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, 2021, included in our annual report filed on Form 10-K. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the entire fiscal year. Page 1 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share and per share data) (Unaudited) ASSETS March 31, 2022 December 31, 2021 Current assets: Cash and cash equivalents $ 110,122 $ 159,613 Short-term investments 155,114 160,014 Accounts receivable, net 206,258 159,281 Inventories 227,108 198,914 Receivables, other 12,527 10,308 Other current assets 23,161 21,375 Income taxes receivable 177 210 Total current assets 734,467 709,715 Property, equipment and leasehold improvements, net 157,729 149,352 Right-of-use assets, net 31,510 33,728 Trademarks, licenses and other intangible assets, net 208,960 214,047 Deferred tax assets 7,664 7,936 Other assets 21,878 30,586 Total assets $ 1,162,208 $ 1,145,364 LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $ 14,377 $ 15,911 Current portion of lease liabilities 4,640 6,014 Accounts payable – trade 72,568 81,980 Accrued expenses 144,724 136,677 Income taxes payable 13,920 4,328 Total current liabilities 250,229 244,910 Long–term debt, less current portion 125,164 132,902 Lease liabilities, less current portion 28,574 29,220 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 31,843,845 and 31,830,420 shares at March 31, 2022 and December 31, 2021, respectively 32 32 Additional paid-in capital 88,181 87,132 Retained earnings 580,094 560,663 Accumulated other comprehensive loss ( 46,273 ) ( 38,432 ) Treasury stock, at cost, 9,864,805 shares at March 31, 2022 and December 31, 2021 ( 37,475 ) ( 37,475 ) Total Inter Parfums, Inc. shareholders’ equity 584,559 571,920 Noncontrolling interest 173,682 166,412 Total equity 758,241 738,332 Total liabilities and equity $ 1,162,208 $ 1,145,364 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 March 31, 2022 2021 Net sales $ 250,678 $ 198,528 Cost of sales 92,020 73,280 Gross margin 158,658 125,248 Selling, general and administrative expenses 97,441 74,896 Impairment loss -- 2,393 Income from operations 61,217 47,959 Other expenses (income): Interest expense 883 377 Gain on foreign currency ( 2,239 ) ( 1,866 ) Interest and investment (income) loss 1,466 ( 386 ) Other income ( 116 ) ( 192 ) ( 6 ) ( 2,067 ) Income before income taxes 61,223 50,026 Income taxes 14,932 13,400 Net income 46,291 36,626 Less: Net income attributable to the noncontrolling interest 10,992 8,964 Net income attributable to Inter Parfums, Inc. $ 35,299 $ 27,662 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 1.11 $ 0.87 Diluted $ 1.10 $ 0.87 Weighted average number of shares outstanding: Basic 31,840 31,631 Diluted 32,010 31,772 Dividends declared per share $ 0.50 $ 0.25 See notes to consolidated financial statements. Page 3 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Comprehensive income: Net income $ 46,291 $ 36,626 Other comprehensive income: Net derivative instrument gain (loss), net of tax 261 ( 600 ) Transfer from OCI into earnings 992 -- Translation adjustments, net of tax ( 12,441 ) ( 26,119 ) Comprehensive income 35,103 9,907 Comprehensive income (loss) attributable to the noncontrolling interests: Net income 10,992 8,964 Other comprehensive income (loss): Net derivative instrument gain (loss), net of tax 72 ( 164 ) Translation adjustments, net of tax ( 3,419 ) ( 8,941 ) Comprehensive income (loss) attributable to the noncontrolling interests 7,645 ( 141 ) Comprehensive income attributable to Inter Parfums, Inc. $ 27,458 $ 10,048 See notes to consolidated financial statements. Page 4 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands) (Unaudited) Three months ended March 31, 2022 2021 Common stock, beginning and end of period $ 32 $ 32 - - 32 32 Additional paid-in capital, beginning of period 87,132 75,708 Shares issued upon exercise of stock options 708 1,467 Share-based compensation 341 391 Additional paid-in capital, end of period 88,181 77,566 Retained earnings, beginning of period 560,663 503,567 Net income 35,299 27,662 Dividends ( 15,921 ) ( 7,913 ) Share-based compensation (adjustment) 53 284 Retained earnings, end of period 580,094 523,600 Accumulated other comprehensive loss, beginning of period ( 38,432 ) ( 5,997 ) Foreign currency translation adjustment, net of tax ( 9,022 ) ( 17,178 ) Transfer from other comprehensive income into earnings 992 -- Net derivative instrument gain (loss), net of tax 189 ( 436 ) Accumulated other comprehensive loss, end of period ( 46,273 ) ( 23,611 ) ( 37,475 ) ( 37,475 ) - - Treasury stock, beginning and end of period ( 37,475 ) ( 37,475 ) Noncontrolling interest, beginning of period 166,412 166,615 Net income 10,992 8,964 Foreign currency translation adjustment, net of tax ( 3,419 ) ( 8,941 ) Net derivative instrument gain (loss), net of tax 72 ( 164 ) Share-based compensation (adjustment) 11 ( 22 ) Transfer of subsidiary shares purchased 54 99 Dividends ( 440 ) -- Noncontrolling interest, end of period 173,682 166,551 738,332 702,450 46,291 36,626 Total equity $ 758,241 $ 706,663 See notes to consolidated financial statements. Page 5 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three months ended March 31, 2022 2021 Cash flows from operating activities: Net income $ 46,291 $ 36,626 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,124 2,529 Provision for doubtful accounts 1,048 1,354 Noncash stock compensation 654 732 Share of income of equity investment ( 116 ) ( 192 ) Impairment loss -- 2,393 Noncash lease expense 1,881 1,735 Deferred tax provision 135 58 Change in fair value of derivatives ( 3,803 ) 1,699 Changes in: Accounts receivable ( 50,316 ) ( 32,566 ) Inventories ( 31,195 ) 4,951 Other assets ( 2,869 ) ( 3,819 ) Operating lease liabilities ( 1,671 ) ( 1,499 ) Accounts payable and accrued expenses 3,203 8,102 Income taxes, net 9,690 10,413 Net cash provided by (used in) operating activities ( 23,944 ) 32,516 Cash flows from investing activities: Purchases of short-term investments ( 2,243 ) ( 30,367 ) Proceeds from sale of short-term investments 3,982 -- Purchases of property, equipment and leasehold improvements ( 12,895 ) ( 1,205 ) Payment for intangible assets acquired ( 647 ) ( 302 ) Net cash used in investing activities ( 11,803 ) ( 31,874 ) Cash flows from financing activities: Repayment of long-term debt ( 4,379 ) ( 14,324 ) Proceeds from exercise of options 708 1,467 Dividends paid ( 15,921 ) ( 7,913 ) Dividends paid to noncontrolling interest ( 440 ) -- Net cash used in financing activities ( 20,032 ) ( 20,770 ) Effect of exchange rate changes on cash ( 2,486 ) ( 6,240 ) Net decrease in cash and cash equivalents ( 58,265 ) ( 26,368 ) Cash and cash equivalents - beginning of period 168,387 169,681 Cash and cash equivalents - end of period $ 110,122 $ 143,313 Supplemental disclosure of cash flow information: Cash paid for: Interest $ 797 $ 375 Income taxes 5,193 2,861 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, 2021. 2. Impact of COVID-19 Pandemic: A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic. In response, various national, state, and local governments issued decrees prohibiting certain businesses from operating and certain classes of workers from reporting to work. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020. Business significantly improved in the second half of 2020 and continued to improve throughout 2021 and thus far in 2022, as retail stores reopened, and consumers increased online purchasing. While we expect this trend to continue, the introduction of variants of COVID-19 in various parts of the world has caused the temporary re-implementation of governmental restrictions to prevent further spread of the virus. In addition, international air travel remains curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. While COVID-19 has significantly restricted international travel, in the near-term, we continue to believe that global travel retail will once again be a growth opportunity for the long-term. Lastly, the improved economy has put significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions have come at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of 2021 by ordering well in advance of need and in larger quantities. Since 2021, we have strived to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We do not expect the supply chain bottlenecks to begin lifting until later in 2022. 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 2022. 3. Recent Agreements: Salvatore Ferragamo In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license became effective in October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions. With respect to the management and coordination of activities related to the license agreement, the Company operates through a wholly-owned Italian subsidiary based in Florence, that was acquired from Salvatore Ferragamo on October 1, 2021. The acquisition together with the license agreement was accounted for as an asset acquisition. Page 7 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on October 1, 2021. All amounts have been translated to U.S. dollars at the October 1, 2021 exchange rate. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed (In thousands) Inventories $ 17,805 Trademarks and licenses 15,880 Other assets 3,033 Assets acquired 36,718 Liabilities assumed ( 958 ) Total Consideration $ 35,760 Emanuel Ungaro In October 2021, we also entered into a 10-year exclusive global licensing agreement with a 5-year optional term subject to certain conditions, with Emanuel Ungaro Italia S.r.l, for the creation, development and distribution of fragrances and fragrance-related products, under the Emanuel Ungaro brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. Donna Karan and DKNY In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious , as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $ 5.0 million to the licensor. The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2023. Land and Building Acquisition - Future Headquarters in Paris In April 2021, Interparfums SA, our 73 % owned French subsidiary, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft. Page 8 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The purchase price includes the complete renovation of the site. As of March 31, 2022, $ 138.4 million of the purchase price, including approximately $ 3.4 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet as of March 31, 2022. The purchase price has been allocated approximately $ 63.6 million to land and $ 74.8 million to the building. The building, which was delivered on February 28, 2022, includes the building structure, development of the property, façade waterproofing, general and technical installations and interior fittings that will be depreciated over a range of 7 to 50 years. The Company has elected to depreciate the building cost based on the useful lives of its components. Approximately $ 5.4 million of cash held in escrow is also included in property, equipment and leasehold improvements on the accompanying balance sheet as of March 31, 2022. The acquisition was financed by a 10 -year € 120 million (approximately $ 133 million) bank loan which bears interest at one-month Euribor plus 0.75% . Approximately € 80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. 4. Recent Accounting Pronouncements: There are no recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements. 5. Inventories: Inventories consist of the following: (In thousands) March 31, 2022 December 31, 2021 Raw materials and component parts $ 114,308 $ 111,312 Finished goods 112,800 87,602 Inventories $ 227,108 $ 198,914 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 March 31, 2022 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Assets: Short-term investments $ 155,114 $ 20,650 $ 134,464 $ — Foreign currency forward exchange contracts not accounted for using hedge accounting 1,476 — 1,476 — Total Assets $ 156,590 $ 20,650 $ 135,940 $ — Liabilities: Foreign currency forward exchange contracts accounted for using hedge accounting $ 1,596 $ — $ 1,596 $ — Interest rate swaps ( 2,579 ) — ( 2,579 ) — Total Liabilities $ ( 983 ) $ — $ ( 983 ) $ — Page 9 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Fair Value Measurements at December 31, 2021 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Assets: Short-term investments $ 160,014 $ 24,506 $ 135,508 $ — Liabilities: Foreign currency forward exchange contracts accounted for using hedge accounting $ 1,982 $ — $ 1,982 $ — Foreign currency forward exchange contracts not accounted for using hedge accounting 63 — 63 — Interest rate swaps ( 234 ) — ( 234 ) — Total Liabilities . $ 1,811 $ — $ 1,811 $ — The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables, cash held in escrow, accounts payable and accrued expenses approximate fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value. Foreign currency forward exchange contracts are valued based on quotations from financial institutions and the value of interest rate swaps are the discounted net present value of the swaps using third party quotes from financial institutions. 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. Page 10 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In connection with the April 2021 acquisition of the office building complex in Paris, € 120 million (approximately $ 133 million) of the purchase price was financed through a 10 -year term loan. The Company entered into interest rate swap contracts related to € 80 million of the loan, effectively exchanging the variable interest rate to a fixed rate of approximately 1.1%. This derivative instrument is recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income. Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial for both the three months ended March 31, 2022 and 2021. All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps is included in long-term debt on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at March 31, 2022, resulted in a net liability and is included in accrued expenses on the accompanying balance sheet. At March 31, 2022, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $ 153.0 million, GB £ 1.0 million and JPY ¥ 150.0 million, which all have maturities of less than one year. 8. Leases: The Company leases its offices and warehouses, vehicles, and certain office equipment, substantially all of which are classified as operating leases. The Company currently has no material financing leases. The Company determines if an arrangement is a lease at inception. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend or terminate, depending on the lease. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date for the location in which the lease is held in determining the present value of lease payments. As of March 31, 2022, the weighted average remaining lease term was 6.7 years and the weighted average discount rate used to determine the operating lease liability was 2.6 %. Rental expense related to operating leases was $ 1.8 million and $ 1.4 million for the three months ended March 31, 2022 and 2021, respectively. Operating lease payments included in operating cash flows totaled $ 1.7 million and $ 1.5 million for the three months ended March 31, 2022 and 2021, respectively, and there were no noncash additions to operating lease assets for the three months ended March 31, 2022 and 2021. Page 11 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 9. Share-Based Payments: The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to five -year period. The fair value of shares vested during the three months ended March 31, 2022 and 2021 aggregated $ 0.10 million and $ 0.09 million , respectively. Compensation cost, net of forfeitures, is recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated based on historic trends. It is generally our policy to issue new shares upon exercise of stock options. The following table sets forth information with respect to nonvested options for the three months ended March 31, 2022: Number of Shares Weighted Average Grant-Date Fair Value Nonvested options – beginning of period 209,510 $ 13.45 Nonvested options granted -- -- Nonvested options vested or forfeited ( 9,780 ) $ 12.18 Nonvested options – end of period 199,730 $ 13.51 Share-based payment expense decreased income before income taxes by $ 0.65 million and $ 0.73 million for the three months ended March 31, 2022 and 2021, respectively, and decreased income attributable to Inter Parfums, Inc. by $ 0.44 million and $ 0.49 million for the three months ended March 31, 2022 and 2021, respectively. The following table summarizes stock option information as of March 31, 2022: Shares Weighted Average Exercise Price Outstanding at January 1, 2022 524,900 $ 57.58 Options forfeited ( 1,180 ) 65.96 Options exercised ( 13,425 ) 52.73 Outstanding at March 31, 2022 510,295 $ 57.69 Options exercisable 310,565 $ 52.42 Options available for future grants 613,715 As of March 31, 2022, the weighted average remaining contractual life of options outstanding is 2.51 years ( 2.12 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $ 15.5 million and $ 11.1 million , respectively; and unrecognized compensation cost related to stock options outstanding aggregated $ 2.5 million . Page 12 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the three months ended March 31, 2022 and 2021were as follows: (In thousands) March 31, 2022 March 31, 2021 Cash proceeds from stock options exercised $ 708 $ 1,467 Tax benefits 75 200 Intrinsic value of stock options exercised 635 1,457 The weighted average fair values of the options granted by Inter Parfums, Inc. during the three months ended March 31, 2021 were $11.35 per share on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted. There were no options granted during the three months ended March 31, 2022. The assumptions used in the Black-Scholes pricing model for the period ended March 31, 2021 is set forth in the following table: March 31, 2021 Weighted average expected stock-price volatility 25 % Weighted average expected option life 5 years Weighted average risk-free interest rate 0.4 % Weighted average dividend yield 1.6 % Expected volatility is estimated based on historic volatility of the Company’s common stock. The expected term of the option is estimated based on historic data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout as authorized by the Board of Directors would increase as the earnings of the Company and its stock price continue to increase. In December 2018, Interparfums SA approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will 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. 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. As of March 31, 2022, the number of shares to be distributed, after forfeited shares, was 172,343 resulting from modifications and stock splits. The increase in shares anticipated to be distributed were transferred from treasury shares at the Interparfums SA level. The revised cost of the grant was approximately $4.4 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. Page 13 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows: Three months ended (In thousands) March 31, 2022 2021 Numerator: Net income attributable to Inter Parfums, Inc. $ 35,299 $ 27,662 Denominator: Weighted average shares 31,840 31,631 Effect of dilutive securities: Stock options 170 141 Denominator for diluted earnings per share 32,010 31,772 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 1.11 $ 0.87 Diluted 1.10 0.87 Not included in the above computations are the effect of antidilutive potential common shares which consist of outstanding options to purchase 0.35 million shares of common stock for the three months ended March 31, 2021. There were no antidilutive potential common shares outstanding for the three months ended March 31, 2022. Page 14 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 11. Segment and Geographic Areas: The Company manufactures and distributes one product line, fragrances and fragrance related products. The Company manages its business in two segments, European based operations and United States based operations. The European assets are located, and operations are primarily conducted, in France. Both European operations and United States operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows: (In thousands) Three months ended March 31, 2022 2021 Net sales: United States $ 68,502 $ 39,196 Europe 182,182 159,766 Eliminations ( 6 ) ( 434 ) $ 250,678 $ 198,528 Net income attributable to Inter Parfums, Inc.: United States $ 6,514 $ 4,187 Europe 28,785 23,475 $ 35,299 $ 27,662 March 31, December 31, 2022 2021 Total Assets: United States $ 239,559 $ 247,703 Europe 950,036 931,735 Eliminations ( 27,387 ) ( 34,074 ) $ 1,162,208 $ 1,145,364 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 15 INTER PARFUMS, INC. AND SUBSIDIARIES