INTERPARFUMS INC 10-Q

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, 2019 included in our annual report filed on Form 10-K. The results of operations for the nine months ended September 30, 2020 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) September 30, 2020 December 31, 2019 ASSETS Current assets: Cash and cash equivalents $ 133,350 $ 192,417 Short-term investments 70,685 60,714 Accounts receivable, net 138,486 133,010 Inventories 178,852 167,809 Receivables, other 1,319 2,054 Other current assets 18,032 17,123 Income taxes receivable 624 169 Total current assets 541,348 573,296 Equipment and leasehold improvements, net 11,627 11,107 Right-of-use assets, net 25,525 28,359 Trademarks, licenses and other intangible assets, net 206,446 201,983 Deferred tax assets 9,748 8,004 Other assets 21,487 6,083 Total assets $ 816,181 $ 828,832 LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $ 5,755 $ 12,326 Current portion of lease liabilities 4,951 5,356 Accounts payable – trade 27,321 54,098 Accrued expenses 71,770 96,421 Income taxes payable 9,450 5,865 Dividends payable — 10,399 Total current liabilities 119,247 184,465 Long–term debt, less current portion 19,384 10,734 Lease liabilities, less current portion 22,289 24,635 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 31,537,558 and 31,513,018 shares at September 30, 2020 and December 31, 2019, respectively 32 31 Additional paid-in capital 73,268 70,664 Retained earnings 488,193 474,637 Accumulated other comprehensive loss ( 24,558 ) ( 39,853 ) Treasury stock, at cost, 9,864,805 shares at September 30, 2020 and December 31, 2019 ( 37,475 ) ( 37,475 ) Total Inter Parfums, Inc. shareholders’ equity 499,460 468,004 Noncontrolling interest 155,801 140,994 Total equity 655,261 608,998 Total liabilities and equity $ 816,181 $ 828,832 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, 2020 2019 2020 2019 Net sales $ 160,637 $ 191,227 $ 354,967 $ 535,712 Cost of sales 63,439 76,790 141,883 204,459 Gross margin 97,198 114,437 213,084 331,253 Selling, general and administrative expenses 65,841 77,793 169,471 238,860 Income from operations 31,357 36,644 43,613 92,393 Other expenses (income): Interest expense 148 384 1,510 1,214 (Gain) loss on foreign currency 891 121 ( 76 ) 818 Interest income ( 393 ) ( 562 ) ( 2,154 ) ( 2,886 ) 646 ( 57 ) ( 720 ) ( 854 ) Income before income taxes 30,711 36,701 44,333 93,247 Income taxes 8,859 10,043 12,165 26,012 Net income 21,852 26,658 32,168 67,235 Less: Net income attributable to the noncontrolling interest 5,314 5,810 8,688 15,176 Net income attributable to Inter Parfums, Inc. $ 16,538 $ 20,848 $ 23,480 $ 52,059 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 0.52 $ 0.66 $ 0.74 $ 1.66 Diluted $ 0.52 $ 0.66 $ 0.74 $ 1.64 Weighted average number of shares outstanding: Basic 31,533 31,452 31,531 31,444 Diluted 31,619 31,676 31,651 31,681 Dividends declared per share -- $ 0.28 $ 0.33 $ 0.83 See notes to consolidated financial statements. Page 3 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands except per share data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Comprehensive income: Net income $ 21,852 $ 26,658 $ 32,168 $ 67,235 Other comprehensive income: Net derivative instrument loss, net of tax -- ( 406 ) ( 19 ) ( 123 ) Transfer from OCI into earnings -- -- ( 52 ) ( 136 ) Translation adjustments, net of tax 22,604 ( 20,277 ) 21,770 ( 23,271 ) Comprehensive income 44,456 5,975 53,867 43,705 Comprehensive income (loss) attributable to the noncontrolling interests: Net income 5,314 5,810 8,688 15,176 Other comprehensive income: Net derivative instrument loss, net of tax -- ( 109 ) ( 19 ) ( 70 ) Translation adjustments, net of tax 6,596 ( 5,938 ) 6,423 ( 6,702 ) Comprehensive income (loss) attributable to the noncontrolling interests 11,910 ( 237 ) 15,092 8,404 Comprehensive income attributable to Inter Parfums, Inc. $ 32,546 $ 6,212 $ 38,775 $ 35,301 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, 2020 2019 Common stock, beginning of period $ 31 $ 31 Shares issued upon exercise of stock options 1 -- Common stock, end of period 32 31 Additional paid-in capital, beginning of period 70,664 69,970 Shares issued upon exercise of stock options 796 2,781 Share-based compensation 1,283 1,052 Purchase of subsidiary shares from noncontrolling interest -- ( 5,167 ) Transfer of subsidiary shares purchased 525 -- Additional paid-in capital, end of period 73,268 68,636 Retained earnings, beginning of period 474,637 448,731 Net income 23,480 52,059 Dividends ( 10,406 ) ( 25,950 ) Share-based compensation 482 1,637 Retained earnings, end of period 488,193 476,477 Accumulated other comprehensive loss, beginning of period ( 39,853 ) ( 33,650 ) Foreign currency translation adjustment, net of tax 15,347 ( 16,569 ) Transfer from other comprehensive income into earnings ( 52 ) ( 136 ) Net derivative instrument loss, net of tax -- ( 53 ) Accumulated other comprehensive loss, end of period ( 24,558 ) ( 50,408 ) Treasury stock, beginning and end of period ( 37,475 ) ( 37,475 ) Noncontrolling interest, beginning of period 140,994 138,139 Net income 8,688 15,176 Foreign currency translation adjustment, net of tax 6,423 ( 6,702 ) Net derivative instrument loss, net of tax ( 19 ) ( 70 ) Share-based compensation 178 190 Purchase of subsidiary shares from noncontrolling interest -- ( 920 ) Transfer of subsidiary shares purchased ( 139 ) -- Dividends ( 324 ) ( 9,654 ) Noncontrolling interest, end of period 155,801 136,159 Total equity $ 655,261 $ 593,420 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, 2020 2019 Cash flows from operating activities: Net income $ 32,168 $ 67,235 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,751 6,329 Provision for doubtful accounts 3,455 748 Lease expense 53 1,046 Share based compensation 1,805 2,735 Deferred tax (benefit) ( 1,390 ) ( 4,183 ) Change in fair value of derivatives ( 604 ) ( 1,377 ) Changes in: Accounts receivable ( 3,095 ) ( 43,189 ) Inventories ( 5,629 ) ( 12,222 ) Other assets 533 ( 1,915 ) Accounts payable and accrued expenses ( 57,147 ) ( 15,973 ) Income taxes, net 2,946 7,469 Net cash provided by (used in) operating activities ( 20,154 ) 6,703 Cash flows from investing activities: Purchases of short-term investments ( 7,162 ) ( 27,694 ) Proceeds from sale of short-term investments -- 39,355 Purchase of equity investment ( 13,998 ) -- Purchases of equipment and leasehold improvements ( 3,013 ) ( 4,727 ) Payment for intangible assets acquired ( 971 ) ( 5,519 ) Net cash provided by (used in) investing activities ( 25,144 ) 1,415 Cash flows from financing activities: Repayments of long-term debt ( 12,380 ) ( 16,795 ) Proceeds from issuance of long-term debt 13,438 -- Proceeds from exercise of stock options 796 2,781 Purchase of subsidiary shares from noncontrolling interest -- ( 6,087 ) Dividends paid ( 20,805 ) ( 25,928 ) Dividends paid to noncontrolling interest ( 324 ) ( 9,654 ) Net cash used in financing activities ( 19,275 ) ( 55,683 ) Effect of exchange rate changes on cash 5,506 ( 7,114 ) Net decrease in cash and cash equivalents ( 59,067 ) ( 54,679 ) Cash and cash equivalents - beginning of period 192,417 193,136 Cash and cash equivalents - end of period $ 133,350 $ 138,457 Supplemental disclosure of cash flow information: Cash paid for: Interest $ 776 $ 1,391 Income taxes 10,330 20,888 See notes to consolidated financial statements. Page 6 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 1. 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, 2019. 2. 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. The COVID-19 pandemic has disrupted our business operations and caused a significant unfavorable impact on our results of operations. 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. More recently, those governments have set guidelines in allowing businesses to reopen and employees to return to offices. Beginning in March 2020, we implemented travel restrictions and we are following social distancing practices. Our teams were set up to work from home and carry on business as efficiently as possible. In all jurisdictions in which we operate we are following guidance from authorities and health officials in allowing our teams to gradually return to our offices, including, requiring personnel to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitization routines at our offices and distribution centers as the health and safety of our employees is paramount. 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. The duration and intensity of this global health emergency and its related disruptions are uncertain. Since March 2020, retail stores in many jurisdictions around the world began reopening and business has improved considerably. However, limited traffic in reopened stores and the virtual shutdown of international air traffic have and is expected to continue to have an unfavorable impact our business. We have faced significant challenges in 2020 and we anticipate that these challenges will continue for at least the remainder of 2020 due to uncertain market conditions. Business has significantly improved during the three months ended September 30, 2020, as compared to the prior quarter as retail stores began reopening and consumers have increased their on-line purchasing. We expect this trend to continue, however, we do not see a resurgence anytime soon in travel retail as air traffic continues to suffer due in part to governmental restrictions on international air travel. In addition, the recent resurgence of COVID-19 cases in various parts of the world, including the United Kingdom, Ireland and other countries in Europe, has caused the re-implementation of government restrictions to prevent further spread of the virus. These restrictions include the temporary closure of businesses deemed “non-essential”, travel bans and restrictions, social distancing and quarantines. Lastly, the COVID-19 pandemic has led to high levels of unemployment and deteriorating economic conditions in many countries where our products are sold, forcing many consumers to limit discretionary purchases. We believe that the impact of the COVID-19 pandemic will continue to have a material adverse effect on our results of our operations, financial position and cash flows through at least the end of this year and into 2021. Page 7 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 3. Recent Agreements: Origines-parfums In June 2020, the Company, through its 73% owned French subsidiary, Interparfums SA, and Divabox SAS (“Divabox”), owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired 25% of Divabox capital for $14 million, through a capital increase. The difference between the purchase price and the fair value of net assets acquired of $8.8 million has been allocated to goodwill, pending final purchase price allocation. The investment is being accounted for under the equity method and is included in other assets on the accompanying balance sheet as of September 30, 2020. In connection with the acquisition, the Company entered into a $13.4 million, three-year term loan payable in three equal annual installments bearing interest at 0.85% above the EURIBOR 3-month rate. The loan requires the maintenance of certain financial covenants, tested annually, including a maximum leverage ratio. Moncler In June 2020, the Company entered into an exclusive, 5-year worldwide license agreement with a potential 5-year extension with Moncler for the creation, development and distribution of fragrances under the Moncler brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. S.T. Dupont In January 2020, we renewed our license agreement with S.T. Dupont for the creation, development and distribution of fragrance products through December 31, 2020, without any material changes in terms and conditions. Our initial 11-year license agreement with S.T. Dupont was signed in June 1997, and had previously been extended through December 31, 2019. The agreement will be extended annually in September of each year upon mutual consent. 4. Recent Accounting Pronouncements: In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as updated in 2019 and 2020, which require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The new rules eliminate the probable initial recognition threshold and, instead, reflect an entity’s current estimate of all expected credit losses. The new rules are effective for the Company in the first quarter of 2020 and there was no material impact on our consolidated financial statements. There are no other 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 5. Inventories: Inventories consist of the following: (In thousands) September 30, 2020 December 31, 2019 Raw materials and component parts $ 71,134 $ 71,895 Finished goods 107,718 95,914 $ 178,852 $ 167,809 6. 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, 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 $ 70,685 $ — $ 70,685 $ — Foreign currency forward exchange contracts not accounted for using hedge accounting 727 — 727 — $ 71,412 $ — $ 71,412 $ — Fair Value Measurements at December 31, 2019 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 $ 60,714 $ — $ 60,714 $ — Foreign currency forward exchange contracts accounted for using hedge accounting 16 16 Foreign currency forward exchange contracts not accounted for using hedge accounting 112 — 112 — $ 60,842 $ — $ 60,842 $ — Liabilities: Interest rate swap $ 30 $ — $ 30 $ — Page 9 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The carrying amount of cash and cash equivalents including money market funds, accounts receivable, other receivables, and accounts payable and accrued expenses approximates 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 obtained from financial institutions. 7. 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. 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 nine month periods ended September 30, 2020 and 2019. All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps 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 September 30, 2020 resulted in an asset and is included in other current assets on the accompanying balance sheet. At September 30, 2020, we had foreign currency contracts in the form of forward exchange contracts of approximately U.S. $ 48.0 million and GB £ 4.0 million which all have maturities of less than one year. Page 10 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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 September 30, 2020, the weighted average remaining lease term was 6.0 years and the weighted average discount rate used to determine the operating lease liability was 2.6 %. Rental expense related to operating leases was $ 1.4 million and $ 4.7 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 1.7 million and $ 4.9 million for the corresponding periods of the prior year. Operating lease payments included in operating cash flows totaled $ 4.3 million and $ 4.5 million for the nine months ended September 30, 2020 and 2019, respectively. Noncash additions to operating lease assets totaled $ 1.0 million and $ 33.9 million for the nine months ended September 30, 2020 and 2019, respectively. 9. Share Based Payments: The Company maintains stock option programs 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 for the nine months ended September 30, 2020 and 2019 aggregated $ 0.09 million and $ 0.07 million, respectively. Compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. 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 month period ended September 30, 2020: Number of Shares Weighted Average Grant Date Fair Value Nonvested options – beginning of period 514,210 $ 12.36 Nonvested options granted 9,000 $ 12.16 Nonvested options vested or forfeited ( 19,390 ) $ 11.28 Nonvested options – end of period 503,820 $ 12.39 Share based payment expense decreased income before income taxes by $ 0.62 million and $ 1.81 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 0.8 million and $ 2.7 million for the corresponding periods of the prior year. Share based payment expense decreased income attributable to Inter Parfums, Inc. by $ 0.43 million and $ 1.29 million for the three and nine months ended September 30, 2020, respectively, as compared to $ 0.5 million and $ 1.7 million for the corresponding periods of the prior year. Page 11 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table summarizes stock option information as of September 30, 2020: Shares Weighted Average Exercise Price Outstanding at January 1, 2020 815,800 $ 49.89 Options granted 9,000 69.11 Options forfeited ( 11,120 ) 60.77 Options exercised ( 24,540 ) 32.45 Outstanding at September 30, 2020 789,140 $ 50.49 Options exercisable 285,320 $ 35.41 Options available for future grants 575,815 As of September 30, 2020, the weighted average remaining contractual life of options outstanding is 3.29 years ( 1.90 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $ 2.4 million and $ 1.9 million, respectively, and unrecognized compensation cost related to stock options outstanding aggregated $ 4.8 million. Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2020 and 2019 were as follows: (In thousands) September 30, 2020 September 30, 2019 Cash proceeds from stock options exercised $ 796 $ 2,781 Tax benefits -- 400 Intrinsic value of stock options exercised 788 2,752 The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, 2020 and 2019 were $ 12.16 and $ 14.83 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 September 30, 2020 and 2019 are set forth in the following table: September 30, 2020 September 30, 2019 Weighted average expected stock-price volatility 25 % 27 % Weighted average expected option life 5 years 5 years Weighted average risk-free interest rate 1.4 % 2.5 % Weighted average dividend yield 2.5 % 2.0 % 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 was based on 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. Page 12 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In December 2018, Interparfums SA, our 73 % owned French subsidiary, approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance conditions, 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, are expected to be distributed in June 2022. In order to avoid dilution of the Company’s ownership of Interparfums SA, all shares to be distributed pursuant to the plan will be pre-existing shares of Interparfums SA purchased in the open market by Interparfums SA in prior years. In March 2020, due to the potential impact on future net sales and operating results resulting from the COVID-19 pandemic, the estimated number of shares to be distributed, after forfeited shares, was reduced from 142,571 to 82,162 . As the Company had already purchased shares in contemplation of the higher anticipated distribution, shares purchased in excess of the reduced anticipated distribution were transferred to treasury shares at the Interparfums SA level. 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 original cost of the grant was approximately $ 4.4 million, and the March 2020 revaluation resulted in a reduction of the cost, to approximately $2.5 million. As a result, a $ 0.3 million reduction of cost, net, was recorded for the three months ended March 31, 2020. In June 2020, the performance conditions were modified effecting 96 employees. As of September 30, 2020, the number of shares to be distributed, after forfeited shares, increased to 120,943 . The increase in shares anticipated to be distributed were transferred from treasury shares at the Interparfums SA level. The original cost of the grant was approximately $ 4.4 million, and the modification resulted in a revised cost of approximately $ 3.8 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 Nine months ended September 30, September 30, (In thousands) 2020 2019 2020 2019 Numerator: Net income attributable to Inter Parfums, Inc. $ 16,538 $ 20,848 $ 23,480 $ 52,059 Denominator: Weighted average shares 31,533 31,452 31,531 31,444 Effect of dilutive securities: Stock options 86 224 120 237 Denominator for diluted earnings per share 31,619 31,676 31,651 31,681 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 0.52 $ 0.66 $ 0.74 $ 1.66 Diluted 0.52 0.66 0.74 1.64 Page 13 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Not included in the above computations are the effect of antidilutive potential common shares which consist of outstanding options to purchase 0.52 and 0.47 million shares of common stock for both the three and nine months ended September 30, 2020, as compared to 0.18 million shares of common stock for the three and nine months ended September 30, 2019. 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 September 30, Nine months ended September 30, (In thousands) 2020 2019 2020 2019 Net sales: United States $ 31,126 $ 48,331 $ 72,970 $ 124,677 Europe 129,741 143,637 283,288 413,063 Eliminations ( 230 ) ( 741 ) ( 1,291 ) ( 2,028 ) $ 160,637 $ 191,227 $ 354,967 $ 535,712 Net income attributable to Inter Parfums, Inc.: United States $ 2,909 $ 5,802 $ 993 $ 12,475 Europe 13,629 15,046 22,487 39,584 $ 16,538 $ 20,848 $ 23,480 $ 52,059 September 30, December 31, 2020 2019 Total Assets: United States $ 134,519 $ 166,180 Europe 705,345 670,657 Eliminations ( 23,683 ) ( 8,005 ) $ 816,181 $ 828,832 12. Reclassifications: Certain prior year’s amounts in the accompanying consolidated statements of cash flows have been reclassified to conform to current period presentation. Page 14 INTER PARFUMS, INC. AND SUBSIDIARIES