UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021.

☐

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

INTER PARFUMS 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)

(212) 983-2640

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.001 par value per share		IPAR		The Nasdaq Stock Market

Indicate by check mark 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).

Large accelerated Filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐
	Emerging Growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At August 9, 2021, there were 31,654,958 shares of common stock, par value $.001 per share, outstanding.

INTER PARFUMS, INC. AND SUBSIDIARIES

INDEX

			Page Number

Part I.	Financial Information		1

	Item 1.	Financial Statements

		Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	2

		Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and June 30, 2020	3

		Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and June 30, 2020	4

		Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2021 and June 30, 2020	5

		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and June 30, 2020	6

		Notes to Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

	Item 4.	Controls and Procedures	29

Part II.	Other Information		29

	Item 6.	Exhibits	30

Signatures			30

INTER PARFUMS, INC. AND SUBSIDIARIES

Part I. Financial Information

Item 1. Financial Statements

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. We have condensed such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued by filing with the SEC. These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2020 included in our annual report filed on Form 10-K.

The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year.

Page 1

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)


ASSETS
	June 30, 2021			December 31, 2020
Current assets:
Cash and cash equivalents	$	149,713		$	169,681
Short-term investments		148,100			126,627
Accounts receivable, net		176,540			124,057
Inventories		163,482			158,822
Receivables, other		19,394			1,815
Other current assets		22,395			16,912
Income taxes receivable		265			2,806
Total current assets		679,889			600,720
Buildings, equipment and leasehold improvements, net		135,452			19,580
Right-of-use assets, net		33,701			24,734
Trademarks, licenses and other intangible assets, net		203,652			214,108
Deferred tax assets		6,187			8,041
Other assets		49,438			22,962
Total assets	$	1,108,319		$	890,145

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	32,246		$	14,570
Current portion of lease liabilities		6,564			5,133
Accounts payable – trade		59,970			35,576
Accrued expenses		100,911			95,629
Income taxes payable		18,502			5,297
Total current liabilities		218,193			156,205

Long–term debt, less current portion		133,244			10,136
Lease liabilities, less current portion		29,351			21,354

Equity:
Inter Parfums, Inc. shareholders’ equity:
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued		—			—
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 31,654,138 and 31,608,588 shares at June 30, 2021 and December 31, 2020, respectively		32			32
Additional paid-in capital		77,529			75,708
Retained earnings		538,690			503,567
Accumulated other comprehensive loss		(17,457	)		(5,997	)
Treasury stock, at cost, 9,864,805 shares at June 30, 2021 and December 31, 2020		(37,475	)		(37,475	)
Total Inter Parfums, Inc. shareholders’ equity		561,319			535,835
Noncontrolling interest		166,212			166,615
Total equity		727,531			702,450
Total liabilities and equity	$	1,108,319		$	890,145

See notes to consolidated financial statements.

Page 2

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands except per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Net sales	$	207,573		$	49,506		$	406,101		$	194,330

Cost of sales		75,223			22,662			148,502			78,444

Gross margin		132,350			26,844			257,599			115,886

Selling, general and administrative expenses		87,695			32,367			162,591			103,630

Impairment loss		—			—			2,394			—

Income (loss) from operations		44,655			(5,523	)		92,614			12,256

Other expenses (income):
Interest expense		1,270			361			1,647			1,362
(Gain) loss on foreign currency		309			(13	)		(1,557	)		(967	)
Interest income		(768	)		(754	)		(1,155	)		(1,761	)
Other (income) expense		93			—			(98	)		—

		904			(406	)		(1,163	)		(1,366	)

Income (loss) before income taxes		43,751			(5,117	)		93,777			13,622

Income taxes (benefit)		14,715			(2,134	)		28,115			3,306

Net income (loss)		29,036			(2,983	)		65,662			10,316

Less: Net income attributable to the noncontrolling interest		6,379			135			15,343			3,375

Net income (loss) attributable to Inter Parfums, Inc.	$	22,657		$	(3,118	)	$	50,319		$	6,941

Earnings (loss) per share:

Net income (loss) attributable to Inter Parfums, Inc. common shareholders:
Basic	$	0.72		$	(0.10	)	$	1.59		$	0.22
Diluted	$	0.71		$	(0.10	)	$	1.58		$	0.22

Weighted average number of shares outstanding:
Basic		31,653			31,532			31,642			31,531
Diluted		31,799			31,532			31,786			31,667

Dividends declared per share	$	0.25			—		$	0.50		$	0.33

See notes to consolidated financial statements.

Page 3

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020			2021			2020
Comprehensive income:

Net income (loss)	$	29,036	$	(2,983	)	$	65,662		$	10,316

Other comprehensive income:

Net derivative instrument gain (loss), net of tax		506		(276	)		(94	)		(19	)

Transfer from OCI into earnings		—		—			—			(52	)

Translation adjustments, net of tax		8,312		11,087			(17,807	)		(834	)

Comprehensive income		37,854		7,828			47,761			9,411

Comprehensive income attributable to the noncontrolling interests:

Net income		6,379		135			15,343			3,375

Other comprehensive income (loss):

Net derivative instrument (loss), net of tax		138		(76	)		(26	)		(19	)

Translation adjustments, net of tax		2,526		3,356			(6,415	)		(173	)

Comprehensive income attributable to the noncontrolling interests		9,043		3,415			8,902			3,183

Comprehensive income attributable to Inter Parfums, Inc.	$	28,811	$	4,413		$	38,859		$	6,228

See notes to consolidated financial statements.

Page 4

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(Unaudited)


	Six months ended June 30,
	2021			2020

Common stock, beginning and end of period	$	32		$	31
Shares issued upon exercise of stock options		—			1
Common stock, end of period		32			32

Additional paid-in capital, beginning of period		75,708			70,664
Shares issued upon exercise of stock options		1,583			656
Share-based compensation		783			855
Transfer of subsidiary shares purchased		(545	)		360
Additional paid-in capital, end of period		77,529			72,535

Retained earnings, beginning of period		503,567			474,637
Net income		50,319			6,941
Dividends		(15,826	)		(10,406	)
Share-based compensation (adjustment)		630			290
Retained earnings, end of period		538,690			471,462

Accumulated other comprehensive loss, beginning of period		(5,997	)		(39,853	)
Foreign currency translation adjustment, net of tax		(11,392	)		(661	)
Transfer from other comprehensive income into earnings		—			(52	)
Net derivative instrument gain (loss), net of tax		(68	)		—
Accumulated other comprehensive loss, end of period		(17,457	)		(40,566	)

Treasury stock, beginning and end of period		(37,475	)		(37,475	)
Net income		—			—
Treasury stock, beginning and end of period		(37,475	)		(37,475	)

Noncontrolling interest, beginning of period		166,615			140,994
Net income		15,343			3,375
Foreign currency translation adjustment, net of tax		(6,415	)		(173	)
Net derivative instrument gain (loss), net of tax		(26	)		(19	)
Share-based compensation (adjustment)		(46	)		128
Transfer of subsidiary shares purchased		225			(139	)
Dividends		(9,484	)		(324	)
Noncontrolling interest, end of period		166,212			143,842

Total equity		702,450			608,998
Net income		65,662			10,316
Total equity	$	727,531		$	609,830

See notes to consolidated financial statements.

Page 5

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six months ended June 30,
	2021			2020
Cash flows from operating activities:
Net income	$	65,662		$	10,316
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		4,941			4,456
Provision for doubtful accounts		1,247			682
Noncash stock compensation		1,447			1,190
Share of income of equity investment		(98	)		—
Impairment loss		2,393			—
Non-cash lease expense		5,060			3,011
Deferred tax provision (benefit)		1,653			(681	)
Change in fair value of derivatives		1,154			(663	)
Changes in:
Accounts receivable		(57,115	)		54,791
Inventories		(8,498	)		(27,076	)
Other assets		(25,860	)		37
Operating lease liabilities		(4,567	)		(2,974	)
Accounts payable and accrued expenses		34,588			(63,415	)
Income taxes, net		16,105			(961	)

Net cash provided by (used in) operating activities		38,112			(21,287	)

Cash flows from investing activities:
Purchases of short-term investments		(30,649	)		(6,878	)
Proceeds from sale of short-term investments		4,821			—
Purchase of equity investment		—			(13,998	)
Purchases of buildings,equipment and leasehold improvements		(120,253	)		(1,571	)
Payment for intangible assets acquired		(648	)		(819	)

Net cash used in investing activities		(146,729	)		(23,266	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		160,389			13,438
Repayment of long-term debt		(17,888	)		(12,086	)
Proceeds from exercise of options		1,583			657
Dividends paid		(15,826	)		(20,805	)
Dividends paid to noncontrolling interest		(9,484	)		(324	)

Net cash provided by (used in) financing activities		118,774			(19,120	)

Effect of exchange rate changes on cash		(4,490	)		(1,281	)

Net decrease in cash and cash equivalents		5,667			(64,954	)

Cash and cash equivalents - beginning of period		169,681			133,417

Cash and cash equivalents - end of period	$	175,348		$	68,463

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	963		$	693
Income taxes		12,568			4,741

See notes to consolidated financial statements.

Page 6

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Significant Accounting Policies:

The accounting policies we follow are set forth in the notes to our consolidated financial statements included in our Form 10-K, which was filed with the Securities and Exchange Commission for the year ended December 31, 2020.

Impact of COVID-19 Pandemic:

A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States and France. In March 2020, the World Health Organization declared COVID-19 a pandemic.

In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. In all jurisdictions in which we operate we have been following guidance from authorities and health officials.

The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020.

Business significantly improved in the second half of 2020 and continued to improve in the first six months of 2021, as retail stores reopened and consumers increased online purchasing. While we expect this trend to continue, the introduction of variants of COVID-19 cases in various parts of the world has caused the temporary re-implementation of governmental restrictions to prevent further spread of the virus. In addition, international air travel has remained curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic may have a material adverse effect on our results of our operations, financial position and cash flows through at least the end of 2021.

3.	Recent Agreements:

Salvatore Ferragamo

In July 2021, we signed a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license will be granted for the production and distribution of Ferragamo brand perfumes. The license is expected to be effective from October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.

With reference to the management and coordination of activities related to the license agreement, the Company will operate through a wholly-owned Italian subsidiary to be based in Florence, and all products will be produced in Italy.

French Tax Settlement

The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA (“IPSA”), does not, in and of itself, constitute a permanent establishment and therefore IPSA should pay French taxes on all or part of the profits of that entity. The French Tax Authority had notified the Company that IP Suisse will be the subject of a tax audit covering the period January 1, 2010 through December 31, 2018. The Company’s exposure in connection with this matter was approximately $5.8 million, net of recovery taxes already paid to the Swiss authorities.

Page 7

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby IPSA agreed to pay €2.5 million (approximately $3.0 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. IPSA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to IPSA by December 31, 2025.

Building Acquisition - Future Headquarters in Paris

In April 2021, our majority owned Paris-based subsidiary, IPSA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.

The €125 million (approximately $149 million) purchase price is in line with market value and includes the complete renovation of the site. As of June 30, 2021, €104.1 million of the purchase price, including approximately €2.5 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of June 30, 2021. Approximately €21.6 million (approximately $25.7 million) of cash held in escrow is included in other assets on the accompanying balance sheet as of June 30, 2021. In addition, approximately €14.2 million in value added tax (“VAT”) credit associated with the purchase is included in other receivables on the accompanying balance sheet as of June 30, 2021. As of June 30, 2021, the Company borrowed €14.2 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the €14.2 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.

The acquisition was financed by a 10-year €120 million (approximately $143 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for fixed interest rate debt.

Anna Sui Corp.

In January 2021, we renewed our license agreement with Anna Sui Corp. for the creation, development and distribution of fragrance products through December 31, 2026, without any material changes in terms and conditions. Our initial 10-year license agreement with Anna Sui Corp. was signed in 2011. The renewal agreement also allows for an additional 5-year term through 2031 at the option of the Company.

Rochas Fashion

Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, we have taken $2.4 million impairment charge on our Rochas fashion trademark in Q1 2021. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value.

Page 8

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements:

There are no recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements.

5. Inventories:

Inventories consist of the following:

(In thousands)	June 30, 2021		December 31, 2020
Raw materials and component parts	$	79,223	$	66,492
Finished goods		84,259		92,330

	$	163,482	$	158,822

Fair Value Measurement:

The following tables present our financial assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.


			Fair Value Measurements at June 30, 2021
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Short-term investments	$	148,100	$	—	$	148,100	$	—
Liabilities:
Interest rate swaps	$	505	$	—	$	505	$	—
Foreign currency forward exchange contracts accounted for using hedge accounting		328		—		328		—
Foreign currency forward exchange contracts not accounted for using hedge accounting		59		—		59		—

	$	892	$	—	$	892	$	—

Page 9

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements


				Fair Value Measurements at December 31, 2020
		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Short-term investments	$	126,627	$	—	$	126,627	$	—
Foreign currency forward exchange contracts not accounted for using hedge accounting		253		—		253		—

	$	126,880	$	—	$	126,880	$	—

The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables, cash held in escrow, accounts payable and accrued expenses approximate fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value.

Foreign currency forward exchange contracts are valued based on quotations from financial institutions and the value of interest rate swaps are the discounted net present value of the swaps using third party quotes from financial institutions.

Derivative Financial Instruments:

The Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based on the dollar offset methodology and excludes the portion of the fair value of the foreign currency forward exchange contract attributable to the change in spot-forward difference which is reported in current period earnings. Any hedge ineffectiveness is also recognized as a gain or loss on foreign currency in the income statement. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses accumulated in other comprehensive income are reclassified to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated in other comprehensive income are reclassified to current-period earnings.

Page 10

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In connection with the April 2021 acquisition of the office building complex in Paris, €120 million (approximately $143 million) of the purchase price was financed through a 10-year term loan. The Company entered into interest rate swap contracts related to €80 million of the loan, effectively exchanging the variable interest rate to a fixed rate of approximately 1.1%. This derivative instrument is recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income

Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income (loss) and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial for both the six months ended June 30, 2021 and 2020.

All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps as of June 30, 2021, resulted in a liability which is included in long-term debt on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at June 30, 2021, resulted in a liability and is included in accrued expenses on the accompanying balance sheet.

At June 30, 2021, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $61.5 million, GB £3.6 million and JPY ¥50.0 million, which all have maturities of less than one year.

8. Leases:

The Company leases its offices and warehouses, vehicles, and certain office equipment, substantially all of which are classified as operating leases. The Company currently has no material financing leases. The Company determines if an arrangement is a lease at inception. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term.

In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend or terminate, depending on the lease. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date for the location in which the lease is held in determining the present value of lease payments.

As of June 30, 2021, the weighted average remaining lease term was 5.5 years and the weighted average discount rate used to determine the operating lease liability was 2.1%. Rental expense related to operating leases was $3.1 million and $4.9 million for the three and six months ended June 30, 2021, respectively, as compared to $1.5 million and $3.3 million for the corresponding periods of the prior year. Operating lease payments included in operating cash flows totaled $4.6 million and $3.0 million for the six months ended June 30, 2021 and 2020, respectively, and noncash additions to operating lease assets totaled $13.8 million and $1.0 million for the six months ended June 30, 2021 and 2020, respectively.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In connection with the preparation of our consolidated financial statements for the three months ended June 30, 2021, we identified an error relating to the recognition of certain leases under ASC 842. The error impacted the lease right-of-use assets and lease liabilities, both of which were understated by approximately €14.0 million ($16.6 million) as of June 30, 2020. There was no income statement impact resulting from this correction. We concluded the impact on the interim financial statements was immaterial and corrected the balances as of June 30, 2021.

Maturities of lease liabilities subsequent to June 30, 2021, are as follows:

(In thousands)


2021	$	3,665
2022		6,129
2023		5,434
2024		5,322
2025		4,219
Thereafter		13,367
		38,136
Less imputed interest (based on 2.1% weighted-average discount rate)		(2,221	)
	$	35,915

Share-Based Payments:

The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to five-year period. The fair value of shares vested during the six months ended June 30, 2021 and 2020 aggregated $0.09 million and $0.08 million, respectively. Compensation cost, net of forfeitures, is recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated based on historic trends. It is generally our policy to issue new shares upon exercise of stock options.

The following table sets forth information with respect to nonvested options for the six months ended June 30, 2021:

	Number of Shares			Weighted Average Grant-Date Fair Value
Nonvested options – beginning of period		353,790		$	12.96
Nonvested options granted		9,000		$	11.35
Nonvested options vested or forfeited		(32,730	)	$	13.00
Nonvested options – end of period		330,060		$	12.91

Share-based payment expense decreased income before income taxes by $1.45 million and $0.72 million for the three and six months ended June 30, 2021, respectively, as compared to $1.07 million and $1.19 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.94 million and $0.46 million for the three and six months ended June 30, 2021, respectively, as compared to $0.67 million and $0.86 million for the corresponding periods of the prior year.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes stock option information as of June 30, 2021:

	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2021		713,210		$	52.74
Options granted		9,000			62.18
Options forfeited		(33,240	)		62.15
Options exercised		(45,550	)		34.75

Outstanding at June 30, 2021		643,420		$	53.66

Options exercisable		313,360		$	44.64
Options available for future grants		604,955

As of June 30, 2021, the weighted average remaining contractual life of options outstanding is 2.93 years (2.23 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $11.5 million and $8.3 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $3.7 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the six months ended June 30, 2021 and June 30, 2020 were as follows:

(In thousands)	June 30, 2021		June 30, 2020

Cash proceeds from stock options exercised	$	1,583	$	657
Tax benefits		200		—
Intrinsic value of stock options exercised		1,496		740

The weighted average fair values of the options granted by Inter Parfums, Inc. during the six months ended June 30, 2021 and 2020 were $11.35 and $12.16 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted. The assumptions used in the Black-Scholes pricing model for the periods ended June 30, 2021 and 2020 are set forth in the following table:

	June 30, 2021	June 30, 2020

Weighted average expected stock-price volatility	25%	25%
Weighted average expected option life	5 years	5 years
Weighted average risk-free interest rate	0.4%	1.4%
Weighted average dividend yield	1.6%	2.5%

Expected volatility is estimated based on historic volatility of the Company’s common stock. The expected term of the option is estimated based on historic data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout as authorized by the Board of Directors would increase as the earnings of the Company and its stock price continue to increase.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In December 2018, IPSA approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2022. In order to avoid dilution of the Company’s ownership of IPSA, all shares to be distributed pursuant to the plan will be pre-existing shares of IPSA, purchased in the open market by IPSA in prior years.

The fair value of the grant had been determined based on the quoted stock price of IPSA shares as reported by the NYSE Euronext on the date of grant. In June 2020, the performance conditions were modified effecting 96 employees. As of June 30, 2021, the number of shares to be distributed, after forfeited shares, increased to 173,603 resulting from the modification and stock split. The increase in shares anticipated to be distributed were transferred from treasury shares at the IPSA level. The original cost of the grant was approximately $4.4 million, and the modification resulted in a revised cost of approximately $4.7 million.

10.

Net Income Attributable to Inter Parfums, Inc. Common Shareholders:

Net income attributable to Inter Parfums, Inc. per common share (“basic EPS”) is computed by dividing net income attributable to Inter Parfums, Inc. by the weighted average number of shares outstanding. Net income attributable to Inter Parfums, Inc. per share assuming dilution (“diluted EPS”), is computed using the weighted average number of shares outstanding, plus the incremental shares outstanding assuming the exercise of dilutive stock options using the treasury stock method.

The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows:


	Three months ended					Six months ended
	June 30,					June 30,
(In thousands)	2021		2020			2021		2020
Numerator:
Net income (loss) attributable
to Inter Parfums, Inc.	$	22,657	$	(3,118	)	$	50,319	$	6,941
Denominator:
Weighted average shares		31,653		31,532			31,642		31,531
Effect of dilutive securities:
Stock options		146		—			144		136
Denominator for diluted
earnings per share		31,799		31,532			31,786		31,667

Earnings per share:
Net income (loss) attributable to Inter
Parfums, Inc. common shareholders:
Basic	$	0.72	$	(0.10	)	$	1.59	$	0.22
Diluted		0.71		(0.10	)		1.58		0.22

Not included in the above computations are the effect of antidilutive potential common shares which consist of outstanding options to purchase 0.18 and 0.26 million shares of common stock for both the three and six months ended June 30, 2021, as compared to 0.80 and 0.59 million shares of common stock for the three and six months ended June 30, 2020, respectively.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

11.

Segment and Geographic Areas:

The Company manufactures and distributes one product line, fragrances and fragrance related products. The Company manages its business in two segments, European based operations and United States based operations. The European assets are located, and operations are primarily conducted, in France. Both European operations and United States operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows:

	Three months ended June 30,						Six months ended June 30,
(In thousands)	2021			2020			2021			2020
Net sales:
United States	$	46,511		$	10,226		$	85,707		$	41,844
Europe		161,151			39,424			320,917			153,547
Eliminations		(89	)		(144	)		(523	)		(1,061	)

	$	207,573		$	49,506		$	406,101		$	194,330

Net income (loss) attributable to Inter Parfums, Inc.:
United States	$	6,090		$	(3,523	)	$	10,277		$	(1,917	)
Europe		16,567			405			40,042			8,858

SEC Form 10-Q filed by Inter Parfums, Inc.