Jimmy Choo up 63%, Montblanc up 28%, and Coach up 24% YoY, and robust across all major geographic regions, led by North America (+36%) and Central/South America (+43%)[95][100] - Consolidated gross margin improved, driven by pricing actions, favorable exchange rates for European operations, and a favorable brand/channel mix for U.S. operations[103][104] - SG&A expenses increased due to higher promotion and advertising costs ($35.2 million in Q1 2023 vs. $34.2 million in Q1 2022) to support new product launches and build brand awareness[107][110] Liquidity and Capital Resources - As of March 31, 2023, the company had a strong liquidity position with $238 million in cash, cash equivalents, and short-term investments, and a working capital of $489 million[126][127] - Cash used in operating activities was $7.4 million, an improvement from $23.9 million in the prior-year period, primarily due to higher net income despite increased working capital needs for accounts receivable and inventory[130] - In February 2023, the Board of Directors increased the annual dividend to $2.50 per share, with a quarterly dividend of $0.625 per share payable on June 30, 2023[136] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks, primarily foreign currency and interest rate exposures, using derivative financial instruments to minimize financial impact - The company uses foreign currency forward exchange contracts to hedge exposure on foreign currency-denominated receivables and future sales, particularly for its European operations where the functional currency is the euro[141] - As of March 31, 2023, the company held foreign currency forward exchange contracts totaling approximately $37.0 million, all with maturities of less than one year[144] - Interest rate risk is managed by monitoring rates and using interest rate swaps to convert variable-rate debt to fixed-rate debt or vice versa, as deemed appropriate[145] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[148] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[149] Part II. Other Information Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases conducted in open market transactions during Q1 2023 Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1-31 | 16,060 | $110.63 | | February 1-28 | 0 | n/a | | March 1-31 | 27,000 | $140.87 | | Total | 43,060 | $129.59 | Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and interactive data files - Filed exhibits include certifications by the CEO and CFO under Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as interactive data files (XBRL)[153]