Inter Parfums(IPAR) - 2022 Q4 - Annual Report

Sales Performance - European based fragrance product sales represented approximately 68%, 75%, and 78% of net sales for 2022, 2021, and 2020, respectively[266]. - United States operations represented 32%, 25%, and 22% of net sales in 2022, 2021, and 2020, respectively[267]. - Total net sales for 2022 reached $1,086.7 million, a 24$879.6 million in 2021, with European based product sales growing by 12% and United States based product sales increasing by 58%[296]. - North America achieved a sales growth of 22% in 2022 compared to 2021, while Western Europe and Asia grew by 28% and 19%, respectively[302]. Brand Contributions - The largest brands contributed the following percentages to net sales in 2022: Montblanc 18%, Jimmy Choo 18%, Coach 15%, and GUESS 12%[269]. New Product Launches - The company plans to launch new fragrances under the Donna Karan and DKNY brands in 2024, following a long-term global licensing agreement[282]. - The company anticipates a solid line-up of new product launches in 2023, including the Moncler Collection and GUESS Uomo Acqua, with expectations for continued growth despite inflation and supply chain challenges[300]. Financial Performance - Gross profit margin for European operations was 68.2% in 2022, up from 66.6% in 2021, while the United States operations saw a gross profit margin of 54.7%, an increase from 53.1% in 2021[303][305]. - Operating margins improved to 17.9% in 2022, up from 16.8% in 2021, reflecting better sales performance and cost management[312]. - Net income attributable to European operations was $107.3 million in 2022, up from$80.7 million in 2021, while net income from U.S. operations increased to $43.7 million from$29.4 million in the same period[322]. Expenses - Selling, general and administrative expenses for European operations were $358.3 million in 2022, representing 48.2$134.0 million, or 39.1% of net sales[308]. - Promotion and advertising expenses totaled $212.4 million in 2022, accounting for 19.5$87.0 million in 2022, representing 8.0% of net sales, driven by new licenses and increased royalty-based product sales[310]. Cash Flow and Liquidity - Cash provided by operating activities was $115.2 million in 2022, with working capital aggregating$443 million and a working capital ratio of 2.3 to 1[331][325]. - The company has $256 million in cash, cash equivalents, and short-term investments as of December 31, 2022, with no liquidity issues expected[324]. - Cash dividends paid in 2022 totaled$79.8 million, reflecting a 100% increase in the annual dividend to $2.00 per share authorized in February 2022[341]. Risk Management - The company has implemented a risk management program to address foreign currency exchange rate fluctuations, primarily using forward exchange contracts[273]. - The company employs a controlled risk management program primarily using derivative financial instruments to address financial exposures[345]. - The company believes the risk of loss due to nonperformance by financial institutions related to foreign currency contracts is remote[347]. - Interest rate risk is managed by monitoring interest rates and determining whether to swap fixed interest rates for floating rate debt or vice versa[348]. Acquisitions and Investments - In December 2022, the company closed a transaction with Lacoste for an exclusive worldwide license for perfumes and cosmetics, effective January 2024 for 15 years[276]. - The acquisition of the future headquarters in Paris was financed by a 10-year €120 million (approximately$128.0 million) bank loan[286]. - The company entered into a $53.3 million (€50 million) loan agreement in December 2022 to finance the acquisition of the Lacoste trademark, with a maximum interest rate of 2$6.8 million impairment charge on the Rochas fashion trademark in Q4 2022 after an independent valuation[283]. - The company reported that if estimates for sales returns and allowances were adjusted by 5%, gross profit could have varied by approximately $0.8 million, impacting net income by$0.5 million[295]. - The company recognized a loss of $1.9 million in 2022 from foreign currency exchange contracts, a significant change from a gain of$2.3 million in 2021[314]. ERP Transition - The company has transitioned to a new ERP system for U.S. operations, aimed at improving efficiency and scalability for new brands[300].