What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-10 compared with 2020-11-09 · 351 added, 414 removed, 60 unchanged (93% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Looking Information

in this report which are not historical in nature are forward-looking statements.

Although we believe that our plans, intentions

and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions

or expectations will be achieved.

Although we believe that our plans, intentions and

expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations

will be achieved.

In some cases you can identify forward-looking statements by forward-looking words such as “anticipate,”

“believe,” “could,” “estimate,” “expect,” “intend,” “may,”

“should,” “will” and “would” or similar words.

You should not rely on forward-looking statements

because actual events or results may differ materially from those indicated by these forward-looking statements as a result of

a number of important factors.

These factors include, but are not limited to, the risks and uncertainties discussed under the

headings “Forward Looking Statements” and “Risk Factors” in Inter Parfums’ annual report on Form

10-K for the fiscal year ended December 31, 2019 and the reports Inter Parfums files from time to time with the Securities and

Exchange Commission.

Inter Parfums does not intend to and undertakes no duty to update the information contained in this report.

“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,”

“will” and “would” or similar words.

You should not rely on forward-looking statements because actual events or results

may differ materially from those indicated by these forward-looking statements as a result of a number of important factors.

These factors

include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and

“Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2020 and the reports Inter

Parfums files from time to time with the Securities and Exchange Commission.

Inter Parfums does not intend to and undertakes no duty

to update the information contained in this report.

operate in the fragrance business, and manufacture, market and distribute a wide array of fragrances and fragrance related products.

We manage our business in two segments, European based operations and United States based operations.

Certain prestige fragrance

products are produced and marketed by our European operations through our 73% owned subsidiary in Paris, Interparfums SA, which

is also a publicly traded company as 27% of Interparfums SA shares trade on the NYSE Euronext.

produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European

based fragrance product sales represented approximately 80% and 77% of net sales for the nine months ended September 30, 2020

and 2019, respectively.

We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld,

Kate Spade New York, Lanvin, Moncler, Montblanc, Paul Smith, S.T.

Dupont, Repetto, Rochas and Van Cleef & Arpels ,

whose products are distributed in over 120 countries around the world.

Certain prestige fragrance products

are produced and marketed by our European operations through our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly

traded company as 27% of Interparfums SA shares trade on the NYSE Euronext.

produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European based

fragrance product sales represented approximately 80% and 79% of net sales for the three months ended March 31, 2021 and 2020, respectively.

We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade New York, Lanvin,

Moncler, Montblanc, Paul Smith, Repetto, Rochas, S.T.

Dupont and Van Cleef & Arpels , whose products are distributed in

over 120 countries around the world.

our United States operations, we also market fragrance and fragrance related products.

United States operations represented 20%

and 23% of net sales for the nine months ended September 30, 2020 and 2019, respectively.

These fragrance products are sold or

to be sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, bebe,

Dunhill, French Connection, Graff, GUESS, Hollister, MCM and Oscar de la Renta brands.

United States operations represented 20% and 21%

of net sales for the three months ended March 31, 2021 and 2020, respectively.

These fragrance products are sold primarily pursuant to

license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, bebe, Dunhill, French Connection, Graff, GUESS,

Hollister, MCM and Oscar de la Renta brands.

INTER PARFUMS, INC.

Substantially

1 unchanged sentence

and renewal of such licenses.

With respect to the Company’s largest brands, we license the Montblanc, Coach, Jimmy Choo

and GUESS brand names.

With respect to the Company’s largest brands, we license the Montblanc, Jimmy Choo, Coach and GUESS

As a percentage of net sales, product sales for the Company’s largest brands were as follows:

PARFUMS, INC.

AND SUBSIDIARIES

sales fluctuations are influenced by the timing of new product launches as well as the third and fourth quarter holiday season.

In certain markets where we sell directly to retailers, seasonality is more evident.

We sell directly to retailers in France as

well as through our own distribution subsidiaries in Spain and the United States.

markets where we sell directly to retailers, seasonality is more evident.

We sell directly to retailers in France as well as through

our own distribution subsidiaries in Spain and the United States.

grow our business in two distinct ways.

First, we grow by adding new brands to our portfolio, either through new licenses or other

arrangements or out-right acquisitions of brands.

Second, we grow through the introduction of new products and by supporting new

and established products through advertising, merchandising and sampling as well as phasing out underperforming products so we

can devote greater resources to those products with greater potential.

The economics of developing, producing, launching

and supporting products influence our sales and operating performance each year.

Our introduction of new products may have

some cannibalizing effect on sales of existing products, which we take into account in our business planning.

First, we grow by adding new brands to our portfolio, either through new licenses or other arrangements

or out-right acquisitions of brands.

Second, we grow through the introduction of new products and by supporting new and established products

through advertising, merchandising and sampling as well as phasing out underperforming products so we can devote greater resources to

those products with greater potential.

The economics of developing, producing, launching and supporting products influence our sales

and operating performance each year.

Our introduction of new products may have some cannibalizing effect on sales of existing products,

which we take into account in our business planning.

business is not capital intensive, and it is important to note that we do not own manufacturing facilities.

We act as a general

contractor and source our needed components from our suppliers.

These components are received at one of our distribution centers

and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished

product for us and then deliver them to one of our distribution centers.

We act as a general contractor

and source our needed components from our suppliers.

These components are received at one of our distribution centers and then, based

upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and

then deliver them to one of our distribution centers.

with any global business, many aspects of our operations are subject to influences outside our control.

We believe we have a strong

brand portfolio with global reach and potential.

As part of our strategy, we plan to continue to make investments behind fast-growing

markets and channels to grow market share.

We believe we have a strong brand

portfolio with global reach and potential.

As part of our strategy, we plan to continue to make investments behind fast-growing markets

and channels to grow market share.

reported net sales are impacted by changes in foreign currency exchange rates.

A strong U.S.

dollar has a negative impact on our

However, earnings are positively affected by a strong dollar, because over 40% of net sales of our European operations

are denominated in U.S.

dollar has a negative impact on our net

However, earnings are positively affected by a strong dollar, because almost 50% of net sales of our European operations are denominated

dollars, while almost all costs of our European operations are incurred in euro.

Conversely, a weak U.S.

dollar has a favorable impact on our net sales while gross margins are negatively affected.

We address certain financial exposures

through a controlled program of risk management that includes the use of derivative financial instruments and primarily enter

into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.

PARFUMS, INC.

dollar has a favorable

impact on our net sales while gross margins are negatively affected.

We address certain financial exposures through a controlled program

of risk management that includes the use of derivative financial instruments and primarily enter into foreign currency forward exchange

contracts to reduce the effects of fluctuating foreign currency exchange rates.

INTER PARFUMS, INC.

AND SUBSIDIARIES

of COVID-19 Pandemic

novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United

States and France.

novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States

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.

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

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 COVID-19 pandemic disrupted our business operations

and caused a significant unfavorable impact on our results of operations in 2020.

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.

jurisdictions in which we operate we have been following guidance from authorities and health officials in allowing our teams to gradually

return to our offices, including, requiring personnel to wear masks and implementing additional cleaning and sanitization routines at

our offices and distribution centers.

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, we anticipate that limited traffic in reopened stores and the

virtual shutdown of international air traffic has and will continue to have an unfavorable impact our business.

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.

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.

Retail store closings, event cancellations and a shutdown

of international air travel brought our sales to a virtual standstill.

Beginning in June 2020, retail stores in many jurisdictions around

the world began reopening and business has improved considerably.

However, international travel has remained largely curtailed globally

due to both government restrictions and consumer health concerns.

significantly improved during the second half of 2020 and into the first quarter of 2021 as retail stores reopened and consumers increased

their on-line purchasing, and we expect this trend to continue.

However, the recent resurgence and introduction of variants of COVID-19

cases in various parts of the world has caused the temporary re-implementation of government restrictions to prevent further spread of

the virus in certain jurisdictions.

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.

Operationally,

we are prepared for increased demand in the post-COVID-19 environment, with business in Asia and North America already showing

signs of a comeback.

we are prepared for increased demand in the post-COVID-19 environment, with business in most parts of the world showing signs of a comeback.

We have geared up to rapidly fill the distribution channels as the crisis subsides.

In that regard, we have

maintained reasonable inventory levels of components and finished goods, and we are gaining local market intelligence from our

distributors and production capacity data from our suppliers.

We do not anticipate any material impairment of trademarks, licenses

and other intangible assets.

PARFUMS, INC.

AND SUBSIDIARIES

conservative financial tradition has enabled us to amass and maintain hefty cash balances and nominal long-term debt.

As of September

30, 2020, we had $204 million in cash, cash equivalents and short-term investments, and only $19.4 million of long-term debt.

We also have $49 million available in untapped credit facilities.

Nonetheless, we have taken several actions to minimize expenses

and protect cash flow.

Our operating cost structure, of which variable costs typically accounts for over two-thirds, has enabled

us to minimize the impact of reduced net sales on our bottom line.

In that regard, we have postponed the launch of several programs

originally scheduled for this year until 2021 and moved related advertising and promotion expenses to 2021 as well.

That includes

our planned launches for the Kate Spade New York, Jimmy Choo, Anna Sui and GUESS brands.

We have also taken several actions with

an eye toward minimizing fixed expenses.

While we have not terminated or furloughed any employees, we have instituted a hiring

freeze and plan on significantly cutting bonuses for 2020.

We have also temporarily suspended our quarterly cash dividend.

actions have had a favorable impact on the Company’s fixed expenditures and cash flow.

Furthermore, our cash and credit

management teams, together with our executive management teams are paying particular attention to the management of working capital.

As a result of the above, we do not anticipate any short-term liquidity problems, nor do we anticipate any material credit losses.

In that regard, we have maintained reasonable inventory

levels of components and finished goods, and we are gaining local market intelligence from our distributors and production capacity data

from our suppliers.

Important Events

Acquisition - Future Headquarters in Paris

April 2021, our majority owned Paris-based subsidiary, Interparfums SA, completed the acquisition of its future headquarters at 10 rue

de Solférino in the 7th arrondissement of Paris from the property developer, Apsys.

This is an office complex combining three

buildings connected by two inner courtyards, a large part of which was the French Socialist Party’s former headquarters, which

consists of approximately 40,000 total sq.

€125 million (approximately $149 million) purchase price for this building, is in line with market values, includes the complete

renovation of the site and is financed by a 10-year €120 million (approximately $143 million) bank loan to take advantage of low

current interest rates.

INTER PARFUMS, INC.

AND SUBSIDIARIES

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

was signed in 2011.

The renewal agreement also allows for an additional 5-year term through 2031 at the option of the Company.

Origines-Parfums

June 2020, the Company through its 73% owned 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 a 25% of Divabox capital for $14 million, through a capital increase.

In connection with the acquisition, the Company

entered into a $13.4 million, three-year term loan payable in three equal annual installments plus interest.

As a website of reference

for all selective fragrance brands, Origines-parfums is a key French player in the online beauty market recognized for its customer

relationship expertise.

This agreement should enhance the introduction of dedicated fragrance lines and products designed to address

a specific consumer demand for this distribution channel and accelerate our digital development.

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.

June 2020, the Company through its 73% owned 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 $14.0 million, through a capital increase.

In connection with the acquisition, the Company entered into a $13.4 million term

loan, which has been amended such that the loan was repaid in full in February 2021.

As a website of reference for all selective fragrance

brands, Origines-parfums is a key French player in the online beauty market recognized for its customer relationship expertise.

agreement should enhance the introduction of dedicated fragrance lines and products designed to address a specific consumer demand for

this distribution channel and accelerate our digital development.

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.

Moncler was founded at Monestier-de-Clermont,

Grenoble, France, in 1952 and is currently headquartered in Italy.

Over the years, the brand has combined style with constant

technological research assisted by experts in activities linked to the world of the mountain.

The Moncler outerwear collections

marry the extreme demands of nature with those of city life.

Our first fragrance launch for the Moncler brand is scheduled for

the first quarter of 2022.

PARFUMS, INC.

AND SUBSIDIARIES

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

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.

Over the years, the brand has combined style with constant technological

research assisted by experts in activities linked to the world of the mountain.

The Moncler outerwear collections marry the extreme demands

of nature with those of city life.

Our first fragrance launch for the Moncler brand is scheduled for the first quarter of 2022.

of Critical Accounting Policies

regarding our critical accounting policies can be found in our 2020 Annual Report on Form 10-K filed with the SEC.

INTER PARFUMS, INC.

AND SUBSIDIARIES

of Operations

and Nine Months Ended September 30, 2020 as Compared to the Three and Nine Months Ended September 30, 2019

September 30,

based brand product sales

States based product sales

sales for the three months ended September 30, 2020 decreased 16.0% to $160.6 million, as compared to $191.2 million for the corresponding

Months Ended March 31, 2021 as Compared to the Three Months Ended March 31, 2020

Three months ended

(in millions)

European based product sales

United States based product sales

Total net sales

sales for the three months ended March 31, 2021 increased 37.1% to $198.5 million, as compared to $144.8 million for the corresponding

period of the prior year.

At comparable foreign currency exchange rates, net sales declined 18.3%.

For the three months ended

September 30, 2020 and 2019, the average dollar/euro exchange rate was 1.17 and 1.11, respectively.

Net sales for the nine months

ended September 30, 2020 decreased 33.7% to $355.0 million, as compared to $535.7 million for the corresponding period of the

based product sales decreased 9.6% and 31.4% for the three and nine months ended September 30, 2020, respectively, as compared

to the corresponding periods of the prior year.

United States based product sales decreased 35.1% and 41.6% for the three and

nine months ended September 30, 2020, respectively, as compared to the corresponding periods of the prior year.

expected, the impact of the COVID-19 pandemic, most notably store closures in many countries where our products are sold, was

the primary reason for the decline in sales across all brands and geographic markets.

However, business is rebounding better than

Since the early days of the pandemic, our sales have increased sequentially each and every month, thanks to store

re-openings and a robust e-commerce business being conducted by our retail customers.

PARFUMS, INC.

AND SUBSIDIARIES

our European operations, the third quarter rate of decline in sales slowed to 9.6% from 68.6% in the second quarter.

sales benefitted from the favorable turnaround of several of our markets, notably Asia and North America.

Among our largest brands,

comparable quarter Montblanc and Jimmy Choo brand sales declined 11.3% and 31.0%, respectively, which is better understood in

the context of the high bars set in 2019 with the rollout of Montblanc’s Explorer and Jimmy Choo’s Urban

Coach and Lanvin fragrance sales were actually ahead of last year’s third quarter by 7.9% and 1.8%, respectively.

Coach brand sales continued to benefit from the debut of Coach Dreams earlier this year, while favorable sales trends in

Lanvin’s key markets, Asia and Eastern Europe, were key sales catalysts.

compared to the second quarter, there has also been dramatic improvement by our U.S.

operations, even though sales have been hampered

by the lack of new product launches this year.

Notably, our largest U.S.

brand, GUESS, had its Bella Vita blockbuster launch

rescheduled until next year.

We also postponed the major launch of Anna Sui Sky .

The 2021 new product pipeline is especially

rich, and therefore we anticipate considerable sales gains over the current year.

recognize that there will continue to be significant challenges for the remainder of 2020 and possibly into early 2021.

In particular,

the one market which shows little sign of a turnaround is travel retail.

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 travel.

Sales to Customers by Region

September 30,

and South America

impact of the COVID-19 pandemic has broadly impacted all regions, with the steepest declines in the Middle East, Eastern Europe

Travel retail accounted for much of the decline in the Asian market.

September 30,

margin as a percent of net sales

profit margin was 60.5% and 60.0% for the three and nine months ended September 30, 2020, respectively, as compared to 59.8%

and 61.8% as for the three and nine months ended September 30, 2019, respectively.

For European operations, gross profit margin

was 62.4% and 62.3% for the three and nine months ended September 30, 2020, respectively, as compared to 62.8% and 64.7%

for the corresponding periods of the prior year.

PARFUMS, INC.

At comparable foreign currency exchange rates, net sales increased 32.7%.

For the 2021 first quarter, the average

dollar/euro exchange rate was 1.20 as compared to 1.10 in the first quarter of 2020.

based product sales increased 40.0% to $159.7 million for the three months ended March 31, 2021, as compared to $114.1 million for the

corresponding period of the prior year.

At comparable foreign currency exchange rates, net sales increased 34.5%.

the rebound that began in the second half of 2020, sales for the first three months of 2021 set a first quarter record.

Not only were

2021 first quarter sales 37.1% ahead of the 2020 first quarter, but they were also 11.4% ahead of the 2019 first quarter sales of $178.2

Product sales for our largest brands within European operations, Montblanc, Jimmy Choo, Coach, and Lanvin, rose 27.5%, 66.7%,

8.8% and 91.2%, respectively.

Montblanc legacy scents were responsible for the increase in brand sales, and the same holds for Lanvin

fragrances with a major sales boost in the brand’s major markets, Eastern Europe and Asia.

In 2021, the increase in Coach sales

was more of a function of a weaker dollar rather than increased sales volume;

in 2020 comparable quarter sales rose 35.9% over the 2019

first quarter due in great part to the pre-pandemic launch of Coach Dreams .

The combination of the strong sales by established

Jimmy Choo scents along with the first quarter launch of I Want Choo produced the gain in first quarter brand sales.

Initial sales

of Kate Spade New York , our first new fragrance for the brand, also pushed first quarter sales to a new record as did the launch

of our eco-friendly scent, Rochas Girl.

INTER PARFUMS, INC.

AND SUBSIDIARIES

carefully monitor movements in foreign currency exchange rates as over 40% of our European based operations net sales are denominated

States based product sales increased 26.2% to $38.8 million for the three months ended March 31, 2021, as compared to $30.7 million for

the corresponding period of the prior year.

With little exception, our U.S.

brands also produced strong growth in the first quarter.

GUESS, our largest brand, continued to benefit from a combination of legacy fragrance sales and initial distribution of Bella Vita .

We have had strong replenishment orders for the Authentic Night duo by Abercrombie & Fitch which debuted late last year while

first quarter shipments of the Canyon Escape duo drove Hollister brand sales growth.

Debuting in limited distribution toward the

end of the first quarter was our MCM signature scent, our first scent for this brand, with global rollout now underway.

The first quarter

decline in Anna Sui brand sales following the 62.3% increase in the 2020 fourth quarter, was primarily due to the launch of Sky

in the 2020 fourth quarter.

The limited duty free/travel retail market also factored into the decline in Anna Sui brand sales.

we have significant Anna Sui open orders and look forward to improving brand sales as the year unfolds.

Our newest Oscar de la Renta

scent, Alibi , was unveiled late in the first quarter with broader distribution now in process.

Net Sales to Customers by Region

Three months ended

(in millions)

North America

Western Europe

Eastern Europe

Central and South America

regions showed gains, with sales by two of our three largest markets, North America and Asia, up 56% and 34%, respectively.

9% reported sales increase in Western Europe was attributable to the weaker dollar, as the region was impacted by the lockdowns

in the United Kingdom, Germany and Italy.

Comparable quarter sales also bounced back in the Middle East, Eastern Europe and

Central and South America, growing 31%, 125% and 22%, respectively.

Profit Margin

(in millions)

Cost of sales

Gross margin as a % of net sales

profit margin was 63.1% of net sales for the three months ended March 31, 2021, as compared to 61.5% for the corresponding period of

the prior year.

For European operations, gross profit margin was 65.5% and 63.9% in the first quarters of 2021 and 2020, respectively.

We carefully monitor movements in foreign currency exchange rates as almost 50% of our European based operations net sales are denominated

dollars, while most of our costs are incurred in euro.

From a margin standpoint, a strong U.S.

dollar has a positive effect

on our gross profit margin while a weak U.S.

dollar has a positive effect on

our gross profit margin while a weak U.S.

dollar has a negative effect.

The weaker dollar in the third quarter of 2020 resulted

in a nominal decline in our gross margin.

Gross margin for the nine months ended September 30, 2020 includes a charge of approximately

$2.0 million relating to the assumption of a return liability for products sold by the former licensee of a brand license entered

into in 2019.

operations, gross profit margin was 52.5% and 51.2% for the three and nine months ended September 30, 2020, respectively,

as compared to 51.0% and 52.3% for the corresponding periods of the prior year.

Although gross margin improved during the third

quarter of 2020, as compared to the corresponding period of the prior year due primarily to product mix, for the nine months ended

September 30, 2020, certain expenses such as depreciation of tools and molds together with the distribution of point of sale materials

exaggerated the decline in gross margin for the periods as a percentage of sales.

we do not bill customers for shipping and handling costs, and such costs, which aggregated $1.6 million and $3.8 million for the

three and nine month periods ended September 30, 2020, respectively, as compared to $2.4 million and $5.9 million for the

corresponding periods of the prior year, are included in selling, general and administrative expenses in the consolidated statements

For the three months ended March 31, 2021 the weaker dollar,

as compared to the corresponding period of the prior year had a negative effect on gross margin.

However, significantly reduced lower

margin giftset sales in 2021 and new product launches with better margins mitigated the negative effect from currency exchange rates

in the period.

gross profit margin was 53.2% and 52.6% in the first quarters of 2021 and 2020, respectively.

With the increase in sales in the

first quarter of 2021, we were better able to absorb expenses such as depreciation of tools and molds and the cost of point-of-sale

materials, as compared to the corresponding period of the prior year.

INTER PARFUMS, INC.

AND SUBSIDIARIES

we do not bill customers for shipping and handling costs and such costs, which aggregated $1.7 million and $1.6 million for the three

months ended March 31, 2021 and 2020, respectively, and are included in selling, general and administrative expenses in the consolidated

statements of income.

As such, our Company’s gross profit may not be comparable to other companies which may include these expenses

1 unchanged sentence

General and Administrative Expenses

general and administrative expenses

general and administrative expenses as a percent of net sales

general and administrative expenses decreased 15.4% and 29.1% for the three and nine months ended September 30, 2020, respectively,

as compared to the corresponding periods of the prior year.

As a percentage of sales, selling, general and administrative expenses

were 41.0% and 47.7% for the three and nine months ended September 30, 2020, respectively, as compared to 40.7% and 44.6% for

the three and nine months ended September 30, 2019, respectively.

European operations net sales decreased 9.6% and 31.4% for the three and nine months ended September 30, 2020, respectively, as

compared to the corresponding periods of the prior year, while selling, general and administrative expenses of our European operations

decreased 11.4% and 29.4% for the same periods, respectively.

In addition, selling, general and administrative expenses of our

European operations represented 41.3% and 47.3% of net sales for the three and nine months ended September 30, 2020, respectively,

as compared to 42.1% and 46.0% for the three and nine months ended September 30, 2019, respectively.

PARFUMS, INC.

AND SUBSIDIARIES

operations net sales decreased 35.1% and 41.6% for the three and nine months ended September 30, 2020, respectively, as compared

to the corresponding periods of the prior year, while selling, general and administrative expenses of our U.S.

operations decreased

29.2% and 27.7% for the three and nine months ended September 30, 2020, as compared to the corresponding periods of the prior

year, and represented 39.7% and 49.5% of net sales for the three and nine months ended September 30, 2020, respectively, as compared

to 36.3% and 40.0% for the corresponding periods of the prior year.

operations are significantly smaller than those of

our European operations and carry higher fixed costs that could not be leveraged as efficiently as those of our European operations

with the decline in net sales.

had significant promotional programs planned for 2020.

At the time of initial retail store closings, certain advertising and promotional

programs were well underway and could not be halted.

Since then we have severely curtailed our promotional activities.

the launch of several programs originally scheduled for this year until 2021 along with related advertising and promotion programs.

Promotion and advertising included in selling, general and administrative expenses aggregated $17.6 million and $51.9 million

for the three and nine months ended September 30, 2020, respectively, as compared to $28.7 million and $92.5 million for the corresponding

periods of the prior year.

Promotion and advertising represented 10.9% and 14.6% of net sales for the three and nine months ended

September 30, 2020, respectively, as compared to 15.0% and 17.3% for the corresponding periods of the prior year.

COVID-19 pandemic recedes, we will once again invest heavily in promotional spending to support new product launches and to build

brand awareness.

expense included in selling, general and administrative expenses aggregated $11.7 million and $26.3 million for the three and

nine months ended September 30, 2020, respectively, as compared to $14.1 million and $39.2 million for the corresponding periods

Three months ended

(in millions)

Selling, general and administrative expenses

Selling, general and administrative expenses as a % of net sales

general and administrative expenses increased 5.1% for the three months ended March 31, 2021, as compared to the corresponding period

of the prior year.

Royalty expense represented 7.3% and 7.4% of net sales for the three and nine months ended September 30,

2020, as compared to 7.4% and 7.3% of net sales for the corresponding periods of the prior year.

As a result of the COVID-19 pandemic

we reached agreements with most of our licensors to waive or significantly reduce minimum guaranteed royalties for 2020.

a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, income

from operations was $31.4 million for the three months ended September 30, 2020, as compared to $36.6 million for the

corresponding period of the prior year.

Income from operations was $43.6 million for the nine months ended September 30,

2020, as compared to $92.4 million for the corresponding period of the prior year.

For the nine months ended September 30, 2020,

our operating margin was 12.3%, as compared to 17.2% for the corresponding period of the prior year.

As a percentage of sales, selling, general and administrative expenses were 37.7% and 49.2% for the three months ended

March 31, 2021 and 2020, respectively.

For European operations, with sales up 40.0%, selling, general and administrative expenses increased

3.9% in 2021, as compared to 2020 and represented 37.2% of sales in 2021, as compared to 50.1% of sales in 2020.

with sales up 26.2%, selling, general and administrative expenses increased 9.9% in 2021 as compared to 2020 and represented 39.9% and

45.8% of sales in 2021 and 2020, respectively.

The decline in selling, general and administrative expenses as a percentage of sales for

the 2021 period was primarily due to lower promotional and advertising expenses.

Sales rebounded more quickly than anticipated, and we

did not have the opportunity to reinvest in additional promotion and advertising to match our historic levels.

Promotion and advertising

included in selling, general and administrative expenses aggregated approximately $21.8 million (11.0% of net sales) for the 2021 period,

as compared to $28.5 million (19.7% of net sales) for the 2020 period.

the COVID-19 pandemic recedes, we plan to invest heavily in promotional spending to support new product launches and to build brand awareness.

We have significant promotion and advertising programs planned for 2021 and expect promotion and advertising expense included in selling

general and administrative expense to aggregate approximately 21% of sales for the full year ended December 31, 2021.

expense included in selling, general and administrative expenses aggregated $15.4 million for the 2021 period, as compared to $11.3 million

in 2020 and represented 7.7% and 7.8% of net sales in 2021 and 2020, respectively.

a result of the above analysis regarding sales, margins and selling, general and administrative expenses, income from operations increased

169.7% to $48.0 million for the three months ended March 31, 2021, as compared to $17.8 million for the corresponding period of the prior

Operating margins were 24.2% of net sales in the current period as compared to 12.3% for the corresponding period of the prior

Income and Expense

expense aggregated $0.1 million and $1.5 million for the three and nine months ended September 30, 2020, respectively, as

compared to $0.4 million and $1.2 million for the corresponding periods of the prior year.

Interest expense is primarily related

to the financing of brand acquisitions.

We also use the credit lines available to us, as needed, to finance our working capital

needs as well as our financing needs for acquisitions.

PARFUMS, INC.

expense aggregated $0.4 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.

Interest expense is

primarily related to the financing of brand and licensing acquisitions.

We use the credit lines available to us, as needed, to finance

our working capital needs as well as our financing needs for acquisitions.

INTER PARFUMS, INC.

AND SUBSIDIARIES

currency gains (losses) aggregated $(0.9) million and $0.1 million for the three and nine months ended September 30, 2020, respectively,

as compared to losses of $0.1 million and $0.8 million for the corresponding periods of the prior year.

We typically enter into

foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated

currency gains aggregated $1.9 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.

enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated

in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency.

Over 40% of net sales of our European operations are denominated in U.S.

income aggregated $0.4 million and $2.2 million for the three and nine months ended September 30, 2020, respectively, as compared

to $0.6 million and $2.9 million for the corresponding periods of the prior year.

Cash and cash equivalents and short-term investments

are primarily invested in certificates of deposit with varying maturities.

to an action plan released by the French Prime Minister, the French corporate income tax rate is expected to be cut from 33% to

25% over a three-year period beginning in 2020.

Our effective tax rate for European operations was 28% for the nine months ended

September 30, 2020, as compared to 30% for the corresponding period of the prior year.

The decrease is the result of favorable

tax rates in other jurisdictions where our European operations conduct business such as Singapore, Switzerland and the United

a result of the true-up of our 2019 tax accrual estimates for U.S.

operations, income taxes resulted in a nominal benefit for

the nine months ended September 30, 2020, as compared to an expense of 16.6% for the corresponding period of the prior year.

50% of net sales of our European operations are denominated in U.S.

income aggregated $0.4 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively.

Cash and cash equivalents

and short-term investments are primarily invested in certificates of deposit with varying maturities.

Our effective tax rate was 26.8% and 29.0%

for the three months ended March 31, 2021 and 2020, respectively.

Pursuant to an action plan released by the French Prime Minister,

the French corporate income tax rate is to be cut from 33% to 25% over the three-year period ending 2023.

Our effective tax rate

for European operations was 28% and 30% for the three months ended March 31, 2021 and 2020, respectively.

effective tax rate for U.S.

operations typically differs from the 21% statutory rate due to benefits received from the exercise

of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income slightly offset by

state and local taxes.

French authorities are considering that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not, in

and of itself, constitute a permanent establishment and therefore Interparfums, SA should pay French taxes on all or part of the

profits of that entity.

The French Tax Authority notified the Company that IP Suisse will be the subject of a tax audit

covering the period January 1, 2010 through December 31, 2018.

No claim or assessment for any taxes or penalties has been made

at this time.

The Company disagrees and is prepared to vigorously defend its position.

Consequently, no provision has been made

in the accompanying financial statements as we believe it is more likely than not that our position will be sustained based on

its technical merits.

Although we believe that we have sufficient arguments to support our position, there exists a risk that

the French authorities may prevail.

The Company’s exposure in connection with this matter is approximately $5.8 million,

net of recovery taxes already paid to the Swiss authorities and excluding interest.

than as discussed above, we did not experience any significant changes in tax rates, and none were expected in jurisdictions where

PARFUMS, INC.

operations was 17.0% for the three months ended March 31, 2021, as compared to 20.9% for the corresponding

period of the prior year.

Our effective tax rate differs from the 21% statutory rate due to benefits received from the exercise of stock

options as well as deductions we are allowed for a portion of our foreign derived intangible income slightly offset by state and local

The benefit from the exercise of stock options for the three months ended March 31, 2021 was $0.2 million as compared to zero

in the 2020 first quarter.

French authorities are considering that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not, in and of

itself, constitute a permanent establishment and therefore Interparfums, SA should pay French taxes on all or part of the profits of

The French Tax Authority notified the Company that IP Suisse will be the subject of a tax audit covering the period January

1, 2010 through December 31, 2018.

No claim or assessment for any taxes or penalties has been made at this time.

The Company disagrees

and is prepared to vigorously defend its position.

Consequently, no provision has been made in the accompanying consolidated financial

statements as we believe it is more likely than not that our position will be sustained based on its technical merits.

Although we believe

that we have sufficient arguments to support our position, there exists a risk that the French authorities may prevail.

The Company’s

exposure in connection with this matter is approximately $5.8 million, net of recovery taxes already paid to the Swiss authorities and

excluding interest.

INTER PARFUMS, INC.

AND SUBSIDIARIES

Income and Earnings per Share

September 30,

thousands except per share data)

income European operations

than as discussed above, we did not experience any significant changes in tax rates, and none were expected in jurisdictions where we

Net Income and Earnings per Share

(in thousands except per

Net income attributable to European operations

Net income attributable to United States operations

Net income attributable to the noncontrolling interest

income attributable to Inter Parfums, Inc.

Net income attributable to Inter Parfums, Inc.

common shareholders:

average number of shares outstanding:

income was $21.9 million and $32.2 million for the three and nine months ended September 30, 2020, as compared to $26.7 million

and $67.2 million for the corresponding periods of the prior year.

The reasons for significant fluctuations in net income for

both European operations and United States operations are directly related to the previous discussions relating to changes in

sales, gross margin, and selling, general and administrative expenses, most of which was caused by the effects of the COVID-19

noncontrolling interest arises from our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company

Weighted average number of shares outstanding:

income increased 175.4% to $36.6 million for the three months ended March 31, 2021, as compared to $13.3 million for the corresponding

period of the prior year.

The reasons for significant fluctuations in net income for both European operations and United States operations

are directly related to the previous discussions relating to changes in sales, gross margin, and selling, general and administrative

expenses and effective tax rates.

noncontrolling interest arises primarily from our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company

as 27% of Interparfums SA shares trade on the NYSE Euronext.

The noncontrolling interest is also affected by the profitability

of Interparfums SA’s 51% owned distribution subsidiary in Spain.

Net income attributable to the noncontrolling interest

aggregated 28% of European operations’ net income for all periods presented.

The noncontrolling interest is also affected by the profitability of Interparfums

SA’s 51% owned distribution subsidiaries in Spain.

Net income attributable to the noncontrolling interest aggregated 28% of European

operations net income for both the three months ended March 31, 2021 and 2020.

Net income attributable to Inter Parfums, Inc.

175.0% to $27.7 million, as compared to $10.1 million for the corresponding period of the prior year.

and Capital Resources

conservative financial tradition has enabled us to amass significant cash balances and nominal long-term debt.

As of September

30, 2020, we had $204 million in cash, cash equivalents and short-term investments, most of which is held in euro by our European

operations and is readily convertible into U.S.

We have not had any liquidity issues to date, and do not expect any liquidity

issues relating to such cash and cash equivalents and short-term investments.

As of September 30, 2020, long-term debt aggregated

conservative financial tradition has enabled us to amass hefty cash balances and nominal long-term debt.

As of March 31, 2021 we had

$294 million in cash, cash equivalents and short-term investments, most of which is held in euro by our European operations and is readily

convertible into U.S.

We have not had any liquidity issues to date, and do not expect any liquidity issues relating to such

cash and cash equivalents and short-term investments held by our European operations.

As of March 31, 2021 long-term debt aggregated

only $9.2 million and we also have $49 million available in untapped credit facilities.

Nonetheless, in response to the COVID-19

pandemic, we have taken several actions to minimize expenses and protect cash flow.

Our operating cost structure, of which variable

costs in a typical year account for over two-thirds, has enabled us to minimize the impact of reduced net sales on our bottom

In that regard, we have postponed the launch of several programs originally scheduled for this year until 2021 and moved

related advertising and promotion programs to 2021 as well.

We have also taken several actions with an eye toward minimizing fixed

While we have not terminated or furloughed any employees, we have instituted a hiring freeze and plan on significantly

cutting bonuses for 2020.

We have also temporarily suspended our quarterly cash dividend.

While these actions have had a favorable

impact on the Company’s fixed expenditures and cash flow, our cash and credit management teams together with our executive

management teams are paying particular attention to the management of working capital.

As a result of the above, we have not had

nor do we not anticipate any short-term liquidity problems.

PARFUMS, INC.

of March 31, 2021, working capital aggregated $462 million and we had a working capital ratio in excess of 4 to 1.

Approximately 86%

of the Company’s total assets are held by European operations, and approximately $179 million of trademarks, licenses and other

intangible assets are held by European operations.

INTER PARFUMS, INC.

AND SUBSIDIARIES

of September 30, 2020, we had a working capital ratio of 4.5 to 1.

Approximately 86% of the Company’s total assets are held

by European operations, and approximately $182 million of trademarks, licenses and other intangible assets are also held by European

Company hopes to continue to benefit from its strong financial position to potentially acquire one or more brands, either on a

proprietary basis or as a licensee.

Opportunities for external growth are regularly examined, with the priority of maintaining

the quality and homogeneous nature of our portfolio.

However, we cannot assure you that any new license or acquisition agreements

will be consummated.

used in operating activities aggregated $20.2 million for the nine months ended September 30, 2020, as compared to cash provided

by operating activities of $6.7 million for the corresponding period of the prior year.

For the nine months ended September 30,

2020, working capital items used $62.4 million in cash from operating activities, as compared to $65.8 million in the 2019 period.

We anticipate significant challenges for the remainder of 2020 due to uncertain market conditions promulgated by the COVID-19

Since March 2020, retail stores in several jurisdictions around the world began reopening and business is rebounding

better than expected.

Accounts receivables are up considerably from June 2020.

However, the September 30, 2020 balance is reasonable

considering the upturn in third quarter 2020 net sales and collection activity remains strong as day’s sales outstanding

was 78 days, as compared to 84 days for the corresponding period of the prior year.

Inventory levels are up approximately 3% from

year end and reflect levels needed to support current net sales expectations and new product launches.

flows used in investing activities in 2020 reflect purchases of short-term investments.

Company hopes to benefit from its strong financial position to potentially acquire one or more brands, either on a proprietary basis

or as a licensee.

Opportunities for external growth continue to be examined, with the priority of maintaining the quality and homogeneous

nature of our portfolio.

However, we cannot assure you that any new license or acquisition agreements will be consummated.

provided by operating activities aggregated $32.5 million for the three month period ended March 31, 2021, as compared to cash used in

operating activities of $25.1 million for the three months ended March 31, 2020.

For the 2021 period, working capital items used $12.9

million in cash from operating activities, as compared to $40.6 million in the 2020 period.

Although accounts receivable is up 26% from

year end, the balance is reasonable based on first quarter 2021 record sales levels and reflects strong collection activity as day’s

sales outstanding is down to 71 for the 2021 period as compared to 85 days for the corresponding period of the prior year.

levels are down 3% from year end and includes inventory anticipated to be needed to support 2021 new product launches.

flows used in investing activities in 2021 reflect the purchases of short-term investments.

These investments are primarily certificates

of deposit with maturities greater than three months.

Approximately $59 million of such certificates of deposit contain penalties

where we would forfeit a portion of the interest earned in the event of early withdrawal.

of deposit and other contracts with maturities greater than three months.

At March 31, 2021, approximately $82 million of such certificates

of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.

business is not capital intensive as we do not own any manufacturing facilities.

1 unchanged sentence

$4.0 million on tools and molds, depending on our new product development calendar.

Capital expenditures also include amounts

for office fixtures, computer equipment and industrial equipment needed at our distribution centers.

June 2020, the Company and 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.

In connection with the acquisition, the Company entered into a $13.4 million, three-year term loan payable in three equal annual

installments plus interest.

PARFUMS, INC.

Capital expenditures also include amounts for office

fixtures, computer equipment and industrial equipment needed at our distribution centers.

April 2021, our majority owned Paris-based subsidiary, Interparfums SA, completed the acquisition of its future headquarters at 10 rue

de Solférino in the 7th arrondissement of Paris from the property developer, Apsys.

This is an office complex combining three

buildings connected by two inner courtyards, which consists of approximately 40,000 total sq.

The €125 million (approximately

$149 million) purchase price for this building, is in line with market values, includes the complete renovation of the site and is financed

by a 10-year €120 million (approximately $143 million) bank loan to take advantage of low current interest rates.

June 2020, the Company and 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.

In connection

with the acquisition, the Company entered into a $13.4 million term loan, which was repaid in full in February 2021.

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.

The remaining value of the Rochas fashion trademarks is €17.1 million (approximately $20.0 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.

INTER PARFUMS, INC.

AND SUBSIDIARIES

short-term financing requirements are expected to be met by available cash on hand at September 30, 2020, and short-term credit

lines provided by domestic and foreign banks.

The principal credit facilities for 2020 consist of a $20.0 million unsecured revolving

line of credit provided by a domestic commercial bank and approximately $29 million in credit lines provided by a consortium of

international financial institutions.

There were no short-term borrowings outstanding as of both September 30, 2020 and September

short-term financing requirements are expected to be met by available cash on hand at March 31, 2021, and short-term credit lines provided

by domestic and foreign banks.

The principal credit facilities for 2021 consist of a $20.0 million unsecured revolving line of credit

provided by a domestic commercial bank, and approximately $29.3 million in credit lines provided by a consortium of international financial

institutions.

There were no short-term borrowings outstanding as of both March 31, 2021 and 2020.

October 2019, the Board of Directors authorized a 20% increase in the annual dividend to $1.32 per share.

In April 2020, as a

result of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the quarterly

cash dividend.

The Board also indicated that it expects to revisit this issue with an eye towards reinstitution of the dividend

when the business environment is more favorable.

In April 2020, as a result

of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the quarterly cash

In February 2021, our Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly.

next quarterly cash dividend of $0.25 per share is payable on June 30, 2021 to shareholders of record on June 15, 2021.

believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facilities,

1 unchanged sentence

rates in the U.S.

and foreign countries in which we operate did not have a significant impact on operating results for the nine

months ended September 30, 2020.

and foreign countries in which we operate did not have a significant impact on operating results for the three months

ended March 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis