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 September 30, 2023.

☐

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 November 7, 2023, there were 31,980,805 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 September 30, 2023 and December 31, 2022	2

			Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2023 and September 30, 2022	3

			Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and September 30, 2022	4

			Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2023 and September 30, 2022	5

			Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022	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		26

	Item 4.	Controls and Procedures		27

Part II. Other Information				27

	Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities		27

	Item 6.	Exhibits		28

Signatures				29

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, 2022, included in our annual report filed on Form 10-K.

The results of operations for the nine months ended September 30, 2023, 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
	September 30, 2023			December 31, 2022
Current assets:
Cash and cash equivalents	$	79,764		$	104,713
Short-term investments		103,745			150,833
Accounts receivable, net		288,085			197,584
Inventories		364,270			289,984
Receivables, other		13,645			28,803
Other current assets		26,847			15,650
Income taxes receivable		498			157
Total current assets		876,854			787,724
Property, equipment and leasehold improvements, net		163,002			166,722
Right-of-use assets, net		29,359			27,964
Trademarks, licenses and other intangible assets, net		286,697			290,853
Deferred tax assets		16,063			11,159
Other assets		22,422			24,120
Total assets	$	1,394,397		$	1,308,542

LIABILITIES AND EQUITY
Current liabilities:
Loans payable - banks	$	4,501		$	—
Current portion of long-term debt		41,768			28,547
Current portion of lease liabilities		5,687			5,296
Accounts payable – trade		87,161			88,388
Accrued expenses		200,065			213,621
Income taxes payable		23,913			8,715
Total current liabilities		363,095			344,567

Long–term debt, less current portion		128,983			151,494
Lease liabilities, less current portion		25,452			24,335

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 31,980,805 and 31,967,300 shares at September 30, 2023 and December 31, 2022, respectively		32			32
Additional paid-in capital		95,752			90,186
Retained earnings		703,091			620,095
Accumulated other comprehensive loss		(59,802	)		(56,056	)
Treasury stock, at cost, 9,949,865 and 9,864,805 shares at September 30, 2023 and December 31, 2022, respectively		(48,764	)		(37,475	)
Total Inter Parfums, Inc. shareholders’ equity		690,309			616,782
Noncontrolling interest		186,558			171,364
Total equity		876,867			788,146
Total liabilities and equity	$	1,394,397		$	1,308,542

See notes to consolidated financial statements.

Page 2

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022

Net sales	$	367,969		$	280,462		$	988,936		$	775,865

Cost of sales		132,962			98,562			362,568			281,525

Gross margin		235,007			181,900			626,368			494,340

Selling, general and administrative expenses		147,805			117,424			393,866			323,249

Income from operations		87,202			64,476			232,502			171,091

Other expenses (income):
Interest expense		2,397			682			7,030			2,589
(Gain) loss on foreign currency		(669	)		273			(656	)		(2,245	)
Interest and investment income		(1,062	)		(3,343	)		(8,421	)		(2,341	)
Other (income) expense		(77	)		346			(125	)		(98	)

Nonoperating expense (income)		589			(2,042	)		(2,172	)		(2,095	)

Income before income taxes		86,613			66,518			234,674			173,186

Income taxes		20,493			13,221			55,128			39,078

Net income		66,120			53,297			179,546			134,108

Less: Net income attributable to the noncontrolling interest		12,906			11,874			37,312			29,769

Net income attributable to Inter Parfums, Inc.	$	53,214		$	41,423		$	142,234		$	104,339

Earnings per share:

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic	$	1.66		$	1.30		$	4.44		$	3.28
Diluted	$	1.66		$	1.30		$	4.42		$	3.26

Weighted average number of shares outstanding:
Basic		31,976			31,860			32,000			31,848
Diluted		32,124			31,968			32,149			31,977

Dividends declared per share	$	0.625		$	0.50		$	1.875		$	1.50

See notes to consolidated financial statements.

Page 3

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Comprehensive income:

Net income	$	66,120		$	53,297		$	179,546		$	134,108

Other comprehensive income:

Net derivative instrument (loss) gain, net of tax		(363	)		1,315			(4,606	)		(173	)

Transfer from OCI into earnings		—			—			1,709			992

Translation adjustments, net of tax		(15,692	)		(32,944	)		(2,657	)		(79,015	)

Comprehensive income		50,065			21,668			173,992			55,912

Comprehensive income attributable to the noncontrolling interests:

Net income		12,906			11,874			37,312			29,769

Other comprehensive income:

Net derivative instrument (loss) gain, net of tax		(100	)		362			(327	)		(49	)

Translation adjustments, net of tax		(4,892	)		(10,012	)		(1,481	)		(24,174	)

Comprehensive income attributable to the noncontrolling interests		7,914			2,224			35,504			5,546

Comprehensive income attributable to Inter Parfums, Inc.	$	42,151		$	19,444		$	138,488		$	50,366

See notes to consolidated financial statements.

Page 4

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(Unaudited)


	Nine months ended September 30,
	2023			2022

Common stock, beginning and end of period	$	32		$	32
		-			-
		32			32
Additional paid-in capital, beginning of period		90,186			87,132
Shares issued upon exercise of stock options		5,523			1,816
Share-based compensation		935			1,017
Purchase of subsidiary shares		(892	)		(4,305	)
Additional paid-in capital, end of period		95,752			85,660

Retained earnings, beginning of period		620,095			560,663
Net income		142,234			104,339
Dividends		(60,058	)		(47,782	)
Share-based compensation		820			1,664
Retained earnings, end of period		703,091			618,884

Accumulated other comprehensive loss, beginning of period		(56,056	)		(38,432	)
Foreign currency translation adjustment, net of tax		(1,176	)		(54,841	)
Transfer from other comprehensive income into earnings		1,709			992
Net derivative instrument loss, net of tax		(4,279	)		(124	)
Accumulated other comprehensive loss, end of period		(59,802	)		(92,405	)

Treasury stock, beginning of period		(37,475	)		(37,475	)
Shares repurchased		(11,289	)		—
Treasury stock, end of period		(48,764	)		(37,475	)

Noncontrolling interest, beginning of period		171,364			166,412
Net income		37,312			29,769
Foreign currency translation adjustment, net of tax		(1,481	)		(24,174	)
Net derivative instrument loss, net of tax		(327	)		(49	)
Share-based compensation (adjustment)		133			(353	)
Purchase of subsidiary shares		(142	)		(152	)
Transfer of subsidiary shares purchased		—			55
Dividends		(20,301	)		(16,056	)
Noncontrolling interest, end of period		697,321			155,452
		788,146			596,040
		179,546			134,108
Total equity	$	876,867		$	730,148

See notes to consolidated financial statements.

Page 5

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine months ended September 30,
	2023			2022
Cash flows from operating activities:
Net income	$	179,546		$	134,108
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		12,781			10,936
Provision for doubtful accounts		(560	)		2,004
Noncash stock compensation		1,887			2,353
Share of income of equity investment		(125	)		(98	)
Noncash lease expense		4,163			4,074
Deferred tax benefit		(5,075	)		(3,658	)
Change in fair value of derivatives		740			1,348
Changes in:
Accounts receivable		(96,076	)		(89,605	)
Inventories		(76,786	)		(109,377	)
Other assets		3,077			2,615
Operating lease liabilities		(4,044	)		(3,887	)
Accounts payable and accrued expenses		(10,919	)		26,406
Income taxes, net		15,669			14,606

Net cash provided by (used in) operating activities		24,278			(8,175	)

Cash flows from investing activities:
Purchases of short-term investments		(145,427	)		(2,862	)
Proceeds from sale of short-term investments		192,568			5,346
Purchases of property, equipment and leasehold improvements		(4,574	)		(32,615	)
Payment for intangible assets acquired		(2,063	)		(3,757	)

Net cash provided by (used in) investing activities		40,504			(33,888	)

Cash flows from financing activities:
Proceeds from loans payable, bank		4,501			—
Proceeds from issuance of long-term debt		13,680			—
Repayment of long-term debt		(22,527	)		(14,210	)
Proceeds from exercise of options		5,523			1,816
Purchase of subsidiary shares from noncontrolling interest		—			(4,402	)
Dividends paid		(60,058	)		(47,782	)
Dividends paid to noncontrolling interest		(20,301	)		(16,056	)
Purchase of treasury stock		(11,289	)		—

Net cash used in financing activities		(90,471	)		(80,634	)

Effect of exchange rate changes on cash		740			(4,413	)

Net decrease in cash and cash equivalents		(24,949	)		(127,110	)

Cash and cash equivalents - beginning of period		104,713			168,387

Cash and cash equivalents - end of period	$	79,764		$	41,227

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	4,659		$	2,091
Income taxes		44,693			27,718

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, 2022.

Impact of COVID-19 Pandemic:

Our business has continued to significantly improve throughout 2022 and the first three quarters of 2023 after the disastrous effects of the COVID-19 Pandemic starting in early 2020, as retail stores reopened, and consumers increased online purchasing. While the COVID-19 Pandemic had significantly restricted international travel, the travel retail business has picked up. Lastly, we experienced significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions came at a time when demand for our product lines has never been stronger or more sustained. We have addressed this issue since the beginning of 2021, by ordering well in advance of need and in larger quantities. Since 2021, we have strived to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. The supply chain bottlenecks have been improving and while lead times remain longer than pre-COVID, we do not expect significant disruptions going forward.

Recent Agreements:

Roberto Cavalli

In July 2023, we closed a transaction agreement with Roberto Cavalli, whereby an exclusive and worldwide license was granted for the production and distribution of Roberto Cavalli brand perfumes and fragrance related products. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license became effective in July 2023 and will last for 6.5 years.

Lacoste

In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license becomes effective in January 2024 and will last for 15 years.

Dunhill

The Dunhill fragrance license has expired on September 30, 2023 and will not be renewed. The Company has now entered the twelve month sell-off period during which it will maintain the right to sell-off remaining Dunhill fragrance inventory, which is customary in the fragrance industry. All usable components have been converted to finished goods, and any remaining components will be destroyed.

Donna Karan and DKNY

In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we have gained several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock to the licensor valued at $5.0 million. The exclusive license became effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2024.

Page 7

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark after an independent expert concluded that the valuation of the trademark was $11.3 million. 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.

Land and Building Acquisition - Headquarters in Paris

In April 2021, Interparfums SA, our 72% owned French Subsidiary, completed the acquisition of its 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 purchase price included the complete renovation of the site. As of September 30, 2023, $148.1 million of the purchase price, including approximately $3 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet. The purchase price has been allocated approximately $60.7 million to land and $87.4 million to the building. The building, which was delivered on February 28, 2022, includes the building structure, development of the property, façade waterproofing, general and technical installations and interior fittings that will be depreciated over a range of 7 to 50 years. The Company has elected to depreciate the building cost based on the useful lives of its components. Approximately $1.2 million of cash held in escrow is also included in property, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2023.

The acquisition was financed by a 10-year €120 million (approximately $127.1 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%.

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.

Page 8

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Inventories:

Inventories consist of the following:

(In thousands)	September 30, 2023		December 31, 2022
Raw materials and component parts	$	151,344	$	146,772
Finished goods		212,926		143,212

Inventories	$	364,270	$	289,984

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 September 30, 2023
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments	$	103,745	$	10,177	$	92,776	$	792
Interest rate swaps		6,274		—		6,274		—

Total asset	$	110,019	$	10,177	$	99,050	$	792
Liabilities:
Foreign currency forward exchange contracts not accounted for using hedge accounting	$	791	$	—	$	791	$	—
Foreign currency forward exchange contracts accounted for using hedge accounting		489		—		489		—

Total liabilities	$	1,280	$	—	$	1,280	$	—

Page 9

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements


			Fair Value Measurements at December 31, 2022
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments	$	150,833	$	19,861	$	130,174	$	798
Interest rate swaps		6,758		—		6,758		—
Foreign currency forward exchange contracts accounted for using hedge accounting		1,189		—		1,189		—

Total asset	$	158,780	$	19,861	$	138,121	$	798
Liabilities:
Foreign currency forward exchange contracts not accounted for using hedge accounting		68		—		68		—

Total liabilities	$	68	$	—	$	68	$	—

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 December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a €50 million (approximately $53 million) 4-year term loan with a variable interest rate. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. This swap is a hedged derivative instrument and is therefore recorded at fair value and changes in fair value are reflected in other comprehensive income.

In connection with the April 2021 acquisition of the office building complex in Paris, €120 million (approximately $127.1 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 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 the three and nine months ended September 30, 2023 and 2022.

All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps is included in other assets on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at September 30, 2023 resulted in a net asset and is included in other current assets on the accompanying balance sheet.

At September 30, 2023, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $58.0 million and GB £2.0 million which all have maturities of less than one year.

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.

Page 11

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2023, the weighted average remaining lease term was 5.4 years and the weighted average discount rate used to determine the operating lease liability was 3.0%. Rental expense related to operating leases was $1.5 million and $4.5 million for the three and nine months ended September 30, 2023, respectively, as compared to $1.2 million and $4.3 million for the corresponding periods of the prior year. Operating lease payments included in operating cash flows totaled $4.0 million and $3.9 million for the nine months ended September 30, 2023 and 2022, respectively, and noncash additions to operating lease assets totaled $5.7 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively.

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 nine months ended September 30, 2023 and 2022 aggregated $0.10 million and $0.11 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 nine months ended September 30, 2023:

	Number of Shares			Weighted Average Grant-Date Fair Value
Nonvested options – beginning of period		168,730		$	16.31
Nonvested options granted		—			—
Nonvested options vested or forfeited		(27,625	)	$	13.91
Nonvested options – end of period		141,105		$	16.78

Share-based payment expense decreased income before income taxes by $0.62 million and $1.89 million for the three and nine months ended September 30, 2023, respectively, as compared to $0.47 million and $2.35 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.41 million and $1.27 million for the three and nine months ended September 30, 2023, respectively, as compared to $0.34 million and $1.52 million for the corresponding periods of the prior year.

The following table summarizes stock option information as of September 30, 2023:

	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2023		441,580		$	67.30
Options forfeited		(20,025	)		72.22
Options exercised		(98,565	)		56.03

Outstanding at September 30, 2023		322,990		$	70.43

Options exercisable		181,885		$	61.44
Options available for future grants		579,000

Page 12

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2023, the weighted average remaining contractual life of options outstanding is 2.15 years (0.34 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $20.64 million and $13.26 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $1.7 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2023 and 2022 were as follows:

(In thousands)	September 30, 2023		September 30, 2022

Cash proceeds from stock options exercised	$	5,523	$	1,816
Tax benefits		900		320
Intrinsic value of stock options exercised		6,135		2,105

There were no options granted during the nine months ended September 30, 2023 and September 30, 2022.

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 continues to increase.

In December 2018, Interparfums SA 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 corporate performance conditions were met and therefore in June 2022, 211,955 shares, adjusted for stock splits, were distributed. The aggregate cost of the grant of approximately $4.8 million was recognized as compensation cost on a straight-line basis over the requisite three-year service period.

In March 2022, Interparfums SA approved an additional plan to grant an aggregate of 88,400 shares to all Interparfums SA employees and corporate officers having more than six months of employment at grant date, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2025 and will follow the same guidelines as the December 2018 plan.

The fair value of the grant had been determined based on the quoted stock price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant. The estimated number of shares to be distributed of 92,998 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $4.2 million will be recognized as compensation cost on a straight-line basis over the requisite three and a quarter year service period.

Similar to the December 2018 plan, in order to avoid dilution of the Company’s ownership of Interparfums SA, all shares distributed or to be distributed pursuant to these plans will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. As of September 30, 2023 the Company acquired 87,609 shares at an aggregate cost of $4.1 million.

All share purchases and issuances have been classified as equity transactions on the accompanying balance sheet.

Page 13

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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				Nine months ended
(In thousands)	September 30,				September 30,
	2023		2022		2023		2022
Numerator:
Net income attributable to Inter Parfums, Inc.	$	53,214	$	41,423	$	142,234	$	104,339
Denominator:
Weighted average shares		31,976		31,860		32,000		31,848
Effect of dilutive securities:
Stock options		148		108		149		129
Denominator for diluted earnings per share		32,124		31,968		32,149		31,977

Earnings per share:
Net income attributable to Inter Parfums, Inc. common shareholders:
Basic	$	1.66	$	1.30	$	4.44	$	3.28
Diluted		1.66		1.30		4.42		3.26

There were no antidilutive potential common shares outstanding for the three and nine months ended September 30, 2023. Not included in the above computations are the effect of antidilutive potential common shares which consist of outstanding options to purchase 0.15 million shares of common stock for both the three and nine months ended September 30, 2022, respectively.

Page 14

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:

(In thousands)	Three months ended September 30,					Nine months ended September 30,
	2023		2022			2023		2022
Net sales:
United States	$	134,469	$	82,183		$	327,359	$	229,129
Europe		233,500		198,318			661,577		546,787
Eliminations		—		(39	)		—		(51	)

SEC Form 10-Q filed by Inter Parfums Inc.