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Termination of Burberry License | 12 Months Ended
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Dec. 31, 2013
Termination of Burberry License [Abstract] |
Termination of Burberry License |
| (2) | Termination of Burberry License
Burberry exercised its option to buy-out the license rights effective December 31, 2012. On October 11, 2012, the Company and Burberry entered into a transition agreement that provided for certain license rights and obligations to continue through March 31, 2013. The Company continued to operate certain aspects of the business for the brand including product development, testing, and distribution. The transition agreement provided for non-exclusivity for manufacturing, a cap on sales of Burberry products, a reduced advertising requirement and no minimum royalty amounts. The Company had determined that the transaction was substantially completed as of December 31, 2012. The following table sets forth a summary of the gain on termination of license which is included in income from operations on the accompanying statement of income for the year ended December 31, 2012:
Exit payment (received December 21, 2012) |  | $ | 239,075 |
Expenses of termination: |  |  |  |
Inventory reserves |  |  | 10,037 |
Wages including $13.8 million in Interparfums SA profit sharing requirements |  |  | 14,391 |
Write-off of intangible assets |  |  | 7,675 |
Writedown of fixed assets |  |  | 3,483 |
Write-off of unused modeling rights |  |  | 1,226 |
Legal, professional and other agreed settlements |  |  | 3,425 |
|  |  | 40,237 |
Gain on termination of license |  | $ | 198,838 |
The transition agreement provided that Burberry inventories at March 31, 2013 should be less than $20.0 million in the aggregate. Actual Burberry inventory as of March 31, 2013 aggregated approximately $18 million. During the second quarter of 2013, the Company and Burberry reached an agreement regarding inventory and Burberry agreed to purchase $7.8 million of inventory at cost. Remaining inventories were sold off in the ordinary course of business pursuant to our sell-off rights, destroyed or given to Burberry at no charge. As of September 30, 2013, the $10 million inventory reserve, recorded in 2012 upon recognition of the gain on termination of license, was fully consumed during 2013. Accounts receivables and accounts payables were collected and paid in the ordinary course of business. In addition, Burberry purchased fixed assets for $2.8 million as agreed in the transition agreement.

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