Russell Greenberg - CFO and EVP Jean Madar - Chairman and CEO.

Joel Altobello - Raymond James Linda Bolton Weiser - B. Riley Steph Wissink - Piper Jaffray Hamed Khorsand - BWS Financial Wendy Nicholson - Citi.

Greetings and welcome to the Inter Parfums, Inc. Second Quarter 2015 Conference Call. At this time all participants are in listen-only-mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It's now my pleasure to introduce your host, Russell Greenberg, Chief Financial Officer and Executive Vice President.

Thank you sir. You may begin..

Thank you, operator. Good morning and welcome to our second quarter conference call. Following the financial review, Jean Madar, our Chairman and CEO, will provide a business overview and then we'll move on to your questions.

Before proceeding further, I want to remind listeners that this conference call may contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results.

These factors include, but are not limited to the risks and uncertainties discussed under the headings of forward-looking statements and risk factors in our annual report on Form 10-K and the reports that we file from time to time with the Securities and Exchange Commission.

We do not intend to and undertake no duty, to update the information discussed. When we refer to our European-based operations, we're primarily talking about sales of prestige fragrances conducted through our 73% owned French subsidiary, Inter Parfums SA.

And when we discuss our United States based operations, we're primarily referring to sales of prestige and specialty retail fragrance products, as well as travel amenities that are all conducted through our wholly-owned domestic subsidiaries. Moving on to second quarter results, net sales were $102 million compared to $118.2 million.

In dollars the decrease was 13.7%. For that comparable foreign currency exchange rates, net sales decreased to 5.3%. European-based operations generated sales of $77.1 million compared to $94.7 million for an 18.5 declined in dollars and an 8% decline using comparable foreign currency exchange rates. Sales by our U.S.

based operations rose 6% to $24.9 million from $23.5 million. Gross profit margin was 59.1% of net sales compared to 57.6%. SG&A expenses as a percentage of net sales was 51.1% compared to 46.8%. Operating income was $8.2 million, compared to $12.9 million resulting in an operating margin of 8.1% of net sales compared to 10.9.

Net income attributable to Inter Parfums, Inc. was $4.4 million or $0.14 per diluted share, compared to $6.1 million or $0.20 per diluted share. Thus for the first half of 2015 we generated net sales of $211.3 million compared to last year's $239.9 million.

While that is a 12% drop in dollars at comparable foreign currency exchange rates net sales decreased 4% for the first half. Net income attributable to Inter Parfums, Inc. was $14.4 million or $0.46 per diluted share in the current first half compared to $15 million or $0.48 per diluted share for the same period one year earlier.

As we have covered second quarter sales drivers in our news release, I will focus certain P&L points. The increase in gross profit margin for European based sales was primarily attributable to the strength of the U.S. dollar relative to the Europe.

The average dollar euro exchange rate for the three months ended June 30, 2015 was 1.1 as compared to 1.37 for the 2014 period. Although some quarterly fluctuations occur due to individual product mix in sales the overall trend of increased gross margin for our U.S.

based operations is due to a greater concentration of higher margin prestige brand product sales. As compared to lower margin specialty retail and mass market product sales. Selling, general and administrative expense as a percentage of sales was 51% for the current second quarter compared to 47% in last year's second quarter.

The increase in SG&A expense as a percentage of net sales reflects reduced absorption of fixed costs in our European operations due to the lower sales levels during the quarter. In the U.S. business SG&A as a percentage of sales was flat with the prior year, as royalty and advertising expense grows proportionately to the sales increased.

Particularly for our newer prestige product licenses such as Oscar de la Renta and Dunhill. Promotion and advertising including in selling general administrative expenses were 17.2% of net sales in both the current second quarter and in the second quarter of 2014.

I should point out that similar to last year a significant portion of our 2015 advertising spend is budgeted for the second half of the year. As a result our operating margins decline to 8.1% in the current second quarter from 10.9% in last year's second quarter.

There were no major changes in non-operating items such as interest expense and income of our currency loss. However our tax rate returned to a more normalized level of 34% in the current quarter versus last year's 41%. This is because our European based operations are now using an effective annual tax rate to estimate taxes for interim periods.

Our financial position remains very strong. We entered the second half of 2015 with a working capital of $342 million including approximately $229 million in cash and cash equivalents and short term investments for a working capital ratio nearly 4 to 1.

The almost 90 million of long-term debt on our balance sheet relates to the five year term loan we recently entered into to finance the Rochas acquisition.

As you may have read in the 10-Q which we also filed this past Friday to reduce exposure to the rising variable interest rates we also entered into a swap transaction effectively changing the variable interest rate to a fixed rate of approximately 1.2%.

Turning to our outlook for the year we expect 2015 net sales of -- $460 million to $470 million resulting in net income per share attributable to Inter Parfums in the range of $0.95 to $ 1 per diluted share.

This guidance with lesser expectation at some of the negative market condition that we see in China and Eastern Europe that were held in the first half of this year will continue for the remainder of 2015. And as always our guidance also assumes that dollar remains at current levels. Jean please continue..

Thank you Russ and good morning everyone. Some of the points made in our second quarter worth further explanation. As we reported, Jimmy Choo was our leading brand during the quarter. Thanks, in great part, to the early success of Jimmy Choo men, especially in the U.S.

plus the launch earlier this year of Jimmy Choo Blossom for women and the steady performance of the Jimmy Choo signature line in general. This lead to the 62% increase in sales in local currencies. In dollars 19% comparable core sales depreciation of the euro versus the dollar reduced the growth in Jimmy Choo brand sales to a still impressive 30%.

I know we mentioned that the U.S. market for the brand has been quite strong. The Jimmy Choo fragrances are also doing quite well in Western Europe and Asia and naturally we're very optimistic about this summer launch August 3, Jimmy Choo women's fragrance called Illicit.

We will have ads running in the US and in UK in September to be followed by a pre-holiday blitz in November and December in both markets. This would be followed by a European launch exclusively set for run in 10 countries and we will start Asia in January.

Moving on to another important brands for the company Montblanc, the weakening of the Euro also had the effect of exacerbating lower sales of this brand, which experienced for the first time a 23% decline in local currencies and a 38% reduction in dollars.

Montblanc sales also had a very difficult comparison against the highly successful launch of Emblem in the second quarter of 2014. Our plans call for [Lady Emblem] to debut during this month and July and August which should reinvigorate Montblanc sales as the year progresses and also into 2015.

Lanvin sales were down 9% and 27% in local currency in dollars respectively, largely as a result of a challenging market environment in Eastern Europe which was partially offset by gains for the ever resilient [Eclat d'Arpege] on which we are moving with the upcoming launch of Éclat de Fleurs and the recent introduction of [Eclat d'Arpege].

For our European operation by the Balmain Homme, just debuted last month and our second fragrance duo for Karl Lagerfeld called Private Klub will launch in the third quarter. I know we mentioned that the new women's scent for Van Cleef was on the docket for 2015 but has been moved now to 2016.

However Ombre Imprerial joins the brand collection extraordinaire and has been doing very well this year. For U.S. operation in the fall we will introduce Romantica by Anna Sui and for Shanghai Tang, the Silk Road collection is also rolling out and our newest fragrance Oscar de la Renta and Dunhill are continuing their global rollout.

While on the subject of U.S.

operation I want to mention that we had a big win in June at the Fragrance Foundation Awards when Modern Man by Banana Republic took home the award for men's fragrance of the year in the popular category, in the highly competitive fragrance area with hundreds of new entries every year it is a great honor to be recognized by our industry for excellence.

As compared to past years 2016 has been a little lighter on launch activity. However both in the U.S and in Europe 2016 will be considerably more active for product lunches including some for newer brands such as Coach, Abercrombie and Fitch, and Hollister. And we will talk about that in our next conference call.

With regards to Rochas, integration and business development activities are underway as we announced in our press release on June 1, we require the Rochas brand covering old brand names and registered trademarks for beauty and fashion. About 95% of the Rochas business is fragrance and fashion accounts for the 10 licenses.

About 60% of our fragrance business is done in Spain and France and the P&G sheet the fragrance business is about $45 million per year and when we took over the brand there was very little inventory so we [started is] job number one.

Our medium terms strategy for fragrance is to focused underlying the generator most business for example we need to overall develop a promotion for order Rochas also on our to do list is to reverse the packaging of some of the enduring Rochas expense such as farm. A broad based product launch is being prepared for early 2017.

In the near term our focus of recession part of the Rochas business is a maintaining department store and brand distribution by year end we hope to compete our analysis of this business and develop our business then accordingly.

With regard to coach we'll be the king of our existing lines in the summer of 2016 once we have assessed the potential of each, our plan is to launch our first new coach fragrance in the fall of 2015.

We'll have more to say about our strategy later on but in general we'll be developing new fragrances that capture the spirit of the Coach brand in an attempt to bring the brand to a larger audience. Although we have a great deal on our plate, our search continues for additional names for our fragrance brand portfolio.

To repeat we have the infrastructure in place to support a much larger business, we have a very strong balance sheet. We have a stellar reputation built on a track record of success.

We have a great group of creative and inspired individuals who have other end of again developed and commercialized new brands, appropriate products that enhance the brands of our fragrance partner. With that operator we can open the line of questions..

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Joel Altobello with Raymond James. Please proceed with your question..

First question, I wanted to go into the US-based gross margin. You mentioned that it was, obviously, up nicely in the first quarter and down fairly sizably this quarter.

What was unusual about the second quarter that caused that decline?.

Joe. The first quarter if you remember we have our initial launch of two new products, Extraordinary for Oscar de la Renta and Icon through Dunhill.

We had a fairly big increase in the pipeline sales, as we move towards the second quarter you have continued sales as you continued to roll out those products into other geographic areas but the main countries has that initial pipeline launch in the first quarter.

And therefore the sales were much greater in the first quarter as it compared to that in the second quarter and that's going to cause quarterly types of fluctuation. However as you can see for the full six month period, that gross margin in the U.S. operations is still higher as a percentage of sales than it was in the prior periods..

Okay.

So should the second half look more like the first quarter or the second quarter?.

As we move forward I think it's going to end up with the blended rate more like what you see for the six months as opposed to what you saw in the first quarter, you are not going to be able to repeat that pipeline effects until in future years when you have a new pipeline for the next product launch.

Specific we are going to see a little bit of a higher margin when you have higher sales because of the pipeline effect. .

Okay.

So the second quarter was the anomaly, I guess?.

Let say it's not the second, the first quarter was more of the anomaly you have much greater because of that pipeline second quarters six months is the little bit more of the natural progression of products being refurnished on customer itself..

Okay. Fair enough. And then, moving on to Rochas, looks like you had a little bit of sales from that brand in the quarter. You mentioned in the past that you could have $10 million of Rochas sales this year.

First, is that in your numbers at this point? And then turning to next year, how much incremental should that brand contribute? If it did $45 million for P&G, obviously, you guys are not expecting that.

But could it do $30 million next year for you guys?.

Yes. I'll start with the later part of the question first.

We don’t usually indicate projections on a brand by brand basis although we have said that we don’t expect to reach the levels because you are going to be paring down and I'm going to let Jean continue more on that but with respect to the first part of your question as we indicated there was very little inventory to buy from Rochas, I think the number came out is somewhere around 3 million or so and some of that are components.

As Jean mentioned in the remarks our job number one is to get our production up to speed. It was a little bit of finished goods that we did sell and maybe there is a little bit more that we will be selling over the next three months or four months but I think the numbers are going really be immaterial from the standpoint of Rochas sales in 2015.

The key is getting the production up to speed so that we can continue and move products into the marketplace for 2016. .

Which is what we have started during the summer as I said putting back some inventory, can we do $10 million anywhere between $6 to $10 million this year [indiscernible] if and when we have inventory.

What's more important is what can we expect next year? So if PNG was in 45 million you mentioned the number of 30 million or 35 million which we think is a very feasible [indiscernible]. The important thing as I said is we have some stronger market share in France and Spain. So we'll be capitalizing on that.

We'll be working on new fragrance also that we have in 2017, so we think that in the next two years we should be able to get back to where PNG was in terms of level of sense..

Our next question comes from the line of Linda Bolton Weiser with B. Riley. Please proceed with your question..

In terms of your comment about the gross margin in the US-based business, can you just remind me, I thought the Dunhill icon was supposed to -- the launch was supposed to follow the European launch in the US.

I thought it was supposed to be the second quarter of 2015, but can you just clarify that? And why that wouldn't have helped the gross margin, then, in the second quarter? That's my first question. .

Yes, Dunhill did launch in the U.S. in the second quarter except the launch in the U.S. is very muted. It's only in a select few department stores as opposed to the Oscar de la Renta extraordinary launch which occurred in the first quarter which pretty much hit every major department store here in the United States.

So that’s the reason you are not going to have that kind of an assess from a U.S. S. business standpoint..

I agree. The business of the Dunhill in the U.S. is very small compared to Oscar de la Renta..

Okay.

So are you finding that after the initial sell-in on the Oscar de la Renta that the follow-through POS is continuing to be kind of strong? Is it as expected?.

What I think is important to say that we are beating our numbers on Oscar de la Renta for extraordinary -- our internal numbers and the sales of Dunhill are also above our expectation. We feel in terms of the U.S. market; and the sales originated from the U.S.

The bigger change came from Anna Sui, which was down something like 20% due to some challenges in China and countries in Asia. But that’s why we still think that we're comfortable with the sales level for the sale of 460 million or 470 million even though we did only 200 [indiscernible] 210 million or 211 million in the first six months.

So it means that we are really expecting the second half to be a -- much stronger and when I look at the sales and the original shipments of the Illicit month of July we are very confident..

Okay. Thank you. That's helpful. And then, just following on that point about the second half. If I do my math right and I put what you are expecting for the year, it does show you only have to do low- to mid-single digit constant currency sales growth in the second half.

However, in the fourth-quarter you had a really strong quarter last year, and your main brands were all up more than 25% in the fourth-quarter last year.

So do you feel comfortable and what does it look like third quarter versus fourth-quarter? Because it sounds like a lot of the launches you're talking about are actually shipping in the third quarter. So how are we going to do in the fourth-quarter when you have those hard comparisons? Thanks. .

Linda, we don’t normally breakdown sales by quarter-by-quarter but from just looking -- just quickly at what you are saying and you are right on a constant dollar basis we are looking at low-single digit sales increases. I think it's going be fairly consistent quarter-to-quarter third versus fourth compared to the prior year third versus fourth.

We also still -- we do have some significant launches that are still happening in the second half of this year Jean just mentioned Jimmy Choo Illicit, how that moves out into the global market place and how that's received is going to have a significant impact on the possibility of beating the kind of numbers that we have in our guidance..

Yes the three important launches that we are starting in third and of course we continue in fourth, is Jimmy Choo the women's Illicit, the new Emblem by Montblanc and the new Lanvin.

So you have a launch for Jimmy Choo for Lanvin, and for Montblanc and these are three largest brands in our portfolio and from what I see from the early sign of sell in we do not have sell through, we feel confident for the sales this year next year.

For next year we will have portfolio of a [Indiscernible] and we'll have a major launch which I think will happen more in the second part of 2016 for Coach. So again these are all three new businesses that we didn’t have in 2015 so the conversion for 2016 will be easier than this year..

Can I just do one more question on the gross margin? You explained very well about the US piece. So when you look at the whole Company gross margins, you had 62% in the first quarter, then 59%. So for the second half, I would think somewhere in between those two numbers is a good place to be.

Do you want to provide more color on that?.

I don’t think you are wrong and your analysis is certainly not fundamentally incorrect, we saw that the margin increase for our European operations was not as severely high in the second half of the first half versus the first quarter.

So I think the blended numbers are what's you are going to see for the remainder of the year but a lot of that also does depend on what happens in those countries where we did see some weakness this particular period.

The China market the Eastern European market, these are areas where for our European operations we do generate a lot of sales that are in U.S. dollars denominated and those are what give it that extra pop if you will from a gross margin standpoint.

I remember the sales for our European operations if we are in a strong dollar environment your sales are down but your margin is up and your margin is up because those dollars denominated sales are giving you that extra pop because of the gross margin. So it depends on what happens in front of those areas for the second half of the year..

Our next question comes from the line of Steph Wissink with Piper Jaffray. Please proceed with your question..

We have a couple of questions. Maybe you could speak to, first, just the pricing environment globally.

And we're curious specifically if there's been any Delta in the performance of your tourist or duty-free business, versus some of the mainline retail around the world?.

Can you repeat the second part of your question if we have seen some?.

Any difference in the performance of the tourist or the duty-free location versus the mainline retail stores?.

No we could not see big difference between local market and duty free market, to make it simple the Americas are doing well, Europe is selective, certain countries are doing terrible and Eastern Europe that has always been the strong market for Inter Parfums is definitely slowing down, when I say Eastern Europe is basically Russia.

The other challenge for us that materialized this quarter was definitely slowdown in China and China represents as the strong amount of sales.

But we are taking action by increasing our advertising budget in China by developing special sizes and customizing certain program for China that was not a long time ago, so we feel that we've seen the worst in terms of weakness, we'll meet definitely new products and we are launching a new Anna Sui as we speak in the third quarter, it will happen in China only at the beginning of 2016.

Lanvin also has very strong sales in China, so in order to fight this weakness, we need to come up with a newness because it’s a bit faster for this part of the world. .

Thank you. And just a follow-up question on your brand pipeline, I think you mentioned in your prepared remarks several new properties coming into the pipeline next year. Several of them were specialty brands.

So can you just give us some sense across the pipeline of things you're looking at, how we should think about the balance between specialty prestige and mass brands?.

For next year it's going be quite balanced because we are going add two important specialty brand Abercrombie and Hollister and we are going have the two designer brands, Coach and Rochas. So I think we have not disclosed yet the numbers for 2016, but we are expecting good growth from the U.S.

and from our subsidiary in France because we are managing Rochas and Coach. So it will be a quite balance between specialty and designer.

Russ you want to add at end?.

Yes, the only thing I would add, and I think it's very important with respect to Coach, Abercrombie and Hollister but for launches that we are preparing for are worldwide international distribution. It's not the standard specialty retail sales where we are only just selling product at the Hollister or Abercrombie is big stores in the United States.

As a matter of fact we are not selling any product into their stores or the retail specialty in retail environment. So these are products that are really being geared for duty free international distribution in our prestige type distribution.

So from that standpoint I don’t like to bridge that gap between what is the difference between specialty retail and prestige. To us these new product launches are really prestige product launches..

That's helpful, Russ.

Could I just ask for clarification? Does that imply that A&F and Hollister will not carry fragrance in their own specialty stores? Or will they continue to direct source?.

At the pressure time they are direct sourcing however they have the option and any product that we create for international markets as they would like this product in their stores. They have the right to push into their stores..

Excellent. Very helpful. Thank you, guys..

Another thing that I would like to add as we mentioned certain weakness in Asia, we are very happy to have next year a new fragrance for Coach because the name recognition of Coach in Asia is very, very high so it was a very good move that we acquired this license. This will strengthen our business in Asia as early as next year..

Our next question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question..

First off, just a clarification on Rochas inventory.

You were talking about the restocking inventory and the channel, right? Is this the channel that Rochas was already in? And what are you doing as far as incorporating that into your own distribution base?.

The entire Rochas brand for fragrance distribution although there was a small amount of overlap between what existed with PNG versus us, most of it was handled by PNG subsidiaries, so we need to -- we map the overall distribution and incorporated into our own excising distribution channels if you will.

So there is a small overlap but very, very small at that. With respect to the inventory as I mentioned earlier, minimal amount of inventory somewhere under 4 million, I think the number was 3.9 million, if I remember off top of my head.

And that inventory contained some components, so we really do not have significant finished goods to put into marketplace yet. So at the same time that we are gearing up for production of Rochas product for delivery either late in 2015, early 2016 we also working on incorporating that distribution model into our existing distribution network..

Okay.

And my other question is, just looking out into the second half of this year with the guidance you provided, what needs to happen for you to hit the higher end of the range? The [470] level? What are you assuming there?.

I can try to answer. You know when we keep guidance we like to give the range 460 to 470 to 10 million over 460 we're talking 2% so it's very difficult to be there precise. So what could happen to hit the 470 is a sales through of new Jimmy Choo and the new Montblanc is good. We will reach the 470.

The good news is that we shift a little bit lower than expected in July so if it's sell through we can replenish faster and book more sales but we think it's definitely a reachable number..

Let me ask in a different way, where I'm trying to go with this. Right now the early indications are from the back-to-school season that the high-end retailers are the only ones doing well. The rest of the markets has been pretty much benign.

So going out into the holiday season, you're approaching that risk as well from an industry standpoint on retail sales.

So I'm just trying to understand, are you expecting prestige to carry the year for you guys? Or is there any specialty exposure here?.

Yes. The important launches that we have this year either from the U.S. or from France are in the prestige environment. So the Jimmy Choo is only in department store of the in U.S. and U.K.

Same thing for Montblanc; same thing for Lanvin and we launch an exclusive program with Harrod's towards the end of the year for Dunhill the new men's fragrance which will be exclusively for Harrod's. So all our initiative are geared for the prestige for the next five months..

[Operator Instructions] Our next question comes from the line of Wendy Nicholson with Citi. Please proceed with your question. .

My question has to do with the probability of further acquisitions in the near term. I know that you financed Rochas with debt because you wanted to remain flexible.

But can you comment at all, first, with regards to the brands that Coty is buying from P&G, do you think any of those might [indiscernible] over the next 12 months? Or do we have to wait for that deal to close? And just broadly speaking, what's the acquisition environment like out there? Do you think there's more opportunity to make more acquisitions in the near term? That would great.

.

Russ I can try.

One thing I will like to say and I'm glad that you noticed that in each we took a loan to finance the $100 million of acquisition of Rochas, although we have 200 or 250 million of cash it means that we are thinking that in the near future it's good to keep this cash to buy something, so yes even though in the quarter we have today a wider portfolio the company absolutely can buy either existing license or trademark of businesses.

Is there any opportunity with quite here buying fragrance business from P&G, yes for sure there are different brands that could fit very well our portfolio. But Inter Parfum is definitely looking for growing the portfolio.

Russ you want to add something?.

I can too, I think it's going to take almost a year before the acquisition, Coty's acquisition of the assets from P&G are really going to take effect so we don’t know what kind of fallout that may exist or may not exist with respect to that.

I think the point that Jean is really trying to make is that we definitely did entrance to the loan and keep the cash so that we can be flexible and have relatively quickly but we didn’t in the Rochas deal in order to build our portfolio.

That is what our goal is and the environment itself I think it's a little quieter right now after the announcements of Coty's acquisition which we all know was pretty enormous. There are a few small deals that we are looking at but the fallout from the Coty/P&G deal we just don’t know at this time..

Okay.

But fair to say that the cash you have on the balance sheet, you want to keep it there? And remain flexible, as opposed to paying another special dividend or buying back stock or anything like that?.

Absolutely..

We have no further questions at this time. Mr. Greenberg I would now like to turn the floor back over to you for closing comments..

Thank you. Before signing off I want to mention that I would be presenting on August 18 at the BWS Financial Growth and Value Summer Investor Series. That is here in New York. And on September 16, at the B. Riley and Co. Retail and Consumer Conference also here in New York. I hope to see some of you at these events.

Again thank you for your participation on the call, whether you're live or listening via webcast. And as always if you have any additional questions, I am available by phone. Thank you very much and have a great day..

Ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation today and have a wonderful day..