UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 REPORT ON FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NO. 0-16469 Jean Philippe Fragrances, Inc. (Exact name of registrant as specified in its charter) Delaware 13-3275609 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 551 Fifth Avenue, New York, New York 10176 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 983-2640. Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value per share. Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes /X/ No / / Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any other amendment to this Form 10K. / X / State the aggregate market value of the voting stock held by nonaffiliates of the registrant (based on the closing price on April 9, 1997 of $5.50): $25,475,356. Indicate the number of shares outstanding of the registrant's $.001 par value common stock as of the close of business on the latest practicable date (April 9, 1997): 9,602,481. Documents Incorporated By Reference: None.
PART I Item 1. Business Introduction Jean Philippe Fragrances, Inc. was organized under the laws of the State of Delaware in May 1985, maintains it executive offices at 551 Fifth Avenue, New York, New York 10176 and its telephone number is 212-983-2640. Unless the context otherwise indicates, the term "Jean Philippe" refers to the parent company, Jean Philippe Fragrances, Inc., and the term the "Company" refers to Jean Philippe Fragrances, Inc. and its consolidated majority-owned direct and indirect subsidiaries, Inter Parfums Holdings, S.A. ("IP Holdings"), Inter Parfums, S.A. ("Inter Parfums"), Inter Parfums Trademarks, S.A. and Inter Parfums Cosmetiques; and the Company's wholly-owned subsidiaries, Elite Parfums, Ltd. ("Elite") and Jean Philippe Fragrances do Brasil, Ltda. ("Jean Philippe Brasil"), a limited liability company. The Company is a manufacturer and distributor of fragrances and cosmetics in the following niche markets: domestic and international brand name and licensed fragrances, alternative designer fragrances and mass market cosmetics. The Company is the owner of the Intimate(R), Parfums Molyneux(R) and Parfums Weil(R) fragrance lines, and Aziza(R), a hypo-allergenic line of eye cosmetics; and is the world-wide licensee, manufacturer and distributor of the Burberrys(R), Ombre Rose(R) and Regine's(R) fragrance lines, the Jordache(R) line of fragrances and cosmetics and Chaz(R) fragrances for men. The Company has entered into an agreement to relinquish its license in the United States and Puerto Rico for Cutex(R) nail care and lip products. See "Item 1. Business-Mass Market Cosmetics." Inter Parfums markets its own line of moderately priced fragrances and certain licensed or brand name fragrances in approximately sixty (60) countries worldwide. The Company has in the past acquired, and may in the future seek to acquire or divest, one (1) or more companies or divisions of companies in the fragrance or cosmetic business, or fragrance product lines or related cosmetic products. Any and all discussions had by management to date have been at the inquiry, pre-negotiation level only, and no assurances can be given that: (i) management will pursue any transaction should a company, business, division, or product line become available for sale or purchase; (ii) or if pursued, that any transaction will be consummated; or (iii) if consummated, that any such transaction will increase the Company's earnings. 1
Products and Selection -Alternative Designer Fragrances The Company produces and markets several lines of fragrances which it sells at a substantial discount from the high image, high retail cost brand name counterparts. Prior to producing and marketing a new alternative designer product, management of the Company looks for the existence of certain factors with respect to a particular designer fragrance: (i) high retail selling price, (ii) substantial expenditure of advertising dollars and (iii) selective distribution. Management is of the opinion that the presence of all three (3) factors gives a reasonable degree of market presence for such designer fragrance. Management then seeks to create a similar scent which, together with creative packaging and steeply discounted prices, will create what the Company intends will be an appealing fragrance to be sold to wholesalers, mass market merchandisers and drug store chains at substantial discounts from the higher cost, brand name fragrance. The Company's alternative designer fragrances, which are produced in the United States, are similar in scent to highly advertised designer fragrances that are marketed at a high retail price. These products are intended to have an upscale image without a high retail price, and typically sell for under $5.00 at the mass market retail level, substantially discounted from the high cost of designer fragrances which typically range from $30.00 to $200.00 at prestige retail locations. Some of the alternative designer fragrances currently produced and marketed by the Company include: JP Do(TM), Elite 2(TM), Uno(TM), C Elite(TM), Flight(TM), Memphis(R) and Dakota(TM). Additionally, the Company markets complementary alternative designer fragrance products such as skin creams, deodorant sticks, roll on deodorants and body sprays. New products are intended to be developed in accordance with market feasibility and demand. Management of the Company believes that demand for new alternative designer fragrances may be created when participants in the designer fragrance industry launch promotional campaigns for new products. -Brand Name and Licensed Fragrances The Parfums Weil and Parfums Molyneux world-wide family of trademarks were acquired in 1994 by Inter Parfums, and cover a variety of moderately priced fragrance lines for distribution to perfumeries, and the fragrance lines are distributed in over thirty (30) countries world-wide. Parfums Molyneux, formed in 1927, has established a classic line of fragrances including Captain and Quartz, with representation in all major markets world-wide. Parfums Weil has enjoyed a similar history dating back to the early 1900's with its first production of a range of original perfumes presented in 2
exquisite Baccarat bottles. Through the years the fragrance lines were modernized and expanded, and today include the trademarks Bambou, Antilope and Kipling, among others. Quartz by Molyneux has achieved wide acceptance in Central and South America. During 1996, Inter Parfums introduced a new fragrance, Quartz for men, which followed the launch in 1995 of Fluer de Weil, a new fragrance developed by Inter Parfums following the trend of light floral notes associated with the Weil brand. In 1994 the Company acquired from Revlon Consumer Products Corporation ("Revlon") the world-wide trademarks for the Intimate fragrance line, and entered into a 99 year royalty free license agreement with Revlon for the use of the trademark Chaz in connection with men's fragrances, deodorants and body sprays. The Intimate and Chaz brands cover a variety of moderately priced fragrances for mass market distribution, and are currently distributed in a number of countries throughout the world. The Intimate product line has been available for over forty (40) years and has gained a reputation for quality and value with women over forty (40) years of age. In 1993 Inter Parfums acquired the exclusive world-wide license for Burberrys fragrances in accordance with the terms of a License Agreement entered into among Burberrys Limited as licensor, Inter Parfums as licensee and Jean Philippe as the guarantor of Inter Parfums obligations thereunder (the "Burberrys License Agreement"). The Burberrys License Agreement expires December 31, 2003, subject to certain minimum sales requirements and royalty payments. In 1995 Inter Parfums completely redesigned all products under the Burberry's brand name, which achieved successful distribution in more than twenty (20) countries around the world. Sales of the new Burberry's line achieved substantial growth in 1996 and its continued success is anticipated for 1997. Additionally in 1997, Inter Parfums retained a new distributor in the United States for its Burberry's fragrances, and will launch two (2) additional new Burberry's fragrance lines. In 1993 Inter Parfums acquired the exclusive world-wide license for Ombre Rose fragrances as well as other fragrances to be developed by Inter Parfums in accordance with the terms of a License Agreement entered into between Jean-Charles Brosseau S.A. as licensor and Inter Parfums as licensee (the "Brosseau License Agreement"). The Brosseau License Agreement is for a term of ten (10) years, subject to certain minimum sales requirements and royalty payments. The Ombre Rose line, with its classically designed bottle, continues to enjoy wide acceptance in the Far East and the United States. In addition, Inter Parfums acquired all of the then existing world-wide distribution rights for Ombre Rose fragrances, which had previously been granted to two (2) affiliated companies based in Miami, Florida, subject to continuing in effect certain sub-distribution agreements outside of the United States in accordance with 3
their respective terms. As part of such transaction, Inter Parfums granted exclusive distribution rights in the United States, Canada and Puerto Rico to Fragrance Marketing Group, Inc., an affiliate of the former distributors of Ombre Rose, for the same term as the Brosseau License Agreement, subject to certain minimum purchase requirements. Jean Philippe has guaranteed the obligations of Inter Parfums under such agreements. In May 1996 the Distribution Agreement was assigned by Fragrance Marketing Group, Inc. to French Fragrances, Inc., which is now the exclusive distributor in the United States, Canada and Puerto Rico. In 1990 the Company obtained the exclusive right to use the trademark Jordache(R) from Jordache Enterprises, Inc. ("Jordache") in connection with the manufacturing, marketing and distribution of fragrances and cosmetics in the United States. The Company also received the license to manufacture, market and distribute fragrances and cosmetics in various territories abroad, which territories are to become exclusive in nature upon the commencement of substantial bona fide sales in each such territory. The initial term of the license was for five and a half (5-1/2) years and ended on June 30, 1995. In addition the license agreement provides the Company with the right to renew the license for ten (10) annual renewal terms, subject to certain minimum sales and royalty payment requirements. In the first quarter of fiscal year ending December 31, 1997, the Company elected to renew the Jordache license for the next annual period. Since obtaining the right to use the Jordache trademark, the Company has created and produced, and presently markets, a Jordache(R) product line, which consists of a collection of moderately priced fragrances and cosmetics (lipstick, nail polish and eye shadows) geared to the youth market. In 1989 the Company became the exclusive world wide distributor for a new fragrance called Regine's, which is sold internationally in approximately sixty (60) countries. The Regine's fragrance was developed by Inter Parfums, the first original fragrance to be created and marketed by the Company. Inter Parfums markets Regine's, Zoa(TM) and Jimmy'z (the Regine's men's fragrance) outside the United States and Canada. In March 1996, the Company, through its indirect, majority-held subsidiary, formerly known as Parfums Jean Desprez, S.A. and its wholly-owned subsidiary, formerly known as Jean Desprez, S.A., sold to Parlux Fragrances, Inc. all of the trademarks and related intellectual property rights, equipment, ancillary assets and inventory of the Bal`a Versailles and Revolution `a Versailles lines, among others. In addition, Parfums Jean Desprez and Jean Desprez on behalf of themselves and their parent and affiliated corporations, agreed not to create alternative designer fragrances with similar packaging to the Bal`a Versailles and Revolution `a Versailles, lines. The aggregate consideration paid by the purchaser was $4.95 million, including inventory. 4
-International Fragrances Inter Parfums creates, produces and markets its proprietary line of fragrances designed to appear expensive, with attractive bottling and packaging, but sold in the middle market. Typical proprietary fragrances sold by Inter Parfums retail between U.S.$10.00 to $15.00. Mass Market Cosmetics In 1994 Jean Philippe entered into a license agreement with Chesebrough-Pond's, Inc. ("Chesebrough") for the exclusive rights to manufacture and market Cutex(R) nail care (excluding nail polish remover) and lip color products in the United States and Puerto Rico (the "Cutex License"). The Cutex License originally provided for an initial term of seven (7) years together with three (3) annual renewal periods, and further provided that either party had the right to cancel the agreement if certain minimum annual sales levels are not achieved. The Cutex License also provided for the payment of royalties based upon net sales and included a minimum annual royalty payment. Sales of Cutex products have been substantially below that set forth in the Cutex License, and product returns have been substantially higher than anticipated. In response thereto management initiated a three (3) step plan in an attempt to revitalize the Cutex operations. First, as a result of disappointing sales in the Cutex lip color line, the Company decided to discontinue production of such line in October 1995. As a result, the Company recorded a nonrecurring charge aggregating $2.2 million, before taxes, in the fourth quarter of 1995. (See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operation"). This charge represented a writedown of current lip product inventory and the effect of potential customer returns or markdowns which may have been required on lip products in 1996. The second step in management's plan to was to procure a reduction in the minimum annual royalties payable under the Cutex License, which the licensor of Cutex agreed to in March 1996. Thereafter the Company initiated the third step of its plan by reducing advertising expenditures for both the media and the trade to coincide with the reduced sales volume. Moreover, the Company cut the retail division's operating expenses by reorganization of the division, including termination of the executive in charge of all retail operations and the head of the retail sales force, and consolidation of other management positions within such division. Wholly apart from management's plan, Chesebrough, the Licensor, entered into an agreement in March 1997 with Carson, Inc. ("Carson"), a New York Stock Exchange listed company, to convey the Cutex trademarks. At the request of Carson, 5
the Company entered into an agreement with Carson consenting to relinquish its Cutex nail and lip products license. In connection with this transaction, all current inventory is to be purchased and certain liabilities are to be assumed by Carson. Both transactions are to close simultaneously, and management anticipates that the transaction will close on or about April 30, 1997. See Item 7, "Management's Discussion And Analysis Of Financial Condition And Results Of Operation." In February 1996 the Company launched its Aziza(R) brand of hypo-allergenic line of eye cosmetics through mass market distribution. The new Aziza line was completely modernized and includes thirty-six (36) of the historically most popular and best selling mascaras, eyeliners and eyeshadows. The Company acquired the world-wide trademarks for the brand name Aziza in June 1994 from Chesebrough-Pond's USA, Unilever N.V. and various affiliates of Unilever N.V. for nominal consideration. Also in the mass market cosmetics category, the Company has created, produced and markets a Jordache(R) line of cosmetics (lipstick, nail polish and eye shadows), which is geared to the youth segment of such market. The Company's Jordache cosmetic and Aziza lines are presently distributed in approximately 5,000 mass market outlets. Production and Supply A substantial portion of the Company's products are produced by the Company either in the United States or France. Although the Company does not own a factory or production plant, it acts as a general contractor, and supervises each stage of production from the creation of the fragrance, design and creation of the bottle, dispenser or container, filling of same, packing and shipping, all as performed by various subcontractors. Management believes that its relationships with such subcontractors are good, and that there are sufficient alternate subcontractors should one or more subcontractors become unavailable. Inventory The Company purchases its raw materials and component parts from suppliers based upon internal estimates of anticipated need for finished goods, which enables the Company to meet its production requirements for finished goods. The Company generally delivers customer orders within seventy-two (72) hours of their receipt. Sales and Marketing The broad array of Company product lines permits the Company to market fragrances and cosmetics to all levels of distribution -- the alternative designer fragrances, Jordache and Aziza cosmetics at mass market, the Inter Parfums 6
proprietary line at the moderately priced level and the Company's brand name and licensed designer fragrances at the high end. The Company markets its alternative designer fragrances, personal care products and its Aziza and Jordache product lines through in-house sales executives to mass merchandisers, major drugstore chains, supermarket chains, "specialty store chains" (multiple outlets of accessories, jewelry and clothing), and wholesalers. The Company's alternative designer products are presently being sold in approximately 10,000 retail outlets. In addition, the Company has an established electronic ordering and invoicing system, or Electronic Data Interface ("EDI"), which permits the Company to receive orders and submit invoices for products via computer modem. Such process eliminates the need for hard copy purchase orders and invoices from certain major retailers. Management believes that EDI facilitates the receipt, processing and invoicing of customer orders. Mass market merchandisers, major drug chains and supermarkets are the most established markets for all of Jean Philippe's product lines, and are the traditional points of distribution for them. The ultimate market for this business segment is the general public. Some of the mass market merchandisers, major drug store chains and supermarket chains which are presently carrying the Company's products include: Walmart, KMart, Walgreen's, Revco, Rite Aid, Winn Dixie, CVS, and Food Lion. Another market for the Company's products consists of distributors and wholesalers, which service independent stores. Often, the trends in this business segment mirror those of major drug store chains and mass market retailers. The Company uses the same marketing strategy of providing quality products coupled with flexible programs (i.e., discounts, extended payment terms) in order to compete with other alternative fragrance companies. During fiscal years ended December 31, 1996, 1995 and 1994, no customer accounted for ten percent (10%) or more of sales on a consolidated basis. Foreign Sales and Marketing Marketing and sales of the Company's brand name and licensed designer fragrance line are conducted through independent distributors, in-house executives and international agents and importing companies and such products are sold in approximately sixty (60) countries world-wide. Generally, marketing and advertising are subject to approval of the respective licensors. Advertising for the Company's designer fragrance lines appear in high fashion magazines and to a lesser extent on television in France and the Middle East. 7
Inter Parfums maintains its own in-house sales force with executives who are generally responsible for marketing the Inter Parfums designer fragrance lines in specific territories. In France, the Inter Parfums designer fragrance lines are sold in approximately 1000 perfumeries. Inter Parfums markets its middle market proprietary fragrances to wholesalers in France, and to distributors and importers predominantly in the Middle East, Far East, Central America and South America through in-house sales executives. In October 1995 the Company commenced marketing its alternative designer fragrance and Jordache lines through a newly formed limited liability company organized in Brazil, Jean Philippe Brasil. Products are marketed to retail outlets through a local Brazilian sales company. See Note "I" to the Consolidated Financial Statements for information regarding the Company's operations by geographic areas. Product Liability The Company maintains product liability coverage in an amount of $3,000,000, which it believes is adequate to cover substantially all of the exposure it may have with respect to its products. The Company has never been the subject of any material product liability claims. Competition The market for fragrances and beauty related products is highly competitive and sensitive to changing consumer preferences and demands. At the present time, management is aware of approximately five (5) established companies which market similar alternative designer fragrances. In response to heavy discounting by certain competitors, which commenced in the fourth quarter of 1996, the Company immediately developed a program of product value analysis which enabled the Company to match competition pricing structure in January 1997. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company believes that the quality of its fragrance products, competitive pricing, as well as its ability to quickly and efficiently develop and distribute new products, will enable it to continue to effectively compete with these companies. The market for name brand and budget color cosmetics is highly competitive, with several major cosmetic companies marketing similar products, many with substantial financial resources and national marketing campaigns. However, management believes that brand recognition of its Aziza and Jordache lines, together 8
with the quality and competitive pricing of its products, should enable it to compete with these companies. However, especially in the area of high priced, original designer fragrances, there are products which are better known than the products produced for or distributed by the Company. There are also many companies which are substantially larger and more diversified, and which have substantially greater financial and marketing resources than the Company, as well as greater name recognition, and the ability to develop and market products competitive with those distributed by the Company. For these reasons, it may be particularly difficult for the Company to successfully increase market share in the high priced, original designer fragrance market. Government Regulation A fragrance is a "cosmetic" as that term is defined under the Federal Food, Drug and Cosmetics Act ("FDC Act"), and must comply with the labeling requirements of the FDC Act, the Fair Packaging and Labeling Act, and the regulations thereunder. Certain of the Company's Cutex brand color cosmetic products contain menthol, and are also classified as a "drug," as the categories of cosmetic and drug are not mutually exclusive. Additional regulatory requirements for such products include additional labeling requirements, registration of manufacturer and semi-annual update of drug list. The Company's fragrances are subject to approval of the Bureau of Alcohol, Tobacco and Firearms as the result of the use of specially denatured alcohol. To date the Company has not experienced any difficulties in obtaining such approval. Trademarks In the United States the Company's registered trademarks include Intimate, Aziza, Beverly, Fire by Jean Philippe(R), Fashion Mood(R), Snow Silk(R) and Memphis(R). In addition, the Company has various trademark applications pending. In addition, under various license agreements the Company has the right to use the registered trademark Cutex in the United States and Puerto Rico, and the registered trademarks, Burberrys, Ombre Rose, Chaz, Regine's and Jordache both in the United States and abroad. Outside of the United States and Canada, the Company owns the following registered trademarks: Intimate, Aziza, the Parfums Molyneux family of trademarks, including Captain, Quartz and Lord, and the Parfums Weil family of trademarks, including Bambou, Antilope and Kipling. See "Business-Products and Selection". 9
Employees As of March 31, 1997 Jean Philippe had seventy (70) full-time domestic employees. Of these, fifteen (15) were engaged in sales activities, and fifty-five (55) in administrative and marketing activities. As part of management's planned restructuring of domestic operations, including relinquishing the Cutex license, the Company has cut seventeen (17) positions, and those affected are being offered severance benefits in accordance with the Company's severance policy. As of March 31, 1997 Inter Parfums and its foreign subsidiaries had forty-eight (48) full-time employees. Of these, sixteen (16) were engaged in sales activities, and thirty-two (32) in administrative and marketing activities. The Company believes that its relationships with its employees are satisfactory. Item 2. Properties The Company's domestic offices are located in approximately 12,000 square feet of office space at 551 Fifth Avenue, New York, New York. These premises are leased for a five (5) year term ending in April 1997, at a monthly rental of approximately $18,000, which is subject to escalations. The Company is seeking a one (1) year extension to its present lease for is domestic offices. The offices of Inter Parfums and the Company's other French subsidiaries are located at 4 Rond Point Des Champs Elysees, Paris, France, in approximately 6,000 square feet of leased office space pursuant to two (2) leases. The first lease, for approximately 4,000 square feet, and the second lease, for approximately 2,000 square feet, both expire in July 1, 2005, unless terminated earlier by either party on six (6) months written notice at three (3) year specified intervals. The annual rentals for each of the two (2) lease are 711,000 French francs and 458,400 French francs, respectively, (approximately $127,000 and $82,000). Rent is subject to escalations each July 1. Management of the Company is of the belief that the Company's executive office facilities are satisfactory for its present needs and those for the foreseeable future. Since October 1995, the Company has occupied a 145,000 square foot distribution center at 60 Stults Road in Dayton, New Jersey. The premises have been leased by the Company for an eight (8) year term expiring October 2003 and requires monthly rental payments of $57,000, aggregating $684,000 per annum. Management of the Company is of the belief that the Company's distribution center is satisfactory for its present needs and those for the foreseeable future. 10
Item 3. Legal Proceedings There is no litigation pending or, to the knowledge of the Company, threatened to which the property of the Company is subject or to which the Company may be a party, which would have a material adverse effect on the Company. Item 4. Submissions Of Matters To A Vote Of Security Holders Not applicable. 11
PART II Item 5. Market For Registrant's Common Equity And Related Stockholder Matters The Company's Common Stock, $.001 par value per share ("Common Stock") is traded on The Nasdaq Stock Market under the symbols "JEAN". The following table sets forth in dollars, the range of high and low closing prices for the past two (2) fiscal years for the Company's Common Stock. <TABLE> <CAPTION> Fiscal 1996 High Closing Price Low Closing Price <S> <C> <C> Fourth Quarter $7.61 $5.88 Third Quarter $8.63 $6.25 Second Quarter $9.75 $7.50 First Quarter $8.63 $7.38 <CAPTION> Fiscal 1995 High Closing Price Low Closing Price <S> <C> <C> Fourth Quarter $10.50 $ 8.13 Third Quarter $11.75 $10.63 Second Quarter $10.88 $ 8.75 First Quarter $ 9.00 $ 7.31 </TABLE> As of March 1, 1997, the number of record holders (brokers and broker's nominees, etc.) of the Company's Common Stock was 110. Management believes that there are approximately 2,400 beneficial owners of the Company's Common Stock. Dividends Jean Philippe has not paid cash dividends since inception and management of the Company does not foresee Jean Philippe paying cash dividends in the foreseeable future as earned surplus is to be retained as working capital for anticipated growth. The revolving credit agreement with the Company's primary domestic institutional lender generally prohibits the payment of cash dividends in excess of fifty (50%) percent of the Company's net income. 12
Item 6. Selected Financial Data The following selected financial data have been derived from the Company's financial statements, and should be read in conjunction with such financial statements, including the footnotes relating thereto, referred to in Item 8 of this Form 10-K. Years Ended December 31 (In Thousands Except Share and Per Share Data) <TABLE> <CAPTION> 1996 1995 1994 1993 1992 <S> <C> <C> <C> <C> <C> Income Statement Data: Net sales $93,281 $93,669 $75,079 $59,546 $43,688 Cost of Sales 51,355 48,703 39,036 32,964 24,536 Selling, General and Administrative 32,416 32,990 23,773 15,814 12,479 Income before taxes and minority interest 9,081 12,380 11,679 11,240 6,669 Net income 5,658 9,038 7,275 7,099 4,278 Net income per common and common equivalent share $.57 $.87(1,2) $.70(1) $.70(1) $.50 Weighted average number of common and common equivalent shares 9,984,463 10,438,896 10,454,555 10,132,628 8,641,393 outstanding </TABLE> As at December 31 (In Thousands Except Share and Per Share Data) <TABLE> <CAPTION> 1996 1995 1994 1993 1992 <S> <C> <C> <C> <C> <C> Balance Sheet Data: Working Capital $46,568 $41,363 $31,226 $31,967 $17,250 Total Assets 85,585 84,001 69,451 49,909 31,807 Long Term Debt 485 596 862 424 -0- Shareholders' equity 53,366 51,976 44,513 33,774 18,488 </TABLE> - -------- 1 Includes a net gain of $3.3 million or $.32 per share, $221,000 or $.02 per share, $645,000 or $.06 per share for the years ended December 31, 1995, 1994 and 1993, respectively, resulting from the sale of common stock of a subsidiary. 2 Includes a nonrecurring charge, net of taxes, of $1.3 million or $.13 per share, relating to the discontinuance of a product line. 13
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operation The Company's business strategy of building core volume and profitability, developing products in new categories, exploring strategic acquisition opportunities, and pursuing expansion in international markets remains as management's primary long-term focus. Current year sales and earnings, however, reflect the difficulties encountered in bringing the Company's Cutex(R) line to the profitability levels originally anticipated. Management has and will continue to take the actions it deems necessary to resume sales growth at improved profitability levels. The Company's recent decision to relinquish its Cutex(R) license is an integral part of a planned restructuring of the Company's domestic operations. As a result, the Company can now focus its resources on its profitable core Alternative Designer Fragrance business in the United States and around the world. 1996 as Compared to 1995 Net sales aggregated $93.3 million in 1996, as compared to $93.7 million in 1995. Sales growth from the Company's French operations along with growth from the 1996 introduction of the Company's Aziza(R) hypo-allergenic eye cosmetic line were offset by the deletion or curtailment of promotional programs which did not achieve expected sell through levels in 1995 and resulted in an unacceptable level of returns in 1996. The Company's Romantic Illusions promotion, certain Jordache(R) lip and nail promotions and several Cutex(R) promotions were among those programs curtailed or deleted. Heavy discounting by certain competitors, which commenced in the fourth quarter of 1996, affected the growth of the Company's Alternative Designer Fragrance lines in the fourth quarter. The Company immediately developed a program of product value analysis which enabled the Company to match the competition pricing structure in January 1997, without affecting gross margin in the long-term. The positive impact of the measures taken are expected to be realized in the second half of 1997. Sales generated by the Company's French subsidiaries increased 10%; at comparable foreign currency exchange rates, sales by the Company's French subsidiaries increased 13%. A very strong fourth quarter, fueled by new product introductions and product line enhancements, enabled the Company's French operations to continue to grow in a very competitive marketplace. Sales growth of the French operations was achieved despite the effect of the sale of the Bal a Versailles(R) trademarks in March of 1996. Sales of Cutex(R) products declined approximately $3.0 million in 1996, primarily as a result of reduced promotional sales. Cutex(R) lip color product returns, resulting 14
from the line's discontinuance in 1995, did not affect net sales in 1996 as the reserve established in 1995, of approximately $1.5 million, proved to be adequate. As of December 31, 1996, the reserve has been fully utilized; however, management does not believe there to be any material remaining obligations relating to lip color products. The Company's Aziza(R) hypo-allergenic eye cosmetic line, which made its debut in February 1996, represented approximately 3% of sales for the year ended December 31, 1996. Aziza(R) continues to enjoy a very strong sell through at the retail level. Heavy competition for retail space in the eye-care category at mass market merchandisers and drug store chains continues. Gross profit margin for 1996 was 45% of sales as compared to 48% in 1995. The lower gross margin is the result of the decline in higher margin Cutex(R) sales along with the decline in higher margin fragrance promotions. In addition, the Company continues to convert discontinued and returned merchandise into cash, via closeout sales at prices below normal margins. As previously mentioned, in reaction to heavy discounting by certain competitors in the Alternative Designer Fragrance lines, the Company developed a program of product value analysis which enabled the Company to match the competition pricing structure without affecting gross margin in the long-term. Gross margin in the first half of 1997 will be affected by the lower selling prices put into effect in January of 1997. The positive impact of the measures taken are expected to be seen in the second half of 1997 when gross margins generated by the Company's Alternative Designer Fragrance line are expected to return to their historical rate of approximately 45%. In addition, product value analysis will be used as a permanent tool by the Company in its ongoing efforts to further improve its gross margins. Selling, general and administrative expenses declined to $32.4 million in 1996 from $33.0 million in 1995 and represented 35% of net sales in both 1995 and 1996. Management has made it a top priority to control such expenditures and plans to continue to take the actions it deems necessary to reduce its overall selling, general and administrative expenses. As a result of the Company's recent decision to relinquish its Cutex(R) license the company is restructuring its domestic operations and will reduce its workforce. In addition, the Company will incur a pre-tax charge against earnings of approximately $1.3 million in the first quarter of 1997 to write-off intangible assets and other expenses relating to the relinquishment of the Cutex(R) license. The combination of the restructuring and the elimination of selling, general and administrative expenses relating to the Cutex(R) operations should enable the Company to significantly reduce its overall selling, general and administrative expenses both in the aggregate and as a percentage of sales after the transaction closes. 15
Interest expense decreased to $0.9 million in 1996 from $1.1 million in 1995. The Company uses its available credit lines, as needed, to finance its working capital needs. The Company incurred a loss on foreign currency of $144,000 in 1996 as compared to a gain of $197,000 in 1995. The Company, on occasion enters into foreign currency forward exchange contracts as a hedge for short-term intercompany borrowings. The Company recognized a net gain on sale of stock of a subsidiary aggregating $14,000 in 1996 and $3.3 million in 1995. The 1995 gain resulted primarily from the public offering by Inter Parfums, in France, of 308,000 shares of its common stock. The 1996 gain resulted from the conversion of long-term debt into common stock of Inter Parfums. Such sale or issuance upon conversion of shares has been accounted for as a gain on sale of stock of a subsidiary and is not part of a broader corporate reorganization contemplated by the Company. Although additional shares may be sold or issued in the future, the Company has no plans to spin-off its subsidiary nor to repurchase the shares previously issued. The Company's effective income tax rate was 31% in 1996 and 26% in 1995. The 1996 rate was favorably impacted by reduction of valuation reserves on deferred tax assets, relating to the utilization of net operating loss carryforwards, made available to the Company's foreign subsidiaries as a result of the March 1996 sale of the Bal a Versailles trademarks. The 1995 rate was favorably impacted as deferred taxes were not required to be provided on the gain on sale of stock by Inter Parfums. Net income was $5.7 million or $0.57 per share as compared to $9.0 million or $0.87 per share for the year ended December 31, 1995. Results for 1995 include a nonrecurring charge of $1.3 million, on an after tax basis, relating to the discontinuance of the Cutex(R) lip color line. Results for 1995 also include a net gain of $3.3 million from the sale of common stock of a subsidiary. Excluding the nonrecurring charge and the gain on sale of stock of a subsidiary, net income was $7.1 million or $0.68 per share in 1995. The weighted average number of shares outstanding was 9,984,463 in 1996 and 10,438,896 in 1995; such decline is the result of the Company's ongoing stock buyback program. 1995 as Compared to 1994 Net sales increased 25% to $93.7 million, as compared to $75.1 million in 1994. This increase reflects the Company's ability to integrate new product lines with existing product offerings. Sales generated by the Company's domestic operations increased 19%. Such growth is the result of the August 1994 acquisition of the Cutex 16
nail care and lip color line, and the continued growth in the core Alternative Designer Fragrance lines. Net sales generated by Cutex product lines increased $5.3 million over 1994 net sales. This increase was well below original expectations as the result of excessive product returns caused in part from the required change in the Uniform Product Code from that of Chesebrough-Ponds, increased competitive pressures for retail shelf space and disappointing sales of the lip color line. Management believes that the significant factor which led to disappointing sales of the Cutex lip color line is the failure of consumers to associate lip color cosmetics with the Cutex brand name to the same extent that consumers do with nail products, wherein the Cutex brand has significantly stronger appeal. In October 1995 the Company decided to discontinue production of the Cutex lip color line and as a result, has taken a nonrecurring charge aggregating $2.2 million, before taxes, in the fourth quarter of 1995. This charge represents a writedown of current lip product inventory of approximately $741,000 and a reserve for returns of lip products of $1,481,000 which may be required on lip products in 1996. The discontinued lip color line did not contribute to net sales in 1995 as customer returns exceeded new product shipments. As a result of the issues relating to the Cutex product lines, the Company and the licensor have agreed to a reduction of the minimum royalties payable under the Cutex license. Sales by the Company's foreign subsidiaries increased 36%; at comparable foreign currency exchange rates, sales by the Company's foreign subsidiaries increased 22%. Such increase reflects new product introductions under the Ombre Rose and Burberrys labels and initial sales by Jean Philippe Brasil, the Company's recently organized Brazilian subsidiary, which commenced operations in October 1995. The Company continues to focus its sales efforts on development of new product categories for sale to our expanding customer base. The February 1996 launch of its Aziza(R) hypo allergenic eye cosmetic line is well under way. Gross profit margin was 48% in both 1995 and 1994. Ordinarily, increased sales of Cutex products would have enabled the Company to improve overall gross margin. However, with the excessive customer returns experienced in 1995, markdowns and inventory writedowns of returned products were necessary. In addition, gross margin has been negatively impacted from incremental closeout sales of discontinued or returned product at reduced prices. While in the ordinary course of business the Company closes out such inventory, management had taken an increased initiative to reduce excess inventory to improve the Company's cash flow and in preparation of 17
moving to our new distribution center in Dayton NJ. The Company's business lines, excluding Cutex, generated a 46% gross margin in both 1995 and 1994. Selling, general and administrative expenses represented 35% of net sales in 1995 as compared to 32% in 1994. The increase is primarily the result of promotion and advertising expenses required for the Cutex product lines and reflect the fact that sales of the Cutex color lines have been below original expectations. In addition, most licensed product lines call for royalties to be paid based on sales volume and some require minimum advertising expenditures. Royalty expense aggregated $2.6 million for 1995 as compared to $1.6 million for 1994. The increase in 1995 represents a full year of sales of Cutex products as compared to four (4) months of sales of Cutex Products in 1994. Interest expense increased to $1.1 million in 1995 from $0.8 million in 1994. The Company uses its available credit lines, as needed, to finance its working capital needs. The Company realized a gain on foreign currency aggregating $197,000 in 1995 as compared to a loss of $161,000 in 1994. The Company, on occasion enters into foreign currency forward exchange contracts as a hedge for short-term intercompany borrowings. The Company recognized a net gain on sale of stock of a subsidiary aggregating $3.3 million in 1995 and $0.2 million in 1994. The 1995 gain resulted primarily from the public offering by Inter Parfums, in France, of 308,000 shares of its common stock. The 1994 gain also resulted from the sale of common stock by Inter Parfums. Such sales of shares has been accounted for as a gain on sale of stock of a subsidiary and is not part of a broader corporate reorganization contemplated by the Company. Although additional shares may be issued in the future, the Company has no plans to spin-off its subsidiary nor to repurchase the shares previously issued. The Company's effective income tax rate was 26% in 1995 and 37% in 1994. Both the 1995 and 1994 tax rates were favorably impacted as deferred taxes were not required to be provided on the gain on sale of stock by Inter Parfums. Excluding such gain the Company's effective tax rate was 35% in 1995 and 37% in 1994. Net income for the year ended December 31, 1995 increased 24% to $9.0 million compared to $7.3 million for the year ended December 31, 1994. Results for 1995 include a nonrecurring charge of $1.3 million, on an after tax basis, relating to the discontinuance of the lip color line. Results also include a net gain from the sale of common stock of a subsidiary of $3.3 million in 1995 and $0.2 million in 1994. Excluding the nonrecurring charge and such gains, net income was $7.1 million or $0.68 per share in 1995 and in 1994. 18
The weighted average number of shares outstanding was 10,438,896 in 1995 and 10,454,555 in 1994. Liquidity and Financial Resources The Company's financial position continues to show solid strength as a result of profitable operating results. At December 31, 1996, working capital aggregated $46.6 million and the Company had cash and cash equivalents on hand aggregating $20.2 million. The working capital ratio improved from 2.58:1 as of December 31, 1995 to 2.78:1 as of December 31, 1996 and the Company's book value per share aggregated $5.56 per share as of December 31, 1996. The Board of Directors of the Company has authorized the repurchase of up to 1,500,000 shares of the Company's common stock and as of December 31, 1996, 749,805 shares have been purchased at an average price per share of $7.93. The Company's short-term financing requirements are expected to be met by available cash at December 31, 1996, cash generated by operations and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 1996 are a $12.0 million unsecured revolving line of credit provided by a domestic commercial bank and $12.0 million in credit lines provided by a consortium of international financial institutions. Borrowings under the domestic revolving line of credit are due on demand and bear interest at the prime rate. The recently announced charge of $1.3 million, expected in the first quarter of 1997, is primarily a noncash charge relating to the write-off of intangible assets associated with the Cutex license. Management of the Company believes that funds generated from operations, supplemented by its available credit facilities, will provide it with sufficient resources to meet all present and reasonably foreseeable future operating needs. Operating activities provided $8.0 million of net cash from operations for the year ended December 31, 1996 as compared to $2.8 million for the year ended December 31, 1995. With current year's reduced promotional activities and ongoing inventory reduction activities, through closeout sales, the Company has continued to improve its cash flow from operations. Inflation rates in the U.S. and foreign countries in which the Company operates have not had a significant impact on operating results for the period ended December 31, 1996. 19
Item 8. Financial Statements and Supplementary Data The required financial statements commence on page F-1. Supplementary Data Quarterly Data (Unaudited) For the year ended December 31, 1996 (In Thousands Except Share and Per Share Data) <TABLE> <CAPTION> 1st 2nd 3rd 4th Full Year Quarter Quarter Quarter Quarter <S> <C> <C> <C> <C> <C> Net sales $23,302 $22,583 $22,578 $24,818 $93,281 Cost of Sales 12,210 12,589 12,641 13,916 51,355 Net income 1,733 1,278 1,478 1,130 5,658 Net income per common and common equivalent share $.18 $.13 $.15 $.12 $.57 Number of shares outstanding 10,083,757 10,148,168 9,911,691 9,813,108 9,984,463 </TABLE> Quarterly Data (Unaudited) For the year ended December 31, 1995 (In Thousands Except Share and Per Share Data) <TABLE> <CAPTION> 1st 2nd 3rd 4th Full Year Quarter Quarter Quarter Quarter <S> <C> <C> <C> <C> <C> Net sales $21,612 $22,152 $25,480 $24,425 $93,669 Cost of Sales 10,660 11,187 13,514 13,342 48,703 Net income 1,621 1,628 2,072 3,717 9,038 Net income per common and common equivalent share $.16 $.16 $.20 $.36(1,2) $.87(1,2) Number of shares outstanding 10,429,287 10,458,483 10,561,214 10,306,599 10,438,896 </TABLE> Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure Not applicable. - -------- 1 Includes a net gain of $3.3 million or $.32 per share resulting from the sale of common stock of a subsidiary. 2 Includes a nonrecurring charge, net of taxes, of $1.3 million or $.13 per share, relating to the discontinuance of a product line. 20
PART III Item 10. Executive Officers And Directors Of Registrant As of March 31, 1997, the executive officers and directors of the Company were as follows: Name Position Jean Madar Chairman of the Board and Chief Executive Officer of Jean Philippe and Director General of Inter Parfums Philippe Benacin Vice Chairman of the Board and President of Jean Philippe and President of Inter Parfums Russell Greenberg Director, Executive Vice President and Chief Financial Officer Francois Heilbronn Director Joseph A. Caccamo Director Jean Levy Director Robert Bensoussan-Torres Director Bruce Elbilia Executive Vice President Wayne C. Hamerling Executive Vice President Jaime Resnik Executive Vice President The directors will serve until the next annual meeting of stockholders and thereafter until their successors shall have been elected and qualified. With the exception of Mr. Benacin, the officers are elected annually by the directors and serve at the discretion of the board of directors. See "Item 11. Executive Compensation-Employment Agreement". There are no family relationships between executive officers or directors of the Company. The following sets forth biographical information as to the business experience of each executive officer and director of the Company for at least the past five (5) years. Jean Madar Jean Madar, age 36, a Director, has been the Chairman of the Board of Directors (since inception), and a co-founder of the Company with Mr. Benacin. From inception 21
until December 1993 he was the President of the Company; in January 1994 he became Director General of Inter Parfums; and in January 1997 he became Chief Executive Officer of the Company. Mr. Madar was previously the managing director of Inter Parfums, from September 1983 until June 1985. At Inter Parfums, he had the responsibility of overseeing the marketing operations of its foreign distribution, including market research analysis and actual marketing campaigns. Mr. Madar graduated from The French Higher School of Economic and Commercial Sciences (ESSEC) in 1983. Philippe Benacin Mr. Benacin, age 38, a Director, has been the Vice Chairman of the Board since September 1991, and is a co-founder of the Company with Mr. Madar. He was elected the Executive Vice President in September 1991, Senior Vice President in April 1993, and President of the Company in January 1994. In addition, has been the President of Inter Parfums for more than the past five (5) years. Mr. Benacin graduated from The French Higher School of Economic and Commercial Sciences (ESSEC) in 1983. Russell Greenberg Mr. Greenberg, age 40, the Chief Financial Officer, was Vice-President, Finance when he joined the Company in June 1992; became Executive Vice President in April 1993; and was appointed to the Board of Directors in February 1995. He is a certified public accountant licensed in the State of New York, and is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. Since graduating from The Ohio State University in 1980, he has been employed in public accounting. From July 1987 through June 1992, he was with Richard A. Eisner & Company, the independent accountants of the Company. Francois Heilbronn Mr. Heilbronn, age 36, a Director, is a graduate of Harvard Business School with a Master of Business Administration degree and is currently working as a consultant for the firm of M.M. Friedrich, Heilbronn & Fiszer, of which he is a partner. He was formerly employed by The Boston Consulting Group, Inc. from 1986 through 1991 as a management consultant. He graduated from Institut D' Etudes Politiques De Paris in June 1983. From 1984 to 1986, he worked as a financial analyst for Lazard Freres & Co. Joseph A. Caccamo Mr. Caccamo, age 41 and who has been a practicing attorney since 1981, is a Director and general counsel to the Company. From May 1987 through February 1991, he was an associate of Parker Chapin Flattau & Klimpl, New York City, and from 22
February 1991 through August 1991, he was of counsel to Brandeis, Bernstein & Wasserman, New York City. In September 1991 he became counsel to the Company through a predecessor firm, Joseph A. Caccamo Attorney at Law, P.C. He is also a director of Hydron Technologies, Inc., a company primarily engaged in the development of cosmetic/personal care products, which has its common stock listed on The Nasdaq Stock Market. Jean Levy Jean Levy, age 64, a Director since August 1996, worked for twenty-seven (27) years at L'Oreal, and was the President and Chief Executive Officer of Cosmair, the exclusive United States licensee of L'Oreal from 1983 through June 1987. In addition, he is the former President and Chief Executive Officer of Sanofi Beaute (France). For the past five years, Mr. Levy has been an independent advisor as well as a consultant for economic development to local governments in France. A graduate of "l'Institut d'Etudes Politiques de Paris," he also attended Yale Graduate School and was a recipient of a Fulbright Scholarship. He was also a Professor at "l'Institut d'Etudes Politiques de Paris". Robert Bensoussan-Torres Robert Bensoussan-Torres, age 39, has been the Chief Executive Office of Christian Lacroix, Paris, a subsidiary of LVMH Group, since February 1993. Christian Lacroix is a French Houte Couture House and has activities in the field of apparel, accessories and fragrances. From December 1990 through January 1993 he was based in Munich, Germany, as the International Sales Director of The Escada Group. Bruce Elbilia Mr. Elbilia, age 37, Executive Vice President joined the Company in June 1986 as the National Sales Director, and from that time until 1994, he was in charge of the Company's marketing efforts. In 1994 Mr. Elbilia became head of international sales and marketing for Jean Philippe, and has expanded Jean Philippe's export sales to South America, the Middle East and Eastern Europe. Mr. Elbilia received a Bachelor of Business Administration degree, with a major in International Business/Marketing from George Washington University in Washington, D.C., which he attended from 1977-1981. Wayne C. Hamerling Mr. Hamerling, age 40, was Vice President, Sales, from May 1987 through April 1993, when he became Executive Vice President. Mr. Hamerling has over fifteen (15) 23
years experience in the fragrance and cosmetic business. From 1980 through 1983 he was employed by Rite Aid Drug Stores; from 1983 through 1985, he was the Senior Buyer for Valley Fair Stores, and from 1985 through May 1987, he was the National Sales Manager for Happy Valley Fragrances. Jaime Resnik Mr. Resnik, age 36, became an Executive Vice President in July 1994, and is in charge of operations. He joined the Company in April 1992 as Operations Manager in charge of production and planning. From October 1988 through April 1991, Mr. Resnik was the Licensing Audit Manager for Jordache Enterprises, with responsibility for auditing approximately thirty (30) licensees with sales in excess of $250 million. From April 1991 through April 1992, Mr. Resnik was the Director of International Licensing for Jordache Enterprises, with responsibility for overseeing the licensing activities of approximately fifty (50) licensees world wide. Mr. Resnik graduated with honors from the University of Miami in 1983 with a B.A. in management. Item 11. Executive Compensation The following table sets forth a summary of all compensation awarded to, earned by or paid to, the Company's Chief Executive Officer and each of the four (4) most highly compensated executive officers of the Company whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during fiscal years ended December 31, 1996, December 31, 1995 and December 31, 1994: 24
SUMMARY COMPENSATION TABLE <TABLE> <CAPTION> Annual Compensation Long Term Awards Name and Year Salary ($) Bonus ($) Other Securities All Other Principal Position Annual Underlying Compensa Compensat Options tion ion($) (#) <S> <C> <C> <C> <C> <C> <C> Jean Madar,(1) 1996 210,700 -0- 30,500(2) 33,500 -0- Chairman of the Board, Chief 1995 175,800 -0- 20,800(3) 100,000 -0- Executive Officer of Jean Philippe and 1994 133,250 -0- 905,225(4) 100,000 -0- Director General of Inter Parfums Philippe Benacin,(5) 1996 101,000 17,200 82,844(6) 33,500 -0- Chief Executive Officer, President of 1995 96,000 -0- 681,200(7) 100,000 -0- Jean Philippe and President of Inter 1994 81,360 -0- 28,205(8) 100,000 -0- Parfums Russell Greenberg(9), 1996 200,000 4,500 2,042 6,000 -0- Executive Vice President and Chief 1995 182,500 4,500 2,219 9,000 -0- Financial Officer 1994 153,500 4,750 960 4,000 -0- </TABLE> - -------- (1) Mr. Madar became Chief Executive Officer in January 1997. As of December 31, 1996, Mr. Madar held 2,638,049 restricted shares of Common Stock, with an aggregate value of $17,147,318 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market, National Market system, of $6.50. (2) Consists of lodging expenses. (3) Consists of lodging expenses. (4) Consists of noncash compensation attributable to the difference between the exercise price and the value of certain restricted shares of Common Stock acquired upon the exercise of stock options. (5) Mr. Benacin was elected President of the Company in January 1994 and was the Chief Executive Officer in 1994, 1995 and 1996. Compensation figures for Mr. Benacin are approximate, as he is paid in French francs, and conversion into U.S. dollars was made at the average exchange rates prevailing during the respective periods. As of December 31, 1996, Mr. Benacin held 2,318,049 restricted shares of Common Stock, with an aggregate value of $15,067,318 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market, National Market system, of $6.50. (6) Consists of noncash compensation of $52,334 attributable to the difference between the exercise price and the value of certain restricted shares of Common Stock acquired upon the exercise of stock options; approximately $2,300 for automobile expenses and $28,200 for lodging expenses. (7) Consists of noncash compensation of $650,000 attributable to the difference between the exercise price and the value of certain restricted shares of Common Stock acquired upon the exercise of stock options; approximately $2,400 for automobile expenses and $28,800 for lodging expenses. (8) Consists of approximately $2,170 for automobile expenses and $26,035 for lodging expenses. (9) Mr. Greenberg held no restricted shares of Common Stock as of December 31, 1996. 25
<TABLE> <S> <C> <C> <C> <C> <C> <C> Bruce Elbilia,(1) 1996 168,000 4,571 58,994(2) 6,000 -0- Executive Vice President 1995 168,000 18,500 56,510(3) 9,000 -0- 1994 158,500 3,500 31,124(4) 4,000 -0- Terrence H. Augenbraun,(5) 1996 165,804 -0- 100,000(6) -0- -0- Executive Vice President 1995 165,804 28,500 100,000(7) 9,000 -0- 1994 93,876 28,500 58,333(8) 11,334 -0- Wayne C. Hamerling,(9) 1996 157,004 3,500 74,903(10) 6,000 -0- Executive Vice President 1995 157,004 3,500 86,974(11) 9,000 -0- 1994 155,949 3,500 66,106(12) 4,000 -0- </TABLE> - -------- (1) As of December 31, 1996, Mr. Elbilia held 12,000 restricted shares of Common Stock, with an aggregate value of $78,000 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market, National Market system, of $6.50. (2) Consists of selling commissions. (3) Consists of selling commissions. (4) Consists of selling commissions. (5) Mr. Augenbraun left the employ of the Company in January 1997. As of December 31, 1996, Mr. Augenbraun held 1,334 restricted shares of Common Stock with an aggregate value of $8,671 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market system, of $6.50. (6) Consists of selling commissions. (7) Consists of selling commissions. (8) Consists of selling commissions. (9) As of December 31, 1996, Mr. Hamerling held 10,000 restricted shares of Common Stock, with an aggregate value of $65,000 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market, National Market system, of $6.50. (10) Consists of selling commissions of $70,067 and non cash compensation of $4,836 equal to the value of personal use of a company leased automobile. (11) Consists of selling commissions equal to $82,160 and noncash compensation of $4,814 equal to the value of personal use of a Company leased automobile. (12) Consists of selling commissions equal to $62,749 and noncash compensation of $3,357 equal to the value of personal use of a Company leased automobile. 26
The following table sets forth certain information relating to stock option grants during Fiscal 1996 to the Company's Chief Executive Officer and each of the four (4) most highly compensated executive officers of the Company whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during fiscal year ended December 31, 1996: OPTION/SAR GRANTS IN LAST FISCAL YEAR <TABLE> <CAPTION> Potential Realized Value at Assumed Annual Rates of Stock Individualized Grants Price Appreciation for Option Term - ------------------------------------------------------------------------------------------ ----------------------------------- Name Number of % of Total Exercise Expiration Five (5%) Ten (10%) Securities Options/SARs or Base Date Percent Percent Underlying Granted to Price ($) ($) Options Employees in ($/Sh) Granted (#) Fiscal Year <S> <C> <C> <C> <C> <C> <C> Jean Madar 33,500 25% $6.50 12/15/01 60,160 132,939 Philippe Benacin 33,500 25% $6.50 12/15/01 60,160 132,939 Russell Greenberg 6,000 4% $6.50 12/15/01 10,775 23,810 Bruce Elbilia 6,000 4% $6.50 12/15/01 10,775 23,810 Wayne Hamerling 6,000 4% $6.50 12/15/01 10,775 23,810 </TABLE> 27
The following table sets forth certain information relating to option exercises effected during Fiscal 1996, and the value of options held as of such date by each of the Chief Executive Officer and the four (4) most highly compensated executive officers of the Company whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during fiscal year ended December 31, 1996: AGGREGATE OPTION EXERCISES FOR FISCAL 1996 AND YEAR END OPTION VALUES <TABLE> <CAPTION> Number of Unexercised Value(1) of Unexercised Options at December 31, In-the-Money Options at 1996 (#) December 31, 1996 ($) Name Shares Acquired Value ($) Exercisable/ Exercisable/ on Exercise Realized(2) Unexercisable Unexercisable - --------------------------- ------------------- ------------- --------------------------- -------------------------- <S> <C> <C> <C> <C> Jean Madar -0- NA 629,187/-0- -0-/-0- Philippe Benacin 18,000 52,334 629,187/-0- -0-/-0- Russell Greenberg -0- NA 39,000/-0- -0-/-0- Bruce Elbilia -0- NA- 42,000/-0- -0-/-0- Wayne C. Hamerling -0- NA 42,000/-0- -0-/-0- </TABLE> Employment Agreements As part of the acquisition by the Company of the controlling interest in Inter Parfums in 1991, the Company entered into an employment agreement with Philippe Benacin. The agreement provides that Mr. Benacin will be employed as Vice Chairman of the Board and President and Chief Executive Officer of IP Holdings and its subsidiary, Inter Parfums. The initial term expired on September 2, 1992, and has subsequently been automatically renewed for additional annual periods. The agreement provides for automatic annual renewal terms, unless either party terminates the agreement upon 120 days notice. Mr. Benacin is entitled to receive an annual salary is 600,000ff (approximately US$ 120,000) together with 5,000ff per month (approximately US$1,000) for lodging expenses, both of which are subject to increases in the discretion of the Board of Directors. In addition he is to receive a nonaccountable expense allowance of 1,200ff (approximately US$ 240) per week and - -------- 1 Total value of unexercised options is based upon the fair market value of the Common Stock as reported by the Nasdaq Stock Market of $6.50 on December 31, 1996. 2 Value realized in dollars is based upon the difference between the fair market value of the Common Stock on the date of exercise, and the exercise price of the option. 28
reimbursement for all out-of-pocket expenses associated with the acquisition, operation and maintenance of an automobile. The agreement also provides for indemnification and a covenant not to compete for one (1) year after termination of employment. Compensation of Directors Each of Mr. Robert Bensoussan-Torres and Mr. Levy receives $1,000 for each board meeting at which they participate. Mr. Caccamo receives $500 for each board meeting at which he participates. On January 14, 1994, the Board of Directors of the Company adopted the 1994 Nonemployee Stock Option Plan (the "1994 Plan"). The purpose of the 1994 Plan is to assist the Company in attracting and retaining key directors who are responsible for continuing growth and success of the Company. The 1994 Plan was approved by the stockholders of the Company on July 8, 1994. The 1994 Plan provides for the grant of nonqualified stock options to nonemployee directors to purchase an aggregate of 25,000 shares of Common Stock. Options to purchase 1,000 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date, except for Joseph A. Caccamo, who is granted options to purchase 4,000 shares. Further, options to purchase 1,000 shares are to be granted to persons who become nonemployee directors at the time they become nonemployee directors. The exercise price of all options granted or to be granted under the 1994 Plan is to be equal to the fair market value of the Company's Common Stock on the date of grant, and the term of each option shall be for a five (5) year period, subject to earlier termination as set forth in the 1994 Plan. In accordance with the terms of the 1994 Plan, options to purchase shares of common stock were granted at the then fair market value, as follows: On August 27, 1996, 1,000 shares were granted to Jean Levy at the exercise price of $6.9375 per share; and on February 1, 1997, 1,000 shares were granted to Francois Heilbronn, and 4,000 shares were granted to Joseph A. Caccamo, all at the exercise price of $6.4375 per share. On March 13, 1997, the Board of Directors of the Company adopted, subject to the approval of its stockholders, the 1997 Nonemployee Stock Option Plan (the "1997 Plan"). The purpose of the 1997 Plan is to assist the Company in attracting and retaining key directors who are responsible for continuing growth and success of the Company. The 1997 Plan will be submitted to the approval of the stockholders of the Company at the next annual meeting. 29
The 1997 Plan provides for the grant of nonqualified stock options to nonemployee directors to purchase an aggregate of 25,000 shares of Common Stock. Options to purchase 1,000 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date (except for Mr. Caccamo as noted above) after all the shares of the 1994 Plan have been used. On March 13, 1997, 2,000 shares were granted to each of Jean Levy and Robert Bensoussan-Torres at the exercise price of $6.00 per share under the 1994 Plan and the 1997 Plan. Item 12. Security Ownership Of Certain Beneficial Owners And Management The following table sets forth information, as of March 31, 1997 with respect to the beneficial ownership of the Company's Common Stock by (a) each person known by the Company to be the beneficial owner of more than five percent (5%) of the Company's outstanding Common Stock, (b) the executive officers and directors of the Company and (c) the directors and officers of the Company as a group: <TABLE> <CAPTION> Name and Address Amount of Approximate of Beneficial Owner Beneficial Percent of Class Ownership(1) <S> <C> <C> Jean Madar 3,207,236(2) 31.5% c/o Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008 Paris, France Philippe Benacin 2,887,236(3) 28.4% c/o Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008 Paris, France Russell Greenberg 39,000(4) Less than 1% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 Francois Heilbronn 9,500(5) Less than 1% 12 Rue Pierre Leroux 75007 Paris, France </TABLE> - -------- (1) All shares of Common Stock are directly held unless otherwise stated. (2) Consists of 2,638,049 shares held directly and options to purchase 569,187 shares. (3) Consists of 2,318,049 shares held directly and options to purchase 569,187 shares. (4) Consists of options to purchase shares of Common Stock. (5) Consists of 4,500 shares held directly and options to purchase 5,000 shares of Common Stock. 30
<TABLE> <S> <C> <C> Joseph A. Caccamo 22,500(1) Less than 1% 1001 Yamato Road, Suite 403 Boca Raton, FL 33431 Jean Levy 3,000 Less than 1% 91 Rue Lauriston 75116 Paris, France Robert Bensoussan-Torres 2,000 Less than 1% c/o Christian Lacroix 73 Rue du Faubourg St. Honore 75008 Paris, France Bruce Elbilia 42,000(2) Less than 1% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 Wayne C. Hamerling 52,000(3) Less than 1% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 Jaime Resnik 26,500(4) Less than 1% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 FMR Corp., Fidelity Management & Research 774,900(5) 8.1% Company and Fidelity Low-Priced Stock Fund 82 Devonshire Street, Boston, MA 02109 All Directors and Officers 6,290,972(6) 57.6% as a Group (10 Persons) </TABLE> - -------- (1) Consists of options to purchase shares of Common Stock. (2) Consists of options to purchase 42,000 shares of Common Stock. (3) Consists of 10,000 shares held directly and options to purchase 42,000 shares of Common Stock. (4) Consists of options to purchase shares of Common Stock. (5) Information is derived forth in a Schedule 13G dated February 14, 1997 of Fidelity Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., FMR Corp. and Fidelity Low-Price Stock Fund ("Fidelity Fund"). Fidelity is a registered investment advisor to various investment companies, including Fidelity Fund, which is listed as a beneficial owner. Edward C. Johnson, 3rd, and members of his family are control persons of FMR and therefore also listed as beneficial owners of the shares of common stock of the Company. (6) Consists of 4,970,598 shares held directly and options to purchase 1,320,374 shares of Common Stock. 31
Item 13. Certain Relationships And Related Party Transactions Transactions with French Subsidiaries In July 1994 the Company, through its subsidiary, Inter Parfums, acquired the outstanding capital stock of Parfums Jean Desprez, and its wholly-owned subsidiary, Jean Desprez, S.A. for approximately $3.1 million in excess of the tangible assets of the companies acquired. The acquisition was funded by Jean Philippe, and was carried as an advance to its direct French subsidiary, IP Holding, and was due and payable on July 12, 1999, together with interest at seven percent (7%) per annum on the unpaid principal balance, payable quarterly in arrears, to the date of payment of the principal balance. IP Holding has in turn advanced such funds to Inter Parfums, which are repayable to IP Holding in ten (10) years together with interest at seven percent (7%) per annum. In addition, subject to compliance with applicable French regulatory requirements, the advance is convertible at the option of IP Holding into additional shares of common stock of Inter Parfums at the rate of 86 French francs per share. Subsequent to the closing of the sale of the Bal`a Versailles and Revolution `a Versailles assets in March 1996 (see Item 1, "Business-Products and Selection-Brand Name and Licensed Products"), IP Holdings repaid the sum of $1.580 million to Jean Philippe Fragrances in partial satisfaction of the aforementioned loan. The balance was contributed to the capital of IP Holdings. In connection with the acquisitions by Inter Parfums of the world-wide rights under the Burberrys License Agreement and the Brosseau License Agreement, Jean Philippe guaranteed the obligations of Inter Parfums under the Burberrys License Agreement and the distribution agreement for Ombre Rose fragrances. Jean Philippe and Elite have guaranteed the obligations of IP Holdings and Inter Parfums to Republic National Bank of New York (France). Loans to Directors In February 1996 the Company made a short term loan in the sum of $400,000 to Jean Madar, the Chairman of the Board, together with interest at the rate of five (5%) percent per annum, and the principal amount of such loan was repaid in two (2) weeks, together with interest of $770. On August 20, 1995 the Company made a bridge loan in the amount of $175,000 to Russell Greenberg, the Chief Financial Officer and a Director, in connection with the sale of his residence and purchase of a new residence, with interest at the rate of four (4%) percent per annum. The sum of $145,000 was repaid four (4) days later. The 32
balance of the loan is repayable $400 per month and prepayable out of the proceeds of any sale of shares of Common Stock of the Company by Mr. Greenberg. As of March 31, 1997, the balance of the loan was $23,700. Repurchase of Shares from Officers and Directors In October 1996 Philippe Benacin, the President and a Director, exercised a nonqualified stock option to purchase 18,000 shares at $4.217 per share. In connection with the Company's stock repurchase program, the Company purchased such shares at $7.125 per share, the fair market value at the time of the purchase. In connection with the Company's stock repurchase program in December 1996, the Company purchased from Jean Madar, the Chief Executive Officer and a Director, 100,000 shares at $6.875 per share and 30,000 shares at $6.50 per share, the fair market value at the time of the purchase. Remuneration of Counsel Joseph A. Caccamo, a director of the Company, is the general counsel to the Company. Mr. Caccamo and his predecessor firm were paid an aggregate of $94,291 in legal fees and for reimbursement of disbursements incurred on behalf of the Company during Fiscal 1996, and Mr. Caccamo presently receives a monthly retainer of $7,500 together with reimbursement for expenses. Mr. Caccamo receives $500 for each board meeting at which he participates. On February 1, 1997 in accordance with the terms of the 1994 Plan, Mr. Caccamo was granted an option with a term of five (5) years to purchase 4,000 shares at $6.4375 per share, the fair market value at the time of grant. 33
PART IV Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K <TABLE> <CAPTION> (a)(1) Financial Statements annexed hereto Page No. <S> <C> Reports of Independent Auditors- F-1 Consolidated Balance Sheets as at December 31, 1996 and December 31, 1995 F-3 Consolidated Statements of Income for the Years ended December 31, 1996, December 31, 1995 and December 31, 1994 F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years ended December 31, 1996, December 31, 1995 and December 31, 1994 F-5 Consolidated Statements of Cash Flows for the Years ended December 31, 1996, December 31, 1995 and December 31, 1994 F-6 Notes to Financial Statements F-7 (a)(2) Financial Statement Schedules annexed hereto: Schedule II - Valuation and Qualifying Accounts and Reserves S-1 Schedules other than those referred to above have been omitted as the conditions requiring their filing are not present or the information has been presented elsewhere in the consolidated financial statements. </TABLE> 34
(a)(3) Exhibits The following documents heretofore filed by the Company with the Securities and Exchange Commission (the "Commission") are hereby incorporated by reference from the Company's Registration Statement on Form S-18, file no. 33-17139-NY: Exhibit No. and Description 3.1 Restated Certificate of Incorporation 4.2 Common Stock Certificate Specimen 4.4 1987 Stock Option Plan The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987: Exhibit No. and Description 3.2 By-laws, as amended The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - January 18, 1990), as follows: Exhibit No. and Description 10.13 License Agreement between the Company and Jordache dated January 18, 1990 (as no. 10.1 therein). 10.15 Letter of Indemnification from Jordache to the Company dated January 18, 1990 (as no. 10.3 therein) 10.16 Letter Agreement from Jordache to the Company regarding foreign license rights dated January 18, 1990 (as no. 10.4 therein). The following documents heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990: 35
Exhibit No. and Description 3.1(a) Certificate of Amendment of the Restated Certificate of Incorporation 10.20 Stock Option Agreement between the Company and Philippe Benacin dated August 31, 1990. The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 29, 1991), as follows: Exhibit No. and Description 10.24 Agreement and Plan or Reorganization dated July 29, 1991 among the Company, Jean Madar and Philippe Benacin (as No. 10.1 therein) The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991: Exhibit No. and Description 10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991 The following documents heretofore filed with the Commission is incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-48811): Exhibit No. and Description 10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992: Exhibit No. and Description 3.1(b) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 31, 1992 36
4.9 1992 Stock Option Plan 4.10 Amendment to 1992 Stock Option Plan 4.11 1993 Stock Option Plan The following documents heretofore filed with the Commission are incorporated by reference to the Company's Registration Statement on Form S-3 (No. 33-63330): Exhibit No. and Description 4.12 Form of Warrant Agreement between Bear, Stearns & Co. Inc. and Jean Philippe Fragrances, Inc. 10.29 Form of Purchase Agreement The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1993), as follows: Exhibit No. and Description 10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter Parfums, S.A. and Jean Philippe Fragrances, Inc.(1) 10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (original in French)(1) 10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A.(translation of French into English)(1) 10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums, S.A.(1) 10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc. 10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.(1) - -------- (1) Filed in excised form, as confidentiality is being sought for certain portions thereof. 37
10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums, S.A.(1) 10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc. 10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.(1) The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.37 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18, 1994 10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 10.40 Commission Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 10.41 Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.42 Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) 10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) 10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994 10.45 License Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994 The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated March 14, 1994) 38
to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.47. English translation of exhibit no. 10.37, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.48. English translation of exhibit no. 10.41, Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.49. English translation of exhibit no. 10.42, Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated March 21, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993: Exhibit No. and Description 3.1(c) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 9, 1993 3.3 Articles of Incorporation of Inter Parfums Holding, S.A. 39
3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums Holding, S.A. 3.4 Articles of Incorporation of Inter Parfums, S.A. 3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter Parfums, S.A. 4.14 Warrant no. 108 registered in the name of Ladenburg, Thalmann & Co., Inc. dated February 2, 1994 4.15 1994 Nonemployee Director Stock Option Plan 10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - May 31, 1994), as follows: Exhibit No. and Description 40
10.55 License Agreement between Chesebrough-Pond's, Inc. and Jean Philippe Fragrances, Inc. dated May 31, 1994(2), listed as no. 10.51 therein. 10.56 Asset Purchase Agreement between Conopco, Inc. and Jean Philippe Fragrances, Inc. dated May 31, 1994, listed as no. 10.52 therein. The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1994), as follows: Exhibit No. and Description 10.57 Revolving Credit Agreement dated July 15, 1994 among Republic National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd., listed as no. 10.54 therein. The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated August 8, 1994) to the Current Report on Form 8-K (date of event - July 13, 1994), as follows: Exhibit No. and Description 10.58. Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53 therein. 10.58.1 English translation of exhibit no. 10.53, Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53.1 therein. The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994: 4.15 1994 Nonemployee Director Supplemental Stock Option Plan 10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance Company and Jean Philippe Fragrances, Inc. - -------- (2) Filed in excised form as confidential treatment has been granted for certain provisions thereof. 41
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995: Exhibit No. and Description 10.60 Guaranty and Security Agreement of Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. to Republic National Bank of New York (France) dated July 19, 1995 10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July 10, 1995 10.62 Intellectual Property Purchase Agreement between Parlux Fragrances, Inc. and Parfums Jean Desprez, S.A. dated March 12, 1996 10.63 Inventory Purchase Agreement between Parlux Fragrances, Inc. and Jean Desprez, S.A. dated March 12, 1996 21 List of Subsidiaries 42
The following exhibits are filed herewith: Exhibit No. and Description 10.64 Amendment to Revolving Credit Agreement dated July 15, 1994 among Republic National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. 10.65 Asset Repurchase Agreement between Carson, Inc. and Jean Philippe Fragrances, Inc. dated March 27, 1997 11 Statement re: Computation of Earnings Per Share (b) Reports on Form 8-K: No Current Reports on Form 8-K were filed during the fourth quarter of Fiscal 1996. 43
REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Jean Philippe Fragrances, Inc. New York, New York We have audited the accompanying consolidated balance sheets of Jean Philippe Fragrances, Inc. and subsidiaries as at December 31, 1996 and December 31, 1995, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Inter Parfums Holdings, S.A. and subsidiaries, consolidated subsidiaries of the Company, which statements include total assets and net sales constituting 54% and 42% of the related consolidated totals for 1996 and 53% and 38% for 1995 and net sales constituting 36% for 1994. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts for Inter Parfums Holdings, S.A. and subsidiaries, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements enumerated above present fairly, in all material respects, the consolidated financial position of Jean Philippe Fragrances, Inc. and subsidiaries at December 31, 1996 and December 31, 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. Our audits referred to above included Schedule II for each of the years in the three-year period ended December 31, 1996. In our opinion, such schedule presents fairly the information set forth therein in accordance with the applicable accounting regulation of the Securities and Exchange Commission. /s/ Richard A. Eisner & Company, LLP New York, New York March 14, 1997 With respect to Note K[2] March 27, 1997 F-1
INTER PARFUMS HOLDING AND SUBSIDIARIES INDEPENDENT AUDITOR'S REPORT We have audited the accompanying consolidated balance sheets of Inter Parfums Holding and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of income, retained earnings and cash flows for the years ended December 31, 1996, 1995 and 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inter Parfums Holding and subsidiaries as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the years ended December 31, 1996, 1995 and 1994, in conformity with generally accepted accounting principles. Paris, March 12, 1997 Cabinet Cauvin, Angleys, Saint-Pierre International Ren Amirkhanian F-2
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands except share and per share data) <TABLE> <CAPTION> December 31, ----------------------- A S S E T S 1996 1995 ---- ---- <S> <C> <C> Current assets: Cash and cash equivalents .............................................. $20,205 $14,204 Accounts receivable, net of allowances of $2,787 and $4,208 in 1996 and 1995, respectively (Note E) ............................................................. 25,137 22,884 Inventories (Notes A and B) ........................................... 23,328 26,093 Receivables, other ..................................................... 1,124 970 Other .................................................................. 1,057 987 Deferred tax benefit (Note J) ......................................... 1,875 2,401 ------- ------- Total current assets ............................................ 72,726 67,539 Equipment and leasehold improvements, net (Notes A and C) ....................................................... 1,734 1,970 Other assets .............................................................. 1,860 1,314 Deferred tax benefit (Note J) ............................................. 582 Trademarks and licenses, net (Notes A, D and K) ........................... 9,265 12,596 ------- ------- T O T A L ....................................................... $85,585 $84,001 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Loans payable, banks (Note E) ......................................... $ 9,468 $ 9,922 Accounts payable ....................................................... 14,740 15,012 Income taxes payable ................................................... 1,950 1,242 ------- ------- Total current liabilities ....................................... 26,158 26,176 ------- ------- Long-term debt, less current portion (Note F) ............................. 485 596 ------- ------- Minority interest ......................................................... 5,576 5,253 ------- ------- Commitments (Note G) Shareholders' equity (Note H): Preferred stock, $.001 par value; authorized 1,000,000 shares; none issued Common stock, $.001 par value; authorized 30,000,000 shares; outstanding 9,602,481 and 10,009,981 shares in 1996 and 1995, respectively ..................... 10 10 Additional paid-in capital ............................................. 20,686 20,610 Retained earnings ...................................................... 38,223 32,565 Foreign currency translation adjustment ................................ 390 1,681 Treasury stock, at cost 1,236,003 and 810,503 shares in 1996 and 1995, respectively ................................ (5,943) (2,890) ------- ------- Total shareholders' equity ...................................... 53,366 51,976 ------- ------- T O T A L ....................................................... $85,585 $84,001 ======= ======= </TABLE> The accompanying notes are an integral part of these financial statements. F-3
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands except share and per share data) <TABLE> <CAPTION> Year Ended December 31, -------------------------------------------- 1996 1995 1994 ---- ---- ---- <S> <C> <C> <C> Net sales ........................................................ $ 93,281 $ 93,669 $ 75,079 Cost of sales .................................................... 51,355 48,703 39,036 ----------- ----------- ----------- Gross margin ..................................................... 41,926 44,966 36,043 Selling, general and administrative ................................................ 32,416 32,990 23,773 Loss on product discontinuance ................................... 2,229 ----------- ----------- ----------- Income from operations ........................................... 9,510 9,747 12,270 ----------- ----------- ----------- Other charges (income): Interest ...................................................... 946 1,148 803 (Gain) loss on foreign currency .................................................... 144 (197) 161 Interest (income) ............................................ (647) (274) (152) (Gain) on sale of stock of subsidiary .................................................. (14) (3,310) (221) ----------- ----------- ----------- 429 (2,633) 591 ----------- ----------- ----------- Income before income taxes ....................................... 9,081 12,380 11,679 Income taxes ..................................................... 2,795 3,188 4,330 ----------- ----------- ----------- Income before minority interest .................................. 6,286 9,192 7,349 Minority interest in net income of consolidated subsidiary .................................... 628 154 74 ----------- ----------- ----------- NET INCOME ....................................................... $ 5,658 $ 9,038 $ 7,275 =========== =========== =========== Net income per share ............................................. $0.57 $0.87 $0.70 =========== =========== =========== Weighted average number of common and common equivalent shares outstanding ................................................... 9,984,463 10,438,896 10,454,555 =========== =========== =========== </TABLE> The accompanying notes are an integral part of these financial statements. F-4
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands except share and per share data) <TABLE> <CAPTION> Common Stock Additional --------------- Paid-in Retained Translation Treasury Shares Amount Capital Earnings Adjustments Stock Total ------- ------ ------- -------- ---------- ------ ------ <S> <C> <C> <C> <C> <C> <C> <C> Balance - January 1, 1994 ...................... 9,921,951 $10 $17,929 $16,253 $(418) $33,774 Issuance of common stock for acquisition ........ 200,000 2,200 2,200 Shares issued upon exercise of stock options and warrants ........................... 120,835 279 279 Net income ...................................... 7,274 7,274 Translation adjustments ......................... 986 986 ---------- --- ------- ------- ------ --------- ------- Balance - December 31, 1994 ................... 10,242,786 10 20,408 23,527 568 44,513 Shares issued upon exercise of stock options ... 91,500 202 202 Net income ..................................... 9,038 9,038 Translation adjustments ........................ 1,113 1,113 Purchased treasury shares ...................... (324,305) $(2,890) (2,890) ---------- --- ------- ------- ------ --------- ------- Balance - December 31, 1995 ................... 10,009,981 10 20,610 32,565 1,681 (2,890) 51,976 Shares issued upon exercise of stock options ... 18,000 76 76 Net income ..................................... 5,658 5,658 Translation adjustments ........................ (1,291) (1,291) Purchased treasury shares ...................... (425,500) (3,053) (3,053) ---------- --- ------- ------- ------ --------- ------- BALANCE - DECEMBER 31, 1996 ................... 9,602,481 $10 $20,686 $38,223 $390 $(5,943) $53,366 ---------- --- ------- ------- ------ --------- ------- ---------- --- ------- ------- ------ --------- ------- </TABLE> The accompanying notes are an integral part of these financial statements. F-5
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands except share and per share data) <TABLE> <CAPTION> Year Ended December 31, ------------------------------ 1996 1995 1994 ---- ---- ---- <S> <C> <C> <C> Cash flows from operating activities: Net income ......................................................... $5,658 $9,038 $7,275 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization .................................. 1,597 1,322 879 Gain on sale of stock of subsidiary ............................ (14) (3,311) (221) Minority interest in net income ................................ 628 158 74 Increase (decrease) in cash from changes in: Accounts receivable .......................................... (3,210) (2,609) (1,493) Inventories .................................................. 1,958 (1,043) (6,118) Other assets ................................................. (923) 1,102 (3,085) Deferred tax benefit ......................................... 1,179 (1,223) (216) Accounts payable ............................................. 332 (75) 4,824 Income taxes payable ......................................... 770 (523) 141 ------- ------- ------- Net cash provided by operating activities .................. 7,975 2,836 2,060 ------- ------- ------- Cash flows from investing activities: Purchase of equipment and leasehold improvements ................... (425) (1,244) (714) Cash portion of trademark and license acquisitions ................. (177) (135) (9,144) Proceeds from sale of trademark .................................... 2,150 ------- ------- ------- Net cash provided by (used in) investing activities ............................................... 1,548 (1,379) (9,858) ------- ------- ------- Cash flows from financing activities: Increase in loan payable - bank .................................... 54 3,085 2,173 Proceeds from issuance of long-term debt ........................... 722 Repayment of long-term debt ........................................ (499) (181) Proceeds from sale of stock of subsidiary .......................... 7,579 194 Purchase of treasury stock ......................................... (3,053) (2,890) Proceeds from exercise of options and warrants ..................... 76 202 279 ------- ------- ------- Net cash provided by (used in) financing activities ............................................... (2,923) 7,477 3,187 ------- ------- ------- Effect of exchange rate changes in cash ............................... (599) (5) (34) ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................. 6,001 8,929 (4,645) Cash and cash equivalents - beginning of year ......................... 14,204 5,275 9,920 ------- ------- ------- CASH AND CASH EQUIVALENTS - END OF YEAR ............................... $20,205 $14,204 $ 5,275 ======= ======= ======= Supplemental disclosures of cash flow information: Cash paid for: Interest ......................................................... $ 962 $1,146 $791 Income taxes ..................................................... 1,555 4,968 4,781 </TABLE> The accompanying notes are an integral part of these financial statements. F-6
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE A) - The Company and its Significant Accounting Policies: [1] Business of the Company: The Company is a manufacturer and distributor of domestic and international brand name and licensed fragrances, alternative designer fragrances and mass market cosmetics. [2] Basis of preparation: The consolidated financial statements include the accounts of Jean Philippe Fragrances, Inc. ("JPF") and its domestic and foreign subsidiaries (the "Company"). All material intercompany balances and transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. [3] Foreign currency translation: For foreign subsidiaries that operate in a foreign currency, assets and liabilities are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the year. Gains and losses from translation adjustments are accumulated in a separate component of shareholders' equity. In instances where the financial statements of foreign entities are remeasured into their functional currency (U.S. dollars), the remeasurement adjustment is recorded in operations. [4] Cash equivalents: All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents. [5] Inventories: Inventories are stated at the lower of cost (first-in, first-out) or market. (continued) F-7
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE A) - The Company and its Significant Accounting Policies: (continued) [6] Equipment and leasehold improvements: Equipment and leasehold improvements are stated at cost. Depreciation and amortization are provided using the straight-line method and the declining balance method over the estimated useful asset lives for equipment, which range between 3 and 10 years and the shorter of the lease term or estimated useful asset lives for leasehold improvements. [7] Trademarks and licenses: Trademarks are stated at cost and are amortized by the straight-line method over twenty years. The cost of licenses acquired is being amortized by the straight-line method over the term of the license, approximately seven to ten years. The Company reviews trademarks and licenses for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. [8] Revenue recognition: Revenue is recognized upon shipment of merchandise. Allowances are established for estimated returns. [9] Issuance of common stock of subsidiary: The Company's share of the proceeds in excess of the carrying amount of the portion of the Company's investment sold is reflected as a gain in the consolidated income statement. [10] Stock-based compensation: During 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The provisions of SFAS No. 123 allow companies to either expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma effects on net income had the fair value of the option been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans. (continued) F-8
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE A) - The Company and its Significant Accounting Policies: (continued) [11] Per share data: Net income per share is based on the weighted average number of common and common equivalent shares outstanding during each year. Common equivalent shares, which consist of unissued shares under options and warrants, are included in the computation when the results are dilutive. (NOTE B) - Inventories: December 31, ----------------- 1996 1995 ------- ------- Raw materials and component parts. . . . . . . . . . . . . $10,738 $10,982 Finished goods. . . . . . . . . . 12,590 15,111 ------- ------- T o t a l . . . . . . . $23,328 $26,093 ------- ------- ------- ------- (NOTE C) - Equipment and Leasehold Improvements: December 31, ----------------- 1996 1995 ------- ------- Equipment . . . . . . . . . . . . $3,536 $3,308 Leasehold improvements. . . . . . 747 727 ------- ------- 4,283 4,035 Less accumulated depreciation and amortization . . . . . . . 2,549 2,065 ------- ------- T o t a l . . . . . . . $1,734 $1,970 ------- ------- ------- ------- (NOTE D) - Trademarks and Licenses: December 31, ----------------- 1996 1995 ------- ------- Trademarks. . . . . . . . . . . . $ 8,526 $11,015 Licenses. . . . . . . . . . . . . 3,108 3,246 ------- ------- 11,634 14,261 Less accumulated amortization . . 2,369 1,665 ------- ------- T o t a l . . . . . . . $ 9,265 $12,596 ------- ------- ------- ------- (continued) F-9
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE E) - Loans Payable - Banks: December 31, ----------------- 1996 1995 ------- ------- Borrowings under a $12,000 unsecured revolving line of credit. Due on demand, bearing interest at the bank's prime rate or 1.75% above the LIBOR rate. . . . . . . . . . . . . . $1,825 $2,600 Borrowings by the Company's foreign subsidiaries under a $4,000 credit facility whereby accounts receivable are sold with recourse and accounted for as a loan and bearing interest at 0.8% above the PIBOR rate (3.41% at December 31, 1996). . . . . . . . . . . . 2,720 2,530 Borrowings by the Company's foreign subsidiaries under several bank overdraft facilities bearing interest at 1.0% above the PIBOR rate. . . . . . . 3,892 4,792 Other borrowings by the Company's foreign subsidiaries. . . . . . . . . . . 1,031 ------- ------- T o t a l. . . . . . . . . . . . . $9,468 $9,922 ------- ------- ------- ------- (NOTE F) - Long-Term Debt: Borrowings by the Company's foreign subsidiary of $485, due in 2004. The loan may be converted into shares of the Company's foreign subsidiary at approximately $15 per share. Interest is payable quarterly at 7% per annum. (continued) F-10
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE G) - Commitments: [1] Leases: The Company leases its office and warehouse facilities under operating leases expiring through 2003. Rental expense amounted to $1,313 in 1996, $730 in 1995 and $442 in 1994. Minimum future rental payments are as follows: 1997. . . . . . . . . . . . . . . $1,180 1998. . . . . . . . . . . . . . . 1,127 1999. . . . . . . . . . . . . . . 684 2000. . . . . . . . . . . . . . . 684 2001. . . . . . . . . . . . . . . 684 Thereafter. . . . . . . . . . . . 1,242 ------ T o t a l . . . . . . . $5,601 ------ ------ [2] License agreements: The Company has a number of license agreements for the use of trademark and rights in connection with the manufacture and sale of its products. In connection therewith, the Company is subject to certain minimum annual royalties as follows: 1997. . . . . . . . . . . . . . . $1,331 1998. . . . . . . . . . . . . . . 1,202 1999. . . . . . . . . . . . . . . 1,247 2000. . . . . . . . . . . . . . . 1,317 2001. . . . . . . . . . . . . . . 1,147 Thereafter. . . . . . . . . . . . 1,932 ------ T o t a l . . . . . . . $8,176 ------ ------ (NOTE H) - Shareholders' Equity: [1] Issuance of common stock of subsidiary: In 1993, Inter Parfums, S.A., a consolidated subsidiary of the Company, sold shares in a private placement transaction to unaffiliated French institutional investors. In 1994, 10,000 additional shares were sold to enable the stock of Inter Parfums, S.A. to commence trading on the over-the-counter Paris Stock Exchange, and 11,536 shares were issued pursuant to the conversion terms of the Company's long-term debt. (continued) F-11
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE H) - Shareholders' Equity: (continued) [1] Issuance of common stock of subsidiary: (continued) In November 1995, Inter Parfums, S.A. completed a public offering of 308,000 shares of its common stock at 130 French francs per share. Net proceeds of such offering aggregated 36.5 million French francs or approximately $7.6 million. In connection with such offering, Inter Parfums Holdings, S.A. ("Holdings"), a wholly-owned subsidiary of the Company and direct parent of Inter Parfums, S.A. exercised its right to convert a portion of its convertible debt into 250,000 shares of capital stock of Inter Parfums, S.A. at 80 French francs per share. As a result of such issuances, the percentage ownership of Inter Parfums, S.A. was reduced from 90.64% to 76.71%. In 1996, certain minority stockholders exercised their rights to convert approximately $57,000 of their convertible debt into 4,157 shares of capital stock of Inter Parfums, S.A. (70 French francs per share), further reducing the Company's percentage ownership interest to 76.52%. The Company's share of the offering or conversion proceeds in excess of the carrying amount of the portion of the Company's investment sold is reflected as a gain in the consolidated income statement. Deferred taxes have not been provided because application of available tax savings strategies would eliminate taxes on this transaction. [2] Stock option plan: The Company maintains a stock option program for key employees, executives and directors. The plans provide for the granting of both nonqualified and incentive options. Options granted under the plans typically vest immediately and are exercisable for a five year period. The Company applies APB 25 in accounting for its stock option incentive plans and accordingly recognizes compensation expense for the difference between the fair value of the underlying common stock and the grant price of the option at the date of grant. (continued) F-12
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE H) - Shareholders' Equity: [2] Stock option plan: (continued) Pro forma information regarding net income and earnings per share is required by SFAS No. 123. Had compensation cost for the Company's stock option plans been determined based upon the fair value at the grant date, consistent with the methodology prescribed under SFAS No. 123 the Company's net income in 1995 and 1996 would have been approximately $8.70 million and $5.54 million, or $0.83 per share and $0.56 per share, respectively. The weighted average fair value of the options granted during 1995 and 1996 are estimated as $1.78 and $1.43 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield 0%, volatility of 30%, risk-free interest rates at the date of grant (5.31% in 1995 and 5.80% in 1996), and an expected life of the option of 2 years. A summary of the Company's stock option activity, and related information for the years ended December 31, follows: <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------------------------------------- 1996 1995 1994 ---------------------- ----------------------- ----------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price ------- ----- ------- ----- ------- ----- <S> <C> <C> <C> <C> <C> <C> Shares under option - beginning of year ........ 1,541,874 $7.23 1,280,474 $7.05 1,004,974 $9.17 Options granted ............. 135,875 6.56 313,150 8.06 1,325,832 8.17 Options exercised ........... (18,000) 4.22 (16,500) 6.20 (26,084) 4.65 Options cancelled ........... (58,300) 8.07 (35,250) 8.61 (1,024,248) 10.64 ---------- ----- ---------- ------ ---------- ----- Shares under options - end of year (1) ................. 1,601,449 $7.18 1,541,874 $7.23 1,280,474 $7.05 ---------- ----- ---------- ------ ---------- ----- ---------- ----- ---------- ------ ---------- ----- </TABLE> Exercise prices for options outstanding as of December 31, 1996 ranged from $4 to $12. The weighted-average remaining contractual life of those options is 2 years. At December 31, 1996 options for 262,125 shares were available for future grant under the plans. In addition, the Company has outstanding options not pursuant to any plan for 1,000 shares which remain outstanding at an exercise price of $12.00. (continued) F-13
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE I) - Geographic Areas: Information on the Company's operations by geographical areas is as follows: Year Ended December 31, ------------------------------ 1996 1995 1994 -------- -------- -------- Net sales: United States. . . . . $ 52,592 $ 57,382 $ 48,377 Europe . . . . . . . . 40,015 38,451 30,672 South America. . . . . 3,038 693 Eliminations . . . . . (2,364) (2,857) (3,970) -------- -------- -------- T o t a l. . . . . . $ 93,281 $ 93,669 $ 75,079 -------- -------- -------- -------- -------- -------- Net income: United States. . . . . $ 3,344 $ 4,256 $ 6,297 Europe . . . . . . . . 1,947 4,619 1,295 South America. . . . . 217 107 Eliminations . . . . . 150 56 (317) -------- -------- -------- T o t a l. . . . . . $ 5,658 $ 9,038 $ 7,275 -------- -------- -------- -------- -------- -------- Total assets: United States. . . . . $ 48,057 $ 50,767 $ 49,625 Europe . . . . . . . . 46,484 44,522 32,518 South America. . . . . 2,219 900 Eliminations . . . . . (11,175) (12,188) (12,692) -------- -------- -------- T o t a l. . . . . . $ 85,585 $ 84,001 $ 69,451 -------- -------- -------- -------- -------- -------- United States export sales were approximately $7,000, $6,400 and $5,700 for the years ended December 31, 1996, 1995 and 1994, respectively. (NOTE J) - Income Taxes: The components of income before income taxes consist of the following: Year Ended December 31, -------------------------- 1996 1995 1994 ------ ------- ------- U.S. operations . . . . . $5,565 $ 6,802 $10,244 Foreign operations. . . . 3,281 5,483 1,951 Eliminations. . . . . . . 235 95 (516) ------ ------- ------- T o t a l. . . . . . $9,081 $12,380 $11,679 ------ ------- ------- ------ ------- ------- (continued) F-14
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE J) - Income Taxes: (continued) The provision for current and deferred income tax expense consists of the following: Year Ended December 31, ------------------------- 1996 1995 1994 ------ ------ ------- Current: Federal . . . . . . . . . $1,561 $2,627 $3,434 State and local . . . . . 328 618 919 Foreign . . . . . . . . . 100 316 180 ------ ------ ------- T o t a l . . . . . . . $1,989 $3,561 $4,533 ------ ------ ------- ------ ------ ------- Deferred: Federal . . . . . . . . . $ 278 $ (555) $ (338) State and local . . . . . 55 (143) (69) Foreign . . . . . . . . . 473 325 204 ------ ------ ------- T o t a l . . . . . . . $ 806 $ (373) $ (203) ------ ------ ------- ------ ------ ------- Deferred taxes are provided principally for reserves, and certain other expenses that are recognized in different years for financial reporting and income tax purposes. At December 31, 1996, the deferred tax assets consists of approximately $1,675 relating to reserves and other expenses which are not currently deductible for tax purposes and approximately $200 relating to available foreign net operating loss carryforwards. Differences between the United States federal statutory income tax rate and the effective income tax rate were as follows: Year Ended December 31, 1996 1995 1994 ---- ---- ---- Statutory rates. . . . . . . . 34.0% 34.0% 34.0% State and local taxes, net of federal benefit . . . . . . 2.8 2.5 4.8 Reduction of valuation reserve on deferred tax asset . . . . . . . . . (7.2) Nontaxable gain on sale of stock of subsidiary . . . . (9.2) Other. . . . . . . . . . . . . 1.2 (1.6) (1.7) ---- ---- ---- Effective rates. . . . . . . . 30.8% 25.7% 37.1% ---- ---- ---- ---- ---- ---- (continued) F-15
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (in thousands except share and per share data) (NOTE K) - Other Matters: [1] As a result of disappointing sales of the Cutex lip color line, the Company decided to discontinue production of the line in October 1995. As a result, the Company recorded a nonrecurring charge aggregating $2.2 million, before taxes, in the fourth quarter of 1995. This charge represented a writedown of lip product inventory and the effect of potential customer returns or markdowns of lip products expected in 1996. [2] On March 27, 1997 Chesebrough Ponds, the licensor of the Cutex trademark, entered into an agreement to sell the Cutex trademarks to Carson, Inc. At the request of Carson, Inc., the Company agreed to relinquish its Cutex nail and lip product license. In connection with the transaction all of the Company's Cutex inventory is to be purchased and certain liabilities are to be assumed by Carson, Inc. Both transactions are to close simultaneously and management anticipates that such closings will occur on or about April 30, 1997. The Company expects to incur a pre-tax charge of approximately $1,300,000 in 1st quarter of 1997 due to the write-off of intangible assets and other expenses relating to the relinquishment of the Cutex license. F-16
SCHEDULE II JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands) <TABLE> <CAPTION> Column A Column B Column C Column D Column E - ------------------------------------------------------------------------------------------------------------------------------------ Additions -------------------------- (1) (2) Balance -------------------------- at Charged to Balance beginning Charged to other at of costs and accounts - Deductions - end of Description period expenses describe (A) describe (B) period - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Year ended December 31, 1996: Allowances for sales returns and doubtful accounts ............. $4,208 $1,133 $2,554 (a) $2,787 ------ ------ ------ ------ ------ ------ ------ ------ Year ended December 31, 1995: Allowances for sales returns and doubtful accounts ............. $2,823 $1,546 $ 160 (a) $4,208 ------ ------ ------ ------ ------ ------ ------ ------ Year ended December 31, 1994: Allowances for sales returns and doubtful accounts ............. $1,202 $2,150 $ 529 (a) $2,823 ------ ------ ------ ------ ------ ------ ------ ------ </TABLE> (a) Write off of bad debts and sales returns. The accompanying notes are an integral part of these financial statements. F-17
SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JEAN PHILIPPE FRAGRANCES, INC. By: /s/ Jean Madar ------------------------------- Jean Madar, Chief Executive Officer Date: April 9, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date - --------- ----- ---- /s/ Jean Madar - ------------- Jean Madar Chairman of the Board of Directors and Chief Executive Officer April 9, 1997 /s/ Philippe Benacin - -------------------- Philippe Benacin Director April 14, 1997 /s/ Russell Greenberg - --------------------- Russell Greenberg Chief Financial and Accounting Officer and Director April 10, 1997 /s/ Francois Heilbronn - ---------------------- Francois Heilbronn Director April 14, 1997 /s/ Joseph A. Caccamo - --------------------- Joseph A. Caccamo Director April 10, 1997 /s/ Jean Levy - ----------------- Jean Levy Director April 14, 1997 _________________ Director April __, 1997 Robert Bensoussan-Torres
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBIT INDEX TO REPORT ON FORM 10-K (MARK ONE) /X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996 or / / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to . Commission File No. 0-16469 Jean Philippe Fragrances, Inc. (Exact name of registrant as specified in its charter) Delaware 13-3275609 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 551 Fifth Avenue, New York, New York 10176 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 983-2640.
The following documents heretofore filed by the Company with the Securities and Exchange Commission (the "Commission") are hereby incorporated by reference from the Company's Registration Statement on Form S-18, file no. 33-17139-NY: Exhibit No. and Description 3.1 Restated Certificate of Incorporation 4.2 Common Stock Certificate Specimen 4.4 1987 Stock Option Plan The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987: Exhibit No. and Description 3.2 By-laws, as amended The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event -January 18, 1990), as follows: Exhibit No. and Description 10.13 License Agreement between the Company and Jordache dated January 18, 1990 (as no. 10.1 therein). 10.15 Letter of Indemnification from Jordache to the Company dated January 18, 1990 (as no. 10.3 therein) 10.16 Letter Agreement from Jordache to the Company regarding foreign license rights dated January 18, 1990 (as no. 10.4 therein). The following documents heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990: 2
Exhibit No. and Description 3.1(a) Certificate of Amendment of the Restated Certificate of Incorporation 10.20 Stock Option Agreement between the Company and Philippe Benacin dated August 31, 1990. The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 29, 1991), as follows: Exhibit No. and Description 10.24 Agreement and Plan or Reorganization dated July 29, 1991 among the Company, Jean Madar and Philippe Benacin (as No. 10.1 therein) The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991: Exhibit No. and Description 10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991 The following documents heretofore filed with the Commission is incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-48811): Exhibit No. and Description 10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992: Exhibit No. and Description 3
3.1(b) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 31, 1992 4.9 1992 Stock Option Plan 4.10 Amendment to 1992 Stock Option Plan 4.11 1993 Stock Option Plan The following documents heretofore filed with the Commission are incorporated by reference to the Company's Registration Statement on Form S-3 (No. 33-63330): Exhibit No. and Description 4.12 Form of Warrant Agreement between Bear, Stearns & Co. Inc. and Jean Philippe Fragrances, Inc. 10.29 Form of Purchase Agreement The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1993), as follows: Exhibit No. and Description 10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter Parfums, S.A. and Jean Philippe Fragrances, Inc.1 10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (original in French)1 10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A.(translation of French into English)1 10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums, S.A.1 10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc. - -------- (1) Filed in excised form, as confidentiality is being sought for certain portions thereof. 4
10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.1 The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.37 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18, 1994 10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 10.40 Commission Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 10.41 Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.42 Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) 10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) 10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994 10.45 License Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994 5
The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated March 14, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.47. English translation of exhibit no. 10.37, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.48. English translation of exhibit no. 10.41, Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.49. English translation of exhibit no. 10.42, Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated March 21, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993: 6
Exhibit No. and Description 3.1(c) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 9, 1993 3.3 Articles of Incorporation of Inter Parfums Holding, S.A. 3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums Holding, S.A. 3.4 Articles of Incorporation of Inter Parfums, S.A. 3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter Parfums, S.A. 4.14 Warrant no. 108 registered in the name of Ladenburg, Thalmann & Co., Inc. dated February 2, 1994 4.15 1994 Nonemployee Director Stock Option Plan 10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - May 31, 1994), as follows: 7
Exhibit No. and Description 10.55 License Agreement between Chesebrough-Pond's, Inc. and Jean Philippe Fragrances, Inc. dated May 31, 19942, listed as no. 10.51 therein. 10.56 Asset Purchase Agreement between Conopco, Inc. and Jean Philippe Fragrances, Inc. dated May 31, 1994, listed as no. 10.52 therein. The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1994), as follows: Exhibit No. and Description 10.57 Revolving Credit Agreement dated July 15, 1994 among Republic National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd., listed as no. 10.54 therein. The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated August 8, 1994) to the Current Report on Form 8-K (date of event - July 13, 1994), as follows: Exhibit No. and Description 10.58. Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53 therein. 10.58.1 English translation of exhibit no. 10.53, Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53.1 therein. The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994: 4.15 1994 Nonemployee Director Supplemental Stock Option Plan 10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance Company and Jean Philippe Fragrances, Inc. - -------- (2) Filed in excised form as confidential treatment has been granted for certain provisions thereof. 8
The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995: Exhibit No. and Description 10.60 Guaranty and Security Agreement of Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. to Republic National Bank of New York (France) dated July 19, 1995 10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July 10, 1995 10.62 Intellectual Property Purchase Agreement between Parlux Fragrances, Inc. and Parfums Jean Desprez, S.A. dated March 12, 1996 10.63 Inventory Purchase Agreement between Parlux Fragrances, Inc. and Jean Desprez, S.A. dated March 12, 1996 21 List of Subsidiaries 9
The following exhibits are filed herewith: Exhibit No. and Description 10.64 Amendment to Revolving Credit Agreement dated July 15, 1994 among Republic National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. 10.65 Asset Repurchase Agreement between Carson, Inc. and Jean Philippe Fragrances, Inc. dated March 27, 1997 11 Statement re: Computation of Earnings Per Share 10