What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 364 added, 323 removed, 146 unchanged (82% of the section changed)

DISCUSSION AND ANALYSIS OF

CONDITION AND RESULTS OF OPERATIONS

Looking Information

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

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, 2021, 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, IPSA, which is also a

publicly traded company as 27% of IPSA 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 73% and 80% of net sales for the three months ended March 31, 2022 and

2021, respectively.

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

Kate Spade, Lanvin, Moncler, Montblanc, S.T.

Dupont, Rochas 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 27%

and 20% of net sales for the three months ended March 31, 2022 and 2021, respectively.

These fragrance products are sold primarily

pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Ferragamo, Graff, GUESS,

Hollister, MCM, Oscar de la Renta and Ungaro brands.

Substantially

all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation

and renewal of such licenses.

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

Jimmy Choo and GUESS brand names.

PARFUMS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Forward Looking Information

Statements 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

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, 2021, and the reports Inter Parfums files from time to time with the Securities and Exchange

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

We 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.

We produce and distribute our European based

fragrance products primarily under license agreements with brand owners, and European based fragrance product sales represented

approximately 70% and 79% of net sales for the six months ended June 30, 2022 and 2021, respectively.

We have built a portfolio

of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, S.T.

Dupont, Rochas and Van Cleef & Arpels , whose products are distributed in over 120 countries around the world.

Through our United States operations, we

also market fragrance and fragrance related products.

United States operations represented 30% and 21% of net sales for the six

months ended June 30, 2022 and 2021, respectively.

These fragrance products are sold primarily pursuant to license or other agreements

with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar

de la Renta and Ungaro brands.

Substantially all of our

prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and

renewal of such licenses.

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

Choo and GUESS brand names.

INTER PARFUMS,

AND SUBSIDIARIES

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

Three Months Ended

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 primarily sell directly to retailers in

France 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.

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.

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.

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

As a percentage of net

sales, product sales for the Company’s largest brands were as follows:

Quarterly 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 primarily sell directly to retailers in France and the United States.

We 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

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.

Our 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.

As 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.

Our 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 almost 50% of net sales of our European operations

are denominated in U.S.

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

dollar has a negative impact on our net sales.

However, earnings are positively

affected by a strong dollar, because almost 50% of net sales of our European operations are denominated in U.S.

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.

The Russian invasion of Ukraine has negatively impacted our operations in both Russia and Ukraine.

the invasion of Ukraine by Russia, we have been following regulations and sanctions which vary by country.

In fiscal 2021, our

operations in Ukraine and Russia accounted for approximately 4% of consolidated net sales.

Future impacts on our business, including

sanctions and counter-sanctions, are difficult to predict due to the high level of uncertainty as to how these developments will

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,

AND SUBSIDIARIES

The Russian invasion of Ukraine has negatively

impacted our operations in both Russia and Ukraine.

Since the invasion, we have been following regulations and sanctions which

vary by country.

In fiscal 2021, our operations in Ukraine and Russia accounted for approximately 4% of consolidated net sales.

Future impacts on our business, including sanctions and counter-sanctions, are difficult to predict due to the high level of uncertainty

as to how these developments will evolve.

We are monitoring the effects of this conflict,

including the risks that may affect our business, and expect that we will adjust our plans accordingly as the situation progresses.

We do not expect any material credit losses as most of our receivables on sales to Russia and Ukraine are covered by insurance or are being paid in advance.

For the three months ended March 31, 2022,

We do not expect any material credit losses as most of our receivables on sales to Russia and Ukraine are covered by insurance

or are being paid in advance.

For the six months ended June 30, 2022,

the activities related to Russia and Ukraine did not have a material impact on our consolidated financial statements.

PARFUMS, INC.

AND SUBSIDIARIES

of COVID-19 Pandemic

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.

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.

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.

Important Events

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.

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.

PARFUMS, INC.

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

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.

COVID-19 has significantly restricted international travel, the travel retail business is beginning to pick up.

We remain confident

that travel retail will once again be a source of growth over 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.

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.

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.

INTER PARFUMS,

AND SUBSIDIARIES

Recent Important Events

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.

The following table summarizes the estimated

4 unchanged sentences

Trademarks and licenses

Assets acquired

Liabilities assumed

Total consideration

18 unchanged sentences

at $5.0 million to the licensor.

The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances

The exclusive license became effective July 1, 2022, and we are planning to launch new fragrances

under these brands in 2023.

INTER PARFUMS,

AND SUBSIDIARIES

Land and Building Acquisition - Future

1 unchanged sentence

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

owned French Subsidiary, completed the acquisition of its headquarters at 10 rue de Solférino in the 7th arrondissement

of Paris from the property developer.

2 unchanged sentences

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.

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 included in property, equipment and leasehold improvements on the accompanying balance sheet as of March 31, 2022.

PARFUMS, INC.

AND SUBSIDIARIES

renovation of the site and includes the purchase of several apartments in the surrounding area to

be used as additional office space .

As of June 30, 2022, $142.7 million of the purchase price, including approximately $4.4

million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet as

of June 30, 2022.

The purchase price has been allocated approximately $59.5 million to land and $83.2 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 $5.1 million

of cash held in escrow is included in property, equipment and leasehold improvements on the accompanying balance sheet as of June

The acquisition was financed by a 10-year

6 unchanged sentences

Results of Operations

Three Months Ended March 31, 2022 as Compared to the

Three Months Ended March 31, 2021

Three months ended March 31,

Three and Six Months Ended June 30, 2022 as Compared

to the Three and Six Months Ended June 30, 2021

(in millions)

months ended June 30,

European based product sales

United States based product sales

Net sales for the three months ended March

31, 2022, increased 26% from March 31, 2021.

PARFUMS, INC.

AND SUBSIDIARIES

sales for the three months ended June 30, 2022, increased 18% from the three months ended June 30, 2021.

At comparable foreign

currency exchange rates, net sales increased 24% from the second quarter of 2021.

The average dollar/euro exchange rate for the

current second quarter was 1.06 compared to 1.20 in the second quarter of 2021 while for the first half of 2022, the average dollar/euro

exchange rate was 1.09 compared to 1.20 in the first half of 2021.

Net sales for the six months ended June 30, 2022, increased

22% as compared to the first half of 2021.

At comparable foreign currency exchange rates, net sales increased 27% from the first

quarter of 2021.

The average dollar/euro exchange rate for the current first quarter was 1.12 compared to 1.20 in the first quarter

The current first quarter was exceptionally

strong for both European and United States based operations, as net sales increased 14% and 77%, respectively, as compared to the

corresponding period of the prior year.

Although the results are exceptional, the strength of the U.S.

dollar versus the euro muted

the reported sales achieved by European brands.

In addition, our U.S.

distribution subsidiary for European based products encountered

shipping related issues following a change in the distribution software by its logistics partner.

Although those issues are now

largely resolved, U.S.

sales of European brands were negatively impacted in the first quarter.

For European based operations, our largest

brands, Montblanc , Jimmy Choo and Coach grew first quarter 2022 sales by 22%, 7% and 22%, respectively, as

compared to the corresponding period of the prior year.

operations, GUESS was the most significant contributor

with first quarter 2022 brand sales 36% ahead of last year’s first quarter.

During the first quarter of 2022, we debuted

Montblanc Legend Red, a new Coach signature scent and Coach Dreams Sunset extensions, and GUESS Uomo

which contributed to the double digit brand sales gains.

Many of our mid-sized brands, including Abercrombie & Fitch ,

Kate Spade , Oscar de la Renta , and Van Cleef & Arpels , also achieved double digit sales gains.

in first quarter sales also reflects incremental sales generated by MCM and Moncler , two newer brands whose initial

products debuted in the second and fourth quarters of 2021, respectively.

Similarly, initial sales of Ferragamo and Ungaro

legacy scents contributed to the first quarter sales increase.

half of 2021.

supply chain disruptions, inflation, lockdowns, transportation issues, the strength of the dollar, sanctions, the slow recovery

of international travel, logistics difficulties in the U.S.

caused by a change in shipping software by our local partner, and

the war in Eastern Europe, 2022 is proving to be an exceptionally strong year for us on both sides of the Atlantic.

the growth trend of the first quarter of 2022, second quarter sales by our U.S.

operations were up substantially with comparable

quarterly gains by GUESS, Abercrombie & Fitch, Oscar de la Renta, and MCM, increasing 39%, 40%, 35%, and 56%, respectively.

Incremental sales of Ferragamo fragrances also factored into the increase.

Of note, Uomo by GUESS was the only major launch

during the second quarter;

legacy scents and flankers fueled the gains by the other brands.

Among the new flankers which launched

in the second quarter were Authentic Moment by Abercrombie & Fitch, and a collector’s edition of our MCM scent.

surge in the dollar masked the gains by our leading brands within our European operations.

Montblanc, for example, grew net sales

by 6% in dollars but 20% in euro.

Similarly, Jimmy Choo brand sales rose 4% in dollars and 18% in euro, while Coach sales increased

13% in dollars and 28% in euros.

In fact, in total, our European operations generated sales growth of 17% in euro but only 3%

In the second quarter, we launched the Moncler duo, Jimmy Choo Man Aqua and Lanvin Mon Éclat ,

along with the rollouts of Montblanc Legend Red , Kate Spade Sparkle and Coach Wild Rose which debuted in

the first quarter.

first half of 2022 started on a strong note and we look forward to executing our plans for the remainder of the year.

are in high demand in a robust environment for the fragrance industry.

We have a number of new product launches in the second

half of the year, including Cosmic Sky for Anna Sui, a new Away flanker for Abercrombie & Fitch, and Ferragamo

Bright Leather for U.S.

In addition, during the second half of the year, we will generate our first ever sales

of Donna Karan and DKNY fragrance.

For European operations, a new Coach men’s line will debut along with an extension of

the Jimmy Choo I Want Choo line.

Also planned is a new men’s line for Boucheron, two Rochas flankers for Byzance

and Eau de Rochas , and a new member of the Collection Extraordinaire by Van Cleef & Arpels.

In sum, 2022 has all

the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds.

PARFUMS, INC.

AND SUBSIDIARIES

The first quarter started on a strong note

and we look forward executing our plans for the remainder of the year.

Our brands are in high demand in a robust environment for

the fragrance industry.

We have a large number of brand extensions across many of our brands launching throughout the year plus

Boucheron Singulier and Coach Open Road , entirely new men’s pillars, in the second half.

Our new Paris headquarters

are now staffed and operational as is our new Italian subsidiary.

Plus, in July Donna Karan and DKNY fragrances will

join our brand portfolio.

In sum, 2022 has all the earmarks of another superb year as the growth catalysts currently far outweigh

the headwinds, most notably limited travel retail business and supply chain disruptions.

Net Sales to Customers by Region

Three months ended March 31,

Six months ended June 30,

(In millions)

3 unchanged sentences

Eastern Europe

First quarter sales in our largest market,

North America, rose 12%, followed by Western Europe and Asia/Pacific where comparable quarter sales in both regions increased 41%.

Our sales in the Middle East, Central and South America, and Eastern Europe were also robust, up 27%, 38% and 13%, respectively.

Additionally, our travel retail business is beginning to show signs of renewed life.

distribution subsidiary for European based products encountered shipping related issues following a change in the distribution

software by its logistics partner.

Although those issues are now largely resolved, U.S.

sales of European brands were negatively

impacted in the first half.

As a result, sales in our largest market, North America, rose only 8% as compared to Western Europe

and Asia where comparable sales increased 40% and 39%, respectively.

Our sales in the Middle East, and Central and South America,

were also robust, up 31% and 35%, respectively.

Gross Profit margin

Three months ended March 31,

Three months ended

Six months ended

(in millions)

5 unchanged sentences

Gross margin as a % of net sales

For European based operations, gross profit

margin as a percentage of net sales was 66.8% and 65.5% in the first quarters of 2022 and 2021, respectively.

European based operations, gross profit margin as a percentage of net sales was 66.9% and 66.8% for the three and six months ended

June 30, 2022, respectively, as compared to 66.8% and 66.1% for the corresponding periods of the prior year.

We carefully monitor

5 unchanged sentences

dollar has a negative effect.

The average dollar/euro exchange rate was 1.12 in the 2022 first quarter

compared to 1.20 in the first quarter of 2021.

The margin gains in 2022 is primarily the result of the stronger U.S.

The average dollar/euro exchange rate was 1.09 in the 2022 second quarter

compared to 1.20 in the second quarter of 2021.

The margin gains in 2022 are primarily the result of the stronger U.S.

in 2022, however increased transportation and component costs mitigated much of the exchange rate benefit.

previously mentioned, supply chain disruptions affecting the procurement of components, the ability to transport goods, and related

cost increases have and are expected to continue to have a negative impact on sales and gross margin.

While we have been addressing

these issues and have implemented processes to mitigate the impact, prolonged disruption could have a material negative effect

on our sales and gross margin.

PARFUMS, INC.

AND SUBSIDIARIES

For United States operations, gross profit

margin was 53.9% and 53.2% in the first quarters of 2022 and 2021, respectively.

The significant increase in sales in the first

quarter of 2022 allowed us to better absorb fixed expenses such as depreciation and point of sale expenses, as compared to the

corresponding period of the prior year.

As previously mentioned, supply chain disruptions

affecting the procurement of components, the ability to transport goods, and related cost increases have and are expected to continue

to have a negative impact on sales and gross margin.

While we have been addressing these issues and have implemented processes

to mitigate the impact, prolonged disruption could have a material negative effect on our sales and gross margin.

Generally, we do not bill customers for

shipping and handling costs, and such costs, which aggregated $2.7 million and $1.7 million for the three months ended March 31,

2022 and 2021, respectively, 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 as a component

of cost of goods sold.

Selling, general and administrative expenses

United States operations, gross profit margin was 54.3% and 54.1% for the three and six months ended June 30, 2022, respectively,

as compared to 53.3% and 53.2% for the corresponding periods of the prior year.

The increase in sales in the first half of 2022,

allowed us to better absorb fixed expenses such as depreciation and point of sale expenses, as compared to the corresponding period

of the prior year.

we do not bill customers for shipping and handling costs, and such costs, which aggregated $2.8 million and $5.5 million for the

three and six months ended June 30, 2022, respectively, as compared to $2.0 million and $3.8 million for the corresponding periods

of the prior year, are included in selling, general and administrative expenses in the consolidated statements of income.

our Company’s gross profit may not be comparable to other companies, which may include these expenses as a component of

cost of goods sold.

general and administrative expenses

Three months ended

Six months ended

(In millions)

5 unchanged sentences

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

For European operations, selling, general

and administrative expenses increased 16.2% in the 2022 first quarter, as compared to the corresponding period of the prior year,

and represented 37.9% and 37.2% of net sales in the 2022 and 2021 periods, respectively.

For United States operations, selling,

general and administrative expenses increased 83.7% in the 2022 first quarter, as compared to the corresponding period of the prior

year, and represented 41.5% and 39.9% of net sales in the 2022 and 2021 periods, respectively.

As discussed in more detail below,

the increased selling, general and administrative expenses as a percent of net sales are primarily the result of increases in promotion

and advertising expenditures.

Promotion and advertising included in selling,

general and administrative expenses aggregated $34.2 million and $21.8 million in the first quarters of 2022 and 2021, respectively,

and represented 13.6% and 11.0% of net sales in the 2022 and 2021 periods, respectively.

Throughout 2021, sales rebounded far more

rapidly than originally anticipated causing us to play catchup with promotional and adverting programs throughout the year.

and advertising are integral parts of our industry, and we continue to invest heavily to support new product launches and to build

brand awareness.

We believe that our promotion and advertising efforts have had a beneficial effect on online net sales.

our brands have benefitted from newly launched and enhanced e-commerce sites in existing markets in collaboration with our retail

customers on their e-commerce sites.

We also continue to develop and implement omnichannel concepts and compelling content to deliver

an integrated consumer experience.

We anticipate that on a full year basis, future promotion and advertising expenditures will

aggregate approximately 21% of net sales, which is in line with pre-COVID historical averages.

European operations, selling, general and administrative expenses increased 11.1% and 13.4% for the three and six months ended

June 30, 2022 as compared to the corresponding period of the prior year, and represented 47.4% and 42.4% of net sales for the

three and six months ended June 30, 2022, respectively, as compared to 44.0% and 40.6% for the three and six months ended June

30, 2021, respectively.

For United States operations, selling, general and administrative expenses increased 76.5% and 79.9% for

the three and six months ended June 30, 2022, as compared to the corresponding period of the prior year, and represented 37.8%

and 39.5% of net sales for the three and six months ended June 30, 2022, respectively, as compared to 36.2% and 37.9% for the

three and six months ended June 30, 2021, respectively.

As discussed in more detail below, the increased selling, general and

administrative expenses as a percent of net sales are primarily the result of increases in promotion and advertising expenditures.

and advertising included in selling, general and administrative expenses aggregated $45.9

million and $80.1 million for the three and six months ended June 30, 2022, respectively, as compared to $33.2 million and $55.0

million for the corresponding periods of the prior year.

Promotion and advertising represented 18.8% and 16.2% of net sales for

the three and six months ended June 30, 2022, respectively, as compared to 16.0% and 13.5% for the corresponding periods

of the prior year.

Throughout 2021, sales rebounded far more rapidly than originally anticipated causing us to play catchup

with promotional and adverting programs throughout the year.

Promotion and advertising are integral parts of our industry, and

we continue to invest heavily to support new product launches and to build brand awareness.

We believe that our promotion and

advertising efforts have had a beneficial effect on online net sales.

All of our brands have benefitted from newly launched and

enhanced e-commerce sites in existing markets in collaboration with our retail customers on their e-commerce sites.

We also continue

to develop and implement omnichannel concepts and compelling content to deliver an integrated consumer experience.

We anticipate

that on a full year basis, promotion and advertising expenditures will aggregate approximately 21% of net sales, which is in line

with pre-COVID historical averages.

PARFUMS, INC.

AND SUBSIDIARIES

Royalty expense included in selling, general

and administrative expenses aggregated $19.4 million for the three months ended March 31, 2022, as compared to $15.4 million for

the corresponding periods of the prior year.

Royalty expense represented 7.7% of net sales for both the three months ended March

31, 2022 and 2021.

Income from Operations

As a result of the above analysis regarding

net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 24.4% and 24.2%

for the three months ended March 31, 2022 and 2021, respectively.

Other Income and Expense

Traditionally, interest

expense was primarily related to the financing of brand and licensing acquisitions.

However, in April 2021, we completed the acquisition

of the headquarters of Interparfums SA.

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%.

Also in 2021, approximately €80 million of the variable rate

debt was swapped for fixed interest rate debt.

We 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.

Gains and losses on foreign currency

transactions have not been significant.

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

Interest and investment (income) loss represents

interest earned on cash and cash equivalents and short-term investments.

As of March 31, 2022, short-term investments include approximately

$20.7 million of marketable equity securities of other companies in the luxury goods sector.

Interest and investment (income) loss

for the three months ended March 31, 2022, includes approximately $3.4 million of losses on such marketable equity securities.

expense included in selling, general and administrative expenses aggregated $18.9 million

and $38.3 million for the three and six months ended June 30, 2022, respectively, as compared to $16.2 million and $31.5 million

for the corresponding periods of the prior year.

Royalty expense represented 7.7 % of net sales for both the three and six months

ended June 30, 2022, as compared to 7.8% of net sales for the corresponding periods of the prior year.

from Operations

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

operating margins aggregated 18.6% and 21.5% for the three and six months ended June 30, 2022, respectively, as compared to 21.5%

and 22.8% for the corresponding periods of the prior year.

Income and Expense

Traditionally,

interest expense was primarily related to the financing of brand and licensing acquisitions.

However, in April 2021, we completed

the acquisition of the headquarters of Interparfums SA.

The acquisition was financed by a 10-year €120 million (approximately

$125 million) bank loan which bears interest at one-month Euribor plus 0.75%.

Also in 2021, approximately €80 million of

the variable rate debt was swapped for variable rate debt with a maximum interest rate of 2%.

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

Gains and losses on foreign currency transactions have not been significant.

Almost 50% of net sales of our European

operations are denominated in U.S.

and investment (income) loss represents interest earned on cash and cash equivalents and short-term investments.

As of June 30,

2022, short-term investments include approximately $16.8 million of marketable equity securities of other companies in the luxury

goods sector.

Interest and investment (income) loss for the three and six months ended June 30, 2022, includes approximately $2.5

million and $5.9 million of losses on such marketable equity securities.

INTER PARFUMS, INC.

AND SUBSIDIARIES

Our consolidated effective tax rate was

24.4% and 26.8% for the three months ended March 31, 2022 and 2021, respectively.

24% for the six months ended June 30, 2022, as compared to 30.0% for the corresponding periods of the prior year.

The effective tax rate for European operations

was 25% and 28% for the three months ended March 31, 2022 and 2021, respectively.

The decline is primarily the result of a decrease

in the French corporate income tax rate.

PARFUMS, INC.

AND SUBSIDIARIES

was 25% for the six months ended June 30, 2022, as compared to 32% for the corresponding period of the prior year.

As previously

disclosed, a global settlement agreement was reached with the French Tax Authorities in June 2021, whereby Interparfums SA agreed

to pay €2.5 million (approximately $3.0 million) relating to activities between Interparfums SA and its wholly owned subsidiary,

The balance of the decline is primarily the result of a decrease in the French corporate income tax rate.

Our effective tax rate for U.S.

was 20.7% for the three months ended March 31, 2022, as compared to 17.0% 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 taxes.

The lower effective tax rate in 2021 is a result of discrete tax items related to benefits received from the exercise of stock

was 22% for the six months ended June 30, 2022, as compared to 19% for the corresponding period of the prior year.

Our effective

tax rate differs from the 21% statutory rate due to state and local taxes, offset by benefits received from the exercise of stock

options as well as deductions we are allowed for a portion of our foreign derived intangible income.

The lower effective tax rate

in 2021 is primarily a result of discrete tax items related to benefits received from the exercise of stock options.

Other than as discussed above, we did not

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Three months ended

Six months ended

(In thousands)

Net income attributable to European operations

Net income attributable to United States operations

Net income European operations

Net income United States operations

Net income attributable to the noncontrolling interest

1 unchanged sentence

Net income attributable to European operations

was $39.8 million and $32.4 million for the three months ended March 31, 2022 and 2021, respectively, while net income attributable

to United States operations was $6.5 million and $4.2 million for the three months ended March 31, 2022 and 2021, respectively.

The 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.

was $24.5 million and $64.3 million for the three and six months ended June 30, 2022, respectively, as compared to $22.9 million

and $55.4 million for the corresponding period of the prior year.

Net income attributable to United States operations was $10.0

million and $16.5 million for the three and six months ended June 30, 2022, respectively, as compared to $6.1 million and $10.3

million for the corresponding period of the prior year.

The 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.

INTER PARFUMS, INC.

AND SUBSIDIARIES

The noncontrolling interest arises from

2 unchanged sentences

Net income attributable to the noncontrolling interest is directly related to the profitability of our European

operations and aggregated 27.6% of European operations net income for both the three months ended March 31, 2022 and 2021.

margins attributable to Inter Parfums, Inc.

as of March 31, 2022 and 2021 aggregated 14.1% and 13.9%, respectively.

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

Net margins attributable to Inter Parfums,

for the six months ended June 30, 2022 and 2021 aggregated 12.7% and 12.4%, respectively.

Liquidity and Capital Resources

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enabled us to amass significant cash balances.

As of March 31, 2022, we had $265 million in cash, cash equivalents and short-term

As of June 30, 2022, we had $196 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.

had any liquidity issues to date, and do not expect any liquidity issues relating to such cash and cash equivalents and short-term

As of March 31, 2022, short-term investments include approximately $20.7 million of marketable equity securities.

As of March 31, 2022, working capital aggregated

As of June 30, 2022, short-term investments include approximately $16.8 million of marketable equity securities.

As of June 30, 2022, working capital aggregated

$445 million and we had a working capital ratio of 2.9 to 1.

1 unchanged sentence

European operations, and approximately $156 million of trademarks, licenses and other intangible assets are also held by European

PARFUMS, INC.

AND SUBSIDIARIES

The Company is party to a number of license

12 unchanged sentences

fragrances and fragrance related products under the Donna Karan and DKNY brands.

This license is expected to take effect on July

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

nature of our portfolio.

This license took effect on July 1, 2022.

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.

Cash used in operating activities aggregated

$23.9 million for the three months ended March 31, 2022, as compared to cash provided by operating activities of $32.5 million

$28.5 million for the six months ended June 30, 2022, as compared to cash provided by operating activities of $38.1 million

for the corresponding period of the prior year.

For the three months ended March 31, 2022, working capital items used $73.2 million

For the six months ended June 30, 2022, working capital items used $117.2 million

in cash from operating activities, as compared to $45.3 million in the 2021 period.

Although from a cash flow perspective accounts

receivable is up 32% from year end 2021, the balance is reasonable based on first quarter 2022 record sales levels and reflects

reasonable collection activity as day’s sales outstanding was 75 days, up slightly from 71 days in the corresponding period

receivable is up 30% from year end 2021, the balance is reasonable based on second quarter 2022 record sales levels and reflects

strong collection activity as day’s sales outstanding was 76 days, down slightly from 79 days in the corresponding period

of the prior year.

From a cash flow perspective, inventory levels as of March 31, 2022, increased 16% from year end 2021.

inventories include product needed to support new product launches, the overall balance is lower than historic levels due primarily

to supply chain disruptions.

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.

From a cash flow perspective, inventory levels as of June 30, 2022, increased 41% from year end 2021.

December 31, 2021, although inventories include product needed to support new launches, the overall balance was lower than historic

levels due primarily to supply chain disruptions.

We have been addressing this issue 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 believe that our inventory levels are reasonable to support

our projected sales and new product pipeline.

INTER PARFUMS, INC.

AND SUBSIDIARIES

Cash flows used in investing activities

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depending on our new product development calendar.

During the three months ended March 31, 2022, approximately $4.9 million was

added to property costs relating to our new Paris corporate headquarters.

Capital expenditures also include amounts for office

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

PARFUMS, INC.

AND SUBSIDIARIES

During the six months ended June 30, 2022, approximately $24.2 million was added

to property costs relating to our new Paris corporate headquarters.

Capital expenditures also include amounts for office fixtures,

computer equipment and industrial equipment needed at our distribution centers.

Our short-term financing requirements are

expected to be met by available cash on hand at March 31, 2022, and short-term credit lines provided by domestic and foreign banks.

expected to be met by available cash on hand at June 30, 2022, and short-term credit lines provided by domestic and foreign banks.

The principal credit facilities for 2022 consist of a $20.0 million unsecured revolving line of credit provided by a domestic commercial

bank and approximately $26 million in credit lines provided by a consortium of international financial institutions.

no short-term borrowings outstanding pursuant to these facilities as of both March 31, 2022 and 2021.

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.

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

In February 2022, our

Board authorized a 100% increase in the annual dividend to $2.00 per share.

The next quarterly cash dividend of $0.50 per share

is payable on June 30, 2022, to shareholders of record on June 15, 2022.

no short-term borrowings outstanding pursuant to these facilities as of both June 30, 2022 and 2021.

In February 2021, our Board of Directors

authorized an annual dividend of $1.00, payable quarterly.

In February 2022, our Board authorized a 100% increase in the annual

dividend to $2.00 per share.

The next quarterly cash dividend of $0.50 per share is payable on September 30, 2022, to shareholders

of record on September 15, 2022.

We believe that funds provided by or used

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Inflation rates in the U.S.

countries in which we operate did not have a significant impact on operating results for the three months ended March 31, 2022.

countries in which we operate did not have a significant impact on operating results for the six months ended June 30, 2022.

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