INTERPARFUMS INC 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) ☒ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2022 or ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________to _______. Commission file no. 0-16469 Inter Parfums, Inc. (Exact name of registrant as specified in its charter) Delaware 13-3275609 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 551 Fifth Avenue , New York , New York 10176 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: 212 . 983.2640 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of exchange on which registered Common Stock, $.001 par value per share The Nasdaq Stock Market IPAR Securities registered pursuant to Section 12(g) of the Act: Title of each class Name of exchange on which registered None None Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $ 1,274,342,976 of voting equity and $-0- of non-voting equity. Indicate the number of shares outstanding of the registrant’s $.001 par value common stock as of the close of business on the latest practicable date February 28, 2023: 32,109,360 . Documents Incorporated by Reference: None. TABLE OF CONTENTS Page Forward Looking Statements ii PART I 1 Item 1. Business 1 Item 1A. Risk Factors 29 Item 1B. Unresolved Staff Comments 37 Item 2. Properties 38 Item 3. Legal Proceedings 38 Item 4. Mine Safety Disclosures 38 PART II 39 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. RESERVED 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 52 Item 8. Financial Statements and Supplementary Data 52 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 52 Item 9A. Controls and Procedures 52 Item 9B. Other Information 53 PART III 54 Item 10. Directors, Executive Officers and Corporate Governance 54 Item 11. Executive Compensation 61 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 76 Item 13. Certain Relationships and Related Transactions, and Director Independence 77 Item 14. Principal Accountant Fees and Services 78 PART IV 80 Item 15. Exhibits and Financial Statement Schedules 80 Item 16. Form 10-K Summary 80 FINANCIAL STATEMENTS F-1 SIGNATURES i FORWARD LOOKING STATEMENTS This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and if incorporated by reference into a registration statement under the Securities Act of 1933, as amended, within the meaning of Section 27A of such act. When used in this report, the words “anticipate,” “believe,” “estimate,” “will,” “should,” “could,” “may,” “intend,” “expect,” “plan,” “predict,” “potential,” or “continue” or similar expressions identify certain 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. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this report. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in this report, including under the heading “Risk Factors”. Such factors include: The effects of; our inability to successfully integrate or manage any future acquisitions; continuation and renewal of existing licenses and similar agreements; potential inability to obtain new licensing, arrangements or agreements for additional brands; potential reduction in sales of our fragrance products due to reduced consumer confidence as the result of a prolonged economic downturn, recession or terrorist attack in the United States, Europe or any of the other countries in which we do significant business; inflation; uncertainties and deterioration in global credit markets could negatively impact suppliers, customers and consumers; re-emergence of COVID-19 and related governmental mandates, or outbreak of other disease, epidemic or pandemic, or similar public health threat,; inability to protect our intellectual property rights; our business could be negatively impacted by social impact and sustainability matters; potential liability for infringement of third party brand names; product liability claims; effectiveness of our sales and marketing efforts and product acceptance by consumers; our dependence upon third party manufacturers and distributors; our dependence upon existing management; competition in the fragrance industry; risks related to our foreign operations, currency fluctuation and international tariff and trade barriers; compliance with governmental regulation; changing political conditions could adversely impact our business and financial results; potential hacking and outages of our global information systems; seasonal variability of our business; our ability to operate our business without infringing, and misappropriating or otherwise violating the intellectual property rights of other parties. These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, and the factors set forth herein may affect us to a greater extent than indicated. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this report. Except as may be required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. ii PART I Item 1. Business General Business Development Founded in 1982, we operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrance, and fragrance related products. Our worldwide headquarters and the office of our wholly-owned United States subsidiaries, Jean Philippe Fragrances, LLC and Interparfums, USA LLC, are located at 551 Fifth Avenue, New York, New York 10176, and our telephone number is 212.983.2640. We also have wholly-owned subsidiaries in Italy, subsidiary, Interparfums Italia Srl and Hong Kong, Inter Parfums USA Hong Kong Limited. Our consolidated wholly-owned subsidiary, Inter Parfums Holdings, S.A., and its majority owned subsidiary, Interparfums SA, maintain executive offices at 10 rue de Solférino, 75007 Paris, France. Our telephone number in Paris is 331.5377.0000. Interparfums SA is the sole owner of Interparfums Luxury Brands, Inc., a Delaware corporation, for distribution of prestige brands in the United States. Interparfums SA is also the majority owner of Parfums Rochas Spain, SL, a Spanish limited liability company, which specializes in the distribution of Rochas fragrances. In addition, Interparfums SA is also the sole owner of Interparfums (Suisse) Sarl, a company formed to hold and manage certain brand names, and Interparfums Asia Pacific Pte., Ltd., an Asian sales and marketing office. Our common stock is listed on The Nasdaq Global Select Market under the trading symbol “IPAR”. The common shares of our subsidiary, Interparfums SA, are traded on the Euronext. The Securities and Exchange Commission (“SEC”) maintains an internet site at http://www.sec.gov that contains financial reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We maintain our internet website at www.interparfumsinc.com , which is linked to the SEC internet site. You can obtain through our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, interactive data files, current reports on Form 8-K, beneficial ownership reports (Forms 3, 4 and 5) and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC. The following information is qualified in its entirety by and should be read together with the more detailed information and audited financial statements, including the related notes, contained or incorporated by reference in this report. General We operate in the fragrance business and manufacture, market and distribute a wide array of fragrance 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 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext. 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 either received and stored directly at our third-party fillers or 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. 1 Our fragrance products focus on prestige brands, each with a devoted following. By concentrating in markets where the brands are best known, we have had many successful product launches. We typically launch new fragrance families for our brands every few years, and more frequently seasonal and limited edition fragrances are introduced as well. The creation and marketing of each product family is intimately linked with the brand’s name, its past and present positioning, customer base and, more generally, the prevailing market atmosphere. Accordingly, we generally study the market for each proposed family of fragrance products for almost a full year before we introduce any new product into the market. This study is intended to define the general position of the fragrance family and more particularly its scent, bottle, packaging and appeal to the buyer. In our opinion, the unity of these four elements of the marketing mix makes for a successful product. As with any 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 in fast-growing markets and channels to grow market share. We discuss in greater detail risk factors relating to our business in Item 1A of this Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and the reports that we file from time to time with the SEC. European Operations We produce and distribute our fragrance products primarily under license agreements with brand owners, and fragrance product sales through our European operations represented approximately 68% of net sales for 2022. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T. Dupont and Van Cleef & Arpels , whose products are distributed in over 120 countries around the world. European operations will also become the exclusive worldwide licensee for Lacoste fragrances on January 1, 2024. United States Operations Prestige brand fragrance products are also produced and marketed through our United States operations, and represented approximately 32% of net sales for the year ended December 31, 2022. These fragrance products are sold under trademarks owned by us or pursuant to license or other agreements with the owners of brands, which include Abercrombie & Fitch, Anna Sui, Dunhill, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Ungaro . Recent Developments Lacoste In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted to Interparfums SA for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license becomes effective in January 2024 and will last for 15 years. Dunhill In April 2022, we announced that the Dunhill fragrance license will expire on September 30, 2023 and will not be renewed. The Company will continue to produce and sell Dunhill fragrances until the license expires and will maintain the right to sell-off remaining Dunhill fragrance inventory for a limited time as is customary in the fragrance industry. 2 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. 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 became effective on July 1, 2022, and we are planning to launch new fragrances under these brands in 2024 . Rochas Fashion Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark after an independent expert concluded that the valuation of the trademark was $11.3 million. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value. Fragrance Products General We are the owner of the Rochas brand, and the Lanvin brand name and trademark for our class of trade. In addition, we have built a portfolio of licensed prestige brands whereby we produce and distribute our prestige fragrance products under license agreements with brand owners. Under license agreements, we obtain the right to use the brand name, create new fragrances and packaging, determine positioning and distribution, and market and sell the licensed products, in exchange for the payment of royalties. Our rights under license agreements are also generally subject to certain minimum sales requirements and advertising expenditures as are customary in our industry. As a percentage of net sales, product sales for the Company’s largest brands were as follows: Year Ended December 31, 2022 2021 2020 Montblanc 18 % 19 % 21 % Jimmy Choo 18 % 18 % 16 % Coach 15 % 16 % 17 % GUESS 12 % 12 % 11 % 3 Our licenses expire on the following dates: Brand Name Expiration Date Abercrombie & Fitch Extends until either party terminates on 3 years’ notice Anna Sui December 31, 2026, plus one 5-year optional term bebe Stores June 30, 2023 Boucheron December 31, 2025, plus a 5-year optional term if certain sales targets are met Coach June 30, 2026 DKNY December 31, 2032, plus a 5-year optional term if certain sales targets are met Donna Karan December 31, 2032, plus a 5-year optional term if certain sales targets are met Dunhill September 30, 2023 Emanuel Ungaro December 31, 2031, plus a 5-year optional term if certain sales targets are met French Connection December 31, 2027, plus a 10-year optional term if certain sales targets are met Graff December 31, 2026, plus 3 optional 3-year terms if certain sales targets are met GUESS December 31, 2033 Hollister Extends until either party terminates on 3 years’ notice Kate Spade June 30, 2030 Jimmy Choo December 31, 2031 Karl Lagerfeld October 31, 2032 Lacoste* December 31, 2038 MCM December 31, 2030, plus 4 option years Moncler December 31, 2026, plus a 5-year optional term if certain conditions are met Montblanc December 31, 2030 Oscar de la Renta December 31, 2031, plus a 5-year optional term if certain sales targets are met Ferragamo December 31, 2031, plus a 5-year optional term if certain sales targets are met S.T. Dupont December 31, 2023 Van Cleef & Arpels December 31, 2024 *The Lacoste license commences on January 1, 2024. In connection with the acquisition of the Lanvin brand names and trademarks for our class of trade, we granted the seller the right to repurchase the brand names and trademarks on July 1, 2027 for €70 million (approximately $79 million) in accordance with an amendment signed in 2021. In connection with such amendment, we also granted a license to the seller to develop and sell cosmetics other than fragrances. Fragrance Portfolio Abercrombie & Fitch— In 2014, we entered into a worldwide license to create, produce and distribute new fragrances and fragrance related products under the Abercrombie & Fitch brand name. We distribute these fragrances in specialty stores, department stores and duty free shops, and in the U.S., in select Abercrombie & Fitch retail stores. Our initial men’s scent, First Instinct was launched in 2016 followed by a women’s version in 2017. Since that time, we unveiled several new fragrances most notably the Authentic and Away duos as well as brand extensions. 4 Abercrombie & Fitch Co. is a leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids. The iconic Abercrombie & Fitch brand was born in 1892 and aims to make every day feel as exceptional as the start of a long weekend. Anna Sui— In 2011, we entered into an exclusive worldwide fragrance license to create, produce and distribute fragrances and fragrance related products under the Anna Sui brand. Anna Sui is one of New York’s most accomplished fashion designers known for creating contemporary clothing inspired by vintage style that capture the brand’s very sweet feminine girly aspect, combined with a touch of hipness and rock-and-roll. Today, Anna Sui has over 50 boutiques and her collection and products are sold in 300 stores in over 30 countries, but her brand is by far most popular and well received throughout Asia. Over the past decade, we have worked in partnership with Anna Sui and her creative team to build upon the brand’s customer appeal and develop and market a family of fragrances including Fantasia , Sui Dreams and the newest scent, Sky, which was ranked as the second best perfume launch of 2021 by WWD Japan. Boucheron— In 2010, we entered into an exclusive 15-year worldwide license agreement for the creation, development and distribution of fragrances and fragrance related products under the Boucheron brand. For over a century, since becoming the first jeweler to open a boutique on Place Vendôme in 1893, Boucheron has embodied very high-end creation, luxury and French know-how. The mysterious and seductive collection of Boucheron fragrances unquestionably continues this prestigious line of creations. Boucheron’s legacy scents, Femme and Homme , and the legendary Jaipur perfume form the foundation of brand sales. Our team has enriched the portfolio with Quatre for men and women, along with several special editions, a growing collection of unique scents aptly named, La Collection , and Serpent Bohème. During 2022, we introduced a new men’s fragrance, Boucheron Singulier , as well as still another addition to our Boucheron Collection . Currently, Boucheron operates through several boutiques worldwide as well as an e-commerce site. Coach — In 2015, we entered into an exclusive 11-year worldwide license to create, produce and distribute new men’s and women’s fragrances and fragrance related products under the Coach brand name. We distribute these fragrances globally to department stores, specialty stores and duty free shops, as well as in Coach retail stores. Founded in 1941, Coach is the ultimate American leather goods brand and has always been renowned for its quality craftsmanship. Now the luxury brand that best embodies New York’s casual elegance, Coach also offers collections of ready-to-wear, lifestyle accessories and fragrances. Its contemporary approach to luxury combines authenticity and innovation, exported worldwide thanks to its thoroughly American non-conformist vision. In 2016, we launched our first Coach fragrance, a women’s signature scent, and in 2017, a men’s scent, both of which became and remain top selling prestige fragrances. Subsequent flankers and extensions have enlarged the Coach fragrance enterprise as have entirely new collections, including Coach Dreams which debuted in early 2020, and its sister scent, Dreams Sunset , which debuted in 2021. For 2022, we unveiled Coach Wild Rose , and Coach Open Road , a new fragrance for men. Coach is part of the Tapestry house of brands. Donna Karan/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, which took effect on July 1, 2022. The Donna Karan and DKNY brands, which draw from the energy and attitude of New York City, are powerhouses in fashion and fragrance. These global lifestyle brands will make excellent additions to our portfolio. 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. Upon joining our portfolio, these brands now rank among our largest. We are planning to launch new fragrances under these brands in 2024. Donna Karan and DKNY are part of the G-III house of brands. 5 Dunhill— Since 2012, we have been the exclusive fragrance licensee whereby we create, produce and distribute fragrances and fragrance related products under the Dunhill brand. Our rights under this license terminate on September 30, 2023. Emanuel Ungaro— In October 2021, we also entered into a 10-year exclusive global licensing agreement with Emanuel Ungaro for the creation, development and distribution of fragrances and fragrance-related products, under the Emanuel Ungaro brand. Founded in 1965 in Paris, the house of Emanuel Ungaro is an icon of French refinement and haute couture. Its unique style is expressed through unquestioning sensuality, purity of silhouette, flamboyant prints, and exquisite attention to details. Season after season, Emanuel Ungaro dared to be different, combining unexpected yet sensual clashes of bright colors and prints with beautiful draping. Today Ungaro fragrances uphold the same values of audacity and elegance, and the brand is best known and most prized internationally, and such presence will remain our sales focus as we continue to produce and distribute the brand’s legacy scents, notably Diva. Beginning in 2023, we plan to unveil a Diva brand extension. Graff — In 2018, we entered into an exclusive, 8-year worldwide license agreement with London-based Graff for the creation, development and distribution of fragrances under the Graff brand. The agreement has three 3-year automatic renewal options, potentially extending the license until December 31, 2035. Since Laurence Graff OBE founded the company in 1960, Graff has been dedicated to sourcing and crafting diamonds and gemstones of untold beauty and rarity and transforming them into spectacular pieces of jewelry that move the heart and stir the soul. Throughout its rich history, Graff has become the world leader for diamonds of rarity, magnitude and distinction. Each jewelry creation is designed and manufactured in Graff’s London atelier, where master craftsmen employ techniques to emphasize the beauty of each individual stone. The company remains a family business, overseen by Francois Graff, Chief Executive Officer. For Graff, a six-scent collection for women, Lesedi La Rona , debuted exclusively at Harrods beginning in March 2020, which we further extended through 2020 as a result of the mandatory store closings throughout that year. In 2021, a select market rollout began in the Middle East, with limited luxury distribution to only the most exclusive, upmarket retail outlets. In 2021 and 2022, we added two new scents to the Lesedi La Rona collection. GUESS — In 2018, we entered into an exclusive, 15-year worldwide license agreement with GUESS, Inc. for the creation, development and distribution of fragrances under the GUESS brand. Established in 1981, GUESS began as a jeans company and has since successfully grown into a global lifestyle brand. GUESS, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products. GUESS products are distributed through branded GUESS stores as well as better department and specialty stores around the world. We began selling GUESS legacy scents in 2018. In 2019 the GUESS brand quickly became the largest within our U.S. operations, with legacy fragrances dominating the sales mix. In 2019, we began shipments of 1981 Los Angeles and Seductive Noir , both flankers of established scents, which accelerated brand growth. Nearly three years in the making, our first new blockbuster scent, Bella Vita , debuted for the GUESS brand both domestically and internationally in 2021. In addition, Effect, a new men’s grooming line and fragrance collection was launched in 2021. Uomo , a new men’s fragrance for GUESS, came to market in 2022 with a flanker debuting in 2023. Hollister— In 2014, we entered into a worldwide license to create, produce and distribute new fragrances and fragrance related products under the Hollister brand name. We distribute these fragrances in specialty stores, department stores and duty free shops, as well as select Hollister retail stores in the U.S. In 2016 we launched our first men’s and women’s fragrance duo, Wave which led to flankers and extensions as did subsequent fragrance families Festival and Canyon Escape . We have a new pillar debuting in 2023, Feelin’ Good . 6 The quintessential apparel brand of the global teen consumer, Hollister celebrates the liberating spirit of the endless summer inside everyone. Inspired by California’s laidback attitude, Hollister’s clothes are designed to be lived in and made your own, for wherever life takes you. Jimmy Choo— In 2009, we entered into an exclusive 12-year worldwide license agreement for the creation, development and distribution of fragrances and fragrance related products under the Jimmy Choo brand, and in 2017, we extended the license agreement which now runs through December 31, 2031. Jimmy Choo encompasses a complete luxury accessories brand. Women’s shoes remain the core of the product offering, alongside handbags, small leather goods, scarves, eyewear, belts, fragrance and men’s shoes. Jimmy Choo has a global store network encompassing more than 200 stores and is present in the most prestigious department and specialty stores worldwide. Jimmy Choo is part of the Capri Holdings Limited luxury fashion group. Our initial Jimmy Choo fragrance was launched in 2011, a signature scent for women. In the decade that followed, Jimmy Choo has grown to become our second largest brand with new pillars and flankers debuting regularly, both for men and women. Our newest women’s fragrance pillar, I Want Choo, was launched in 2021 and for 2022, two flankers debuted, Jimmy Choo Man Aqua and I Want Choo Forever . For 2023, Jimmy Choo Rose Passion is scheduled to be unveiled. Karl Lagerfeld— In 2012, we entered into a 20-year worldwide license agreement with Karl Lagerfeld B.V., the internationally renowned haute couture fashion house, to create, produce and distribute fragrances under the Karl Lagerfeld brand. Under the creative direction of the late Karl Lagerfeld, one of the world’s most influential and iconic designers, the Lagerfeld Portfolio represents a modern approach to distribution, an innovative digital strategy and a global 360 degree vision that reflects the designer’s own style and soul. Karl Lagerfeld created the first fragrance that bears his name in 1978, and that legacy has expanded to include several growing multi-scent collections, Les Parfums Matières and more recently, Karl Cities, a new collection featuring entries for New York, Paris, Hamburg, Tokyo and Vienna was unveiled. Kate Spade— In 2019, we entered into an exclusive, 11-year worldwide license agreement with Kate Spade to create, produce and distribute new perfumes and fragrance related products under the Kate Spade brand which we distribute globally to department and specialty stores and duty free shops, as well as in Kate Spade retail stores. Our first original scent, Kate Spade New York , debuted in January 2021 and for 2022, we added a flanker to our line, Kate Spade Sparkle . Kate Spade Cherie debuted in early 2023. Since its launch in 1993 with a collection of six essential handbags, Kate Spade has always stood for optimistic femininity. Today, the brand is a global life and style house with handbags, ready-to-wear, jewelry, footwear, gifts, home décor and more. Polished ease, thoughtful details and a modern, sophisticated use of color—Kate Spade’s founding principles define a unique style synonymous with joy. Under the vision of its creative director, the brand continues to celebrate confident women with a youthful spirit. Kate Spade is part of the Tapestry house of brands. Lanvin— In 2007, we acquired the worldwide rights to the Lanvin brand names and international trademarks listed in Class 3, our class of trade. A synonym of luxury and elegance, the Lanvin fashion house, founded in 1889 by Jeanne Lanvin, expanded into fragrances in the 1920s. Lanvin fragrances occupy an important position in the selective distribution market in France, Eastern Europe and Asia, and we have several lines currently in distribution, including Éclat d’Arpège , Lanvin L’Homme , Jeanne Lanvin, Modern Princess and A Girl in Capri . The Éclat d’Arpège line accounts for almost 50% of brand sales. Les Fleurs de Lanvin, a new floral fragrance collection, was released during the second half of 2021. For 2022, we unveiled a new extension to our Éclat d’Arpège line, Mon Éclat . 7 MCM— In 2019, we entered into an exclusive, 10-year worldwide license agreement with German luxury fashion house MCM for the creation, development and distribution of fragrances and fragrance related products under the MCM brand. The agreement has a 4-year automatic renewal option, potentially extending the license until December 31, 2034. MCM is a luxury lifestyle goods and fashion house founded in 1976 with an attitude defined by the cultural Zeitgeist and its German heritage with a focus on functional innovation, including the use of cutting-edge techniques. Today, through its association with music, art, travel and technology, MCM embodies the bold, rebellious and aspirational. Always with an eye on the disruptive, the driving force behind MCM centers on revolutionizing classic design with futuristic materials. MCM’s millennial and Gen Z audience is genderless, ageless, empowered and unconstrained by rules and boundaries. Following through on our plan to develop extraordinary fragrances that capture the creative spirit of MCM, our first new fragrance, MCM , was released during the first quarter of 2021 to great, and somewhat unexpected success. We released a flanker in 2022, along with a limited edition called Graffiti . Our distribution strategy encompasses MCM stores, high-end department stores and prestige beauty retailers, with a geographic focus on Asia, the Americas and Europe. Our first ever men’s scent for the brand is debuting in 2023. Moncler— In June 2020, we 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. 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 for the Moncler brand has a revolutionary LED design, and the flask-shaped bottles of Moncler Pour Femme and Moncler Pour Homme forge a powerful bond with the House Moncler’s alpine roots and pioneering spirit. This playful and unique innovation enables its owner to write a personalized note that scrolls in red letters on the screen of the mirror bottle. Our first fragrance was pre-launched in 250 select outlets in the second half of 2021, and was met with an excellent response. The rollout to approximately 3,000 doors took place during 2022. Moncler will also launch a new collection in Q1 2023. Montblanc— In 2010, we entered into an exclusive license agreement to create, develop and distribute fragrances and fragrance related products under the Montblanc brand. In 2015, we extended the agreement which now runs through December 31, 2025. Montblanc has achieved a world-renowned position in the luxury segment and has become a purveyor of exclusive products, which reflect today’s exacting demands for timeless design, tradition and master craftsmanship. Through its leadership positions in writing instruments, watches and leather goods, promising growth outlook in women’s jewelry, international retail footprint through its network of more than 600 boutiques, high standards of product design and quality, Montblanc has grown to be our largest fragrance brand. In 2011, we launched our first new Montblanc fragrance, Legend, which quickly became our best-selling men’s line and has given rise to a plethora of flankers including Legend Night and Legend Spirit. In 2014, we launched our second men’s line, Emblem and like its predecessor, Emblem gave rise to brand extensions. In 2019, we unveiled Montblanc Explorer , which has added flankers, most recently Montblanc Explorer Ultra Blue . The Legend continues, as in 2022, we introduced a new flanker, Montblanc Legend Red . For 2023, extensions for the Montblanc signature scent for women and Explorer line for men are in the pipeline. 8 Oscar de la Renta— In 2013, we entered into an exclusive worldwide license to create, produce and distribute fragrances and fragrance related products under the Oscar de la Renta brand. In 2019, the agreement was extended through December 31, 2031, with an additional five-year option potentially extending the agreement through December 31, 2036. After taking over distribution of the brand’s legacy fragrances in 2014, we introduced Extraordinary the following year. Oscar de la Renta Bella Blanca debuted in 2018, followed by Bella Rosa and Bella Essence and soon to join them, Bella Bouquet . Debuting in 2021 was an entirely new fragrance pillar, Alibi which welcomed a sister scent in 2022, Alibi Eau de Toilette . Oscar de la Renta is one of the world’s leading luxury goods firms. The New York-based company was established in 1965, and encompasses a full line of women’s accessories, bridal, children’s wear, fragrance, beauty and home goods, in addition to its internationally renowned signature women’s ready to wear collection. Oscar de la Renta products are sold globally in fine department and specialty stores, www.oscardelarenta.com and through wholesale channels. Rochas — In 2015, we acquired the Rochas brand from The Procter & Gamble Company. Founded by Marcel Rochas in 1925, the brand began as a fashion house and expanded into perfumery in the 1950s under Hélène Rochas’ direction. Our first new fragrance for Rochas, Mademoiselle Rochas , had a successful launch in 2017 in its traditional markets of France and Spain. Over the next few years, we debuted flankers for legacy scents Eau de Rochas and Mademoiselle Rochas, plus others, and in 2018 we launched our first new men’s line, Rochas Moustache . Byzance debuted in early 2020 and Rochas Girl in 2021, and the first flanker for both came to market in 2022 as well as one for L’Homme Rochas. Flankers for many of these pillars debuted in 2022 with more to come in 2023. Ferragamo— In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide 10-year license was granted for the production and distribution of Ferragamo brand perfumes, with a 5-year optional term if certain conditions are met. Salvatore Ferragamo S.p.A. is the parent company of the Salvatore Ferragamo Group, one of the world’s leaders in the luxury industry and whose origins date back to 1927. Named after its founder, the brand still represents and lives by the original values of Salvatore Ferragamo. The uniqueness and exclusivity of its creations, along with the perfect blend of style, creativity and innovation enriched by the quality and superior craftsmanship of the ‘Made in Italy’ tradition, have always been the hallmarks of the Salvatore Ferragamo’s products notably shoes, leather goods, apparel, silk products and other accessories for men and women. The current fragrance lineup includes Storie di Seta, a collection of four refined, luminous olfactory works of art. Each fragrance is made with rare, sustainable raw materials, and can be worn alone or in combination, creating a personalized multifaceted scent. The genderless collection is comprised of four fragrances in four colors. Four exclusive motifs drawn from the House’s textile heritage adorn each flacon. Established scents in the Ferragamo portfolio include Ferragamo , a collection of fragrances for men, Signoria , a collection of fragrances for women, the Tuscan Creations series, the Amo series and the Uomo series. New flankers are in the works for 2023 and 2024 with a major new pillar in the works for 2025. S.T. Dupont— In 1997, we signed an exclusive worldwide license agreement with S.T. Dupont for the creation, manufacture and distribution of S.T. Dupont fragrances. The license agreement had been renewed several times and is now renewed annually, without any material changes in terms and conditions. S.T. Dupont is a French luxury goods house founded in 1872, which is known for its fine writing instruments, lighters and leather goods. S.T. Dupont fragrances include S.T. Dupont pour Femme , S.T. Dupont pour Homme, Pure and S.T. Dupont Collection. Van Cleef & Arpels— In 2018, we renewed its license agreement for an additional six years with Van Cleef & Arpels for the creation, development, and distribution of fragrance products through December 2024. Our initial 12-year license agreement with Van Cleef & Arpels was signed in 2006. 9 Van Cleef & Arpels fragrances in current distribution include: First and Collection Extraordinaire. Sales of the Collection Extraordinaire line have experienced continued growth since its debut. We continue to introduce new additions to the Van Cleef & Arpels Collection Extraordinaire assortment annually, including Oud Blanc , in 2020 and Rêve de Matiere in 2021. Patchouli Blanc is the new addition to the Collection Extraordinaire , released in 2022 with further additions coming in 2023. Founded in 1896, Van Cleef & Arpels is a French luxury jewelry company owned by Richemont Holdings Limited. Business Strategy Focus on prestige beauty brands . Prestige beauty brands are expected to contribute significantly to our growth. We focus on developing and launching quality fragrances utilizing internationally renowned brand names. By identifying and concentrating in the most receptive market segments and territories where our brands are known, and executing highly targeted launches that capture the essence of the brand, we have had a history of successful launches. Certain fashion designers and other licensors choose us as a partner, because our Company’s size enables us to work more closely with them in the product development process as well as our successful track record. Grow portfolio brands through new product development and marketing . We grow through the creation of fragrance family extensions within the existing brands in our portfolio. We regularly create a new family of fragrances for each brand in our portfolio. We frequently introduce seasonal and limited edition fragrances as well. With new introductions, we leverage our ability and experience to gauge trends in the market and further leverage the brand name into different product families in order to maximize sales and profit potential. We have had success in introducing new fragrance families (sub-brands, flanker brands or flankers) within our brand franchises. Furthermore, we promote the performance of our prestige fragrance operations through knowledge of the market, detailed analysis of the image and potential of each brand name, and a highly professional approach to international distribution channels. Continue to add new brands to our portfolio, through new licenses or acquisitions. Prestige brands are the core of our business, and we intend to add new prestige beauty brands to our portfolio. Over the past 35 years, we have built our portfolio of well-known prestige brands through acquisitions and new license agreements. We intend to further build on our success in prestige fragrances and pursue new licenses and acquire new brands to strengthen our position in the prestige beauty market. To that end, in 2020, we signed a new license for the Moncler brand. We also acquired a minority interest in Divabox, which owns the Origines-parfums online platform. 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 acquisition enhances the introduction of dedicated fragrance lines and products designed to address a specific consumer demand for this distribution channel and accelerate our digital development. During 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. In 2021, we also 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. This exclusive license became effective in July 2022. During 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted to Interparfums SA for the production and distribution of Lacoste brand perfumes and cosmetics. As of December 31, 2022, we had cash, cash equivalents and short-term investments of approximately $256 million, which we believe should assist us in entering new brand licenses or outright acquisitions. We identify prestige brands that can be developed and marketed into a full and varied product families and, with our technical knowledge and practical experience gained over time, take licensed brand names through all phases of concept, development, manufacturing, marketing and distribution. Expand existing portfolio into new categories . We selectively broaden our product offering beyond the fragrance category and offer other fragrance related products and personal care products under some of our existing brands. We believe such product offerings meet customer needs, generate trial and further strengthen customer loyalty. 10 Continue to build global distribution footprint . Our business is a global business, and we intend to continue to build our global distribution footprint. In order to adapt to changes in the environment and our business, in addition to our arrangements with third party distributors globally, we are operating distribution subsidiaries or divisions in the major markets of the United States, France, Italy and Spain for distribution of prestige fragrances. We may look into future joint arrangements or acquire distribution companies within other key markets to distribute certain of our prestige brands. While building a global distribution footprint is part of our long-term strategy, we may need to make certain decisions based on the short-term needs of the business. We believe that in certain markets, vertical integration of our distribution network may be one of the keys to future growth of our Company, and ownership of such distribution should enable us to better serve our customers’ needs in local markets and adapt more quickly as situations may determine. Production and Supply The stages of the development and production process for all fragrances are as follows: ● Simultaneous discussions with perfume designers and creators (includes analysis of esthetic and olfactory trends, target clientele and market communication approach) ● Concept choice ● Produce mock-ups for final acceptance of bottles and packaging ● Receive bids from component suppliers (glass makers, plastic processors, printers, etc.) and packaging companies ● Choose suppliers ● Schedule production and packaging ● Issue component purchase orders ● Follow quality control procedures for incoming components; and ● Follow packaging and inventory control procedures. Suppliers who assist us with product development include, but are not limited to : ● Independent perfumery design companies (Aesthete, Carré Basset, PI Design, Cent Degres) ● Perfumers (IFF, Givaudan, Firmenich, Robertet, Takasago, Mane) who create a fragrance consistent with our expectations and, that of the fragrance designers and creators ● Fillers (Voyant, CPFPI, Omega Packaging, Societe de Diffusion de Produits de Parfumerie, TSM Brands, ICR, Cosmint, Tatra, Arcade Beauty) ● Bottle manufacturers (Pochet du Courval, Verescence, Verreries Brosse, Bormioli Luigi, Stoelzle Masnières, Heinz), caps (Qualipac, ALBEA, RPC, Codiplas, LF Beauty, Texen Group, S.A.R.L. J3P SBG Packaging Group), Pumps (Silgan Dispensing Systems Thomaston Corp, Aptar, Rexam) or boxes (Autajon, Diamond Packaging, TPC Printing) ● Logistics (Bansard and Bolloré Logistics for storage, order preparation and shipment) 11 Suppliers’ accounts for our European operations are primarily settled in euro and for our United States operations, suppliers’ accounts are primarily settled in U.S. dollars. For our European operations components for our prestige fragrances are purchased from many suppliers around the world and are primarily manufactured in France. For United States operations, components for our prestige fragrances are sourced from many suppliers around the world and are primarily manufactured in the United States and Italy. Additionally, we occasionally utilize third party manufacturers in China and Turkey. Environmental, Social & Governance Both our U.S. operations and our European operations are good corporate citizens and take our responsibilities seriously. We comply with all applicable laws, rules and regulations in general, and in particular with regard to chemicals and hazardous materials. Throughout our supply chain, from procurement of components to distribution of finished products, we act responsibly and monitor and comply with all legal requirements. While we do not own our manufacturing facilities, we set a high bar with our industrial partners by placing an emphasis on quality, the use of good manufacturing practices and innovation, and encouraging them to build strong ESG programs of their own. Like many of our industry competitors, we are applying a multifunctional and comprehensive approach in addressing the issues of corporate, environmental and social responsibility and transparency, building off the UN Sustainable Development Goals. Our European Operations have led the way on this initiative, but our US operations are actively catching up. European Operations Interparfums SA, our European operations with their headquarters in Paris, has made further progress in the areas of environmental, social, and corporate governance (ESG) based on the results of the 2022 campaign of the rating agency Gaïa Research 1 which ranks the top performing companies in this area. Campaign for Fiscal Year 2020 for Fiscal 2019 2021 for Fiscal 2020 2022 for Fiscal Year 2021 ESG Rating 69/100 76/100 81/100 This score is calculated on the basis of 140 criteria divided into 4 pillars: Environmental, Social, Governance and External Stakeholders. Interparfums SA applies a comprehensive approach in addressing the issues of corporate, environmental and social responsibility and transparency. It has developed from one year to the next its corporate social responsibility (“CSR”) policy, implemented by its Operational and Support Departments by involving all personnel, and has identified issues to be addressed in three key areas: its responsibilities toward operational stakeholders, staff and the company. Social and societal values have been an important component of Interparfums SA’s development for a number of years, exemplified notably by an attractive policy of employee benefits and solid relations with its partners. In October 2022, Interparfums SA announced that it had retained the services of Muriel Buiatti, as its CSR Project Manager to assist the CSR Executive Committee in achieving its goals. A graduate of the French Engineering School, Ecole Polytechnique, Ms. Buiatti exercised various responsibilities, including research and development, at L’Oréal for 13 years. After completing her Master’s Degree in Sustainable Development, she founded Commenterre, which specializes in helping companies address their CSR issues. 1 Gaïa Research, a member of the EthiFinance Group is an extra-financial rating agency specializing in rating the ESG performance of small and midsize companies and mid-cap companies listed on European markets. 12 To support its strategy, at the beginning of 2021 and at the initiative of management, Interparfums SA created an CSR Executive Committee, consisting of members of the Operations & Supply Chain, Human Resources, Legal Affairs and Communications teams, tasked with formalizing the company’s CSR strategy focusing on the following priorities, aligned with the UN Sustainable Development Goals: - reinforce its status as a responsible employer, by notably creating a “Responsible Employer Charter” and strengthening the employee training plan; - reduce its environmental footprint, notably by adopting environmentally optimized design specifications to reduce packaging and the introduction of recycled and recyclable materials for each product developed; - strengthen its sustainable development approach by formalizing a code of business conduct and ethics that is enforceable against operational stakeholders. Environmental Interparfums SA does not own its own manufacturing facilities, having chosen to support its industrial partners by placing an emphasis on quality, the use of good manufacturing practices and innovation. The construction of a high quality environmentally certified warehouse in 2011 and sourcing in Europe more than 80% of its needs highlight the efforts undertaken in recent years. In addition, reflecting the stakes in terms of protecting the planet, Interparfums SA now intends to also exercise an increasingly active role in contributing to the environment. As part of its CSR strategy, Interparfums SA has partnered with EcoVadis to assess the CSR performance of its supply chain and suppliers. EcoVadis operates a global platform to assess corporate social responsibility and share performance data using their assessment method based on international CSR standards. In 2022, 119 suppliers were evaluated or were in the process of being evaluated, representing over 68% of Interparfums SA’s procurement activity. As part of a continuous improvement process, Interparfums SA’s objective will be to monitor and encourage the CSR performance of its suppliers in four major areas: the environment, social and human rights, ethics and responsible procurement. EcoVadis assessment results: Number of suppliers evaluated Average EcoVadis score Average Environmental score Average Labor and Human Rights score Average Ethics score Average Sustainable Procurement score 91 66.7 69.5 66.9 60.7 65.3 In addition, in 2022, Interparfums SA has calculated its total carbon footprint in accordance with international standards, and namely the Green House Gas Protocol (GHG Protocol) for the conversion of all emission sources into tons of CO 2 equivalent and the Base Carbone ® , a public database of emission factors made available by the French Agency for Ecological Transition (ADEME). 2021 Carbon footprint: 174,930 tCO2e - 2021 Carbon intensity: 312 KgCO2e per € thousand of revenue (in the low range of our industry) 13 In tons CO 2 equivalent 2021 Weight Scope 1 (gas and fuel energy consumption) 226 0,1 % Scope 2 (electricity consumption) 29 0,0 % Scope 3 (other indirect emissions) 174,675 99,9 % Total 174,930 100,0 % This first measurement is a crucial step before determining a low carbon trajectory in accordance with the European green deal regulation which aims to be climate-neutral by 2050. Moreover, Interparfums SA complies with IS 22716, International Standards for Good Manufacturing Practices, with all aspects of the manufacturing process, including receiving of raw materials and packaging materials, production and quality control. In this regulatory environment, regular audit campaigns are carried out for all packaging plants by the quality department based on the ISO 22716 standard in place. The ultimate purpose of these audits is to ensure that packaging service providers maintain a good level of traceability for their activities. All plant activities were reviewed: receiving process for raw materials and packaging materials, manufacturing, packaging and quality controls. These reports demonstrated that Interparfums SA’s subcontractors comply with ISO 22716 Good Manufacturing Practices and in particular, traceability requirements for all perfume production operations. It is also in compliance with the EU directive entitled Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), which governs and regulates the safe use of chemicals. Although not a manufacturer, per se, Interparfums SA has taken the initiative and monitors its suppliers for compliance with REACH, and has commitments from each of them concerning “Substances of Very High Concern” as listed in appendix XIV of REACH. No supplier of Interparfums SA has advised it of any such hazardous materials in any of its products to date. Interparfums SA monitors the outsourcing of the entire production process of its manufacturing partners with expertise and accountable leadership in their respective areas. These include producers of juice, glass, caps and cardboard boxes and packaging companies. We take environmental issues into account at each of these phases, and in particular regarding the choice of materials used for components, waste management and reducing the carbon footprint. Moreover, all the alcohol used by Interparfums SA is from vegetal origin (essentially from beets). 14 Proposing environmentally and socially responsible packaging 2021 2022 Target Year Monitor: Monitor the EcoVadis scores of our suppliers Average score 65/100 Average score 66.7/100 Average score >70/100 2025 Increase: Increase the PCR glass part of our packaging 47 % 46 % 60 % 2025 Initiating a low-carbon trajectory Reduce: Reduce scope 1, 2, 3 greenhouse gases emission intensity -3%/year Neutrality 2040 Contribute Define the appropriate regenerative agriculture program One 5 years program defined Sustainability & The Environment At every stage of the purchasing process, Interparfums SA seeks to determine the precise needs and considers the requirement of limiting sources of unnecessary costs and a waste of resources: - reducing waste, in particular at the phases of production, consumption and the end of the product life; - recycling flawed production, notably at the production phase; - repairing palettes to increase their lifespan. Interparfums SA regularly monitors energy and water consumption indicators to assess possibilities for improving energy efficiencies in the area of lighting, heating and air-conditioning for the entire warehousing site, for example by adjusting ventilation flows and using a program that reduces heating and ventilation over weekends. With this objective, measures are planned to automatically turn off lights in the warehouse when employees are taking outside breaks and maintain the warehouse temperature at 11°C (51°Fahrenheit). These energy savings initiatives include measures providing for managing the hours for reloading the electric forklifts during non-peak hours during the night, requiring low consumption for a maximum of 280,000 kW instead of 600,000 kW during the day. Monthly reports on electricity consumption are prepared, allowing the company to analyze the causes for overconsumption, when applicable, in order to take corrective actions as applicable. The measurement of energy consumption highlighted stable levels for electricity and gas over the last four years, whereas water consumption has on average declined marginally. Finally, in the spirit of contributing to protecting the environment, the company has installed parking places at the logistic site for bicycles and electric recharging stations for cars. By strategically locating its warehouse at the crossroads for its subcontractors, Interparfums SA has reduced distances for shipments of finished products. Measures undertaken in collaboration with the warehouse and trade goods shipping manager, within the framework of the improvement and optimization of shipments between production sites and the logistics platform have contributed to reducing the number of back-and-forth trips for trucks. 15 In the area of transport to distributors, Interparfums SA uses road transport for France and Europe and maritime transport for the Americas, Asia and the Middle East. Use of air transport is very limited and reserved only for urgent situations where no other solutions are available. Certain promotional materials manufactured in Asia are shipped directly to American distributors without being imported and stored in France. In addition, in 2018 Interparfums SA put into service a new warehouse located in Singapore to promote the use of short channels within the Asia Pacific region. This warehouse makes it possible to maintain a permanent inventory in this region and, in this way, encourages the use of maritime transport for goods shipped from France to Asia. Measures to prevent environmental risks and pollution involve firstly the choice of techniques and materials. To reduce the impacts of its activities, a water-soluble solution in part biodegradable that does not harm the environment is used in the coloring of some of its bottles. For the remainder of the product lines, the coating process provides for the gradual elimination of solvent-based coatings and the progressive adoption of hydro-coating for all the company’s products, in compliance with the law of 2005 for reducing emissions of Volatile Organic Compounds (VOC) in the air. In addition, certain sub-contractors for glass making have electrostatic air filters to reduce dust and smoke emissions in addition to wastewater recycling. Interparfums SA has, in addition, eliminated thermosetting plastics from its line of bath and body care products in favor of recyclable plastic. To balance product quality and aesthetics with environmental considerations, Interparfums SA takes care to reduce packaging volumes and select the appropriate materials at each stage of production to ensure optimal conditions for their recycling or disposal. The manufacture of recyclable glass bottles includes a system for the recovery, crushing and remolding the waste. Indicators in place since 2013 for tracking wastage have improved Interparfums SA’s ability to monitor wastage rates by glass bottle decorators. Its first objective is to apply a continuous improvement approach and reduce rates of wastage over the long term. The second objective is to succeed in reducing this wastage and reintroduce bottles back into the manufacturing cycle. In addition, Interparfums SA has adopted procedures for recovering waste from subcontractors originating from surplus production or components of discontinued products. The recovered waste is then sorted for the purpose of their elimination. Interparfums SA has also revised the bulk and secondary packaging (product boxes and perfume sets) in order to optimize the palletizing process, reduce the purchase of cardboard packaging materials and reduce volumes transported by decreasing the amount of empty space. The company henceforth requires a minimum number of palettes per truck. Finally, cardboard packaging materials for testers are 100% recyclable. Social Donations and sponsorship initiatives: - Interparfums SA contributes to volunteer-sector organizations intervening in the areas of solidarity, childhood, combating exclusion and promoting health, by providing financial assistance to support their projects and initiatives. - Since 2018, through the Givaudan Foundation, - Interparfums provided support to five schools for the management of their libraries. 16 - In 2021, the program for the installation of school libraries continued in Sulawesi with a new library in Moramo (South East Sulawesi), benefiting 1,040 children and 66 school teachers, and providing a total of 5,180 books. - In 2021, €136,000 of charitable initiatives and donations were made by Interparfums SA. - Educational establishments: - As part of its desire to share its experience and train future generations, Interparfums SA is a regular contributor, particularly in the fields of marketing and finance, at different leading schools (business schools, Sciences Po, École supérieure de parfumerie). - Interparfums SA also regularly welcomes and trains interns at Interparfums SA offices as well as work-study contract beneficiaries. Assisting Local Economies - Production facilities of Interparfums SA’s subcontractors as well as warehousing facilities for finished products are located primarily in the Haute Normandie region of France. These activities contribute to developing the local economy. - Interparfums SA provides support for patchouli-producing communities in Indonesia. Sustainable Development Goals In line with Interparfums SA’s Corporate Social Responsibility strategy, the main goals set by Interparfums SA are presented in the following table. Social Initiatives Current Situation Expected performance Deadline Attracting, supporting and developing all talents Attract: Write a Responsible Employer Charter Share the Responsible Employer Charter 2023 Develop: Strengthen training 50% of the employees 70% of the employees 2025 Develop : CSR training for employees - 80% in 2 years 2023 Diversify: Raising employee awareness about disabilities Once a year Once a year Governance - Interparfums SA only engages in recognized ethical practices. - It has adopted the Middlenext Corporate Governance Code since 2010, which was revised in September 2016 and September 2021 to ensure effective governance. - Board of Directors – Interparfums SA has a Board of Directors consisting of 11 members, with 5 members being independent. It also intends to set up a committee of shareholders. 17 ○ Director Ethics - in accordance with the new Middlenext Code Recommendation 2 reinforcing the management of conflicts of interest, each Director declares before each meeting any potential conflicts of interest and, on an annual basis, any actual or potential conflicts of interest between their obligations to Interparfums SA and their private interests, in particular with respect to their other offices and functions. ○ In any event, the members of the Board shall refrain from participating in the proceedings and voting on any matter in which they would be in a situation of real or potential conflict of interest. - Existence of a CSR Executive Committee - Audit committee consisting of 5 independent directors. United States Operations In the U.S. we are also a good corporate citizen. Like our French subsidiary, Interparfums USA also retained Muriel Buiatti to advise and guide us on our path to become a better corporate citizen, as we attempt to increase our efforts in ESG. Also, like our French subsidiary, we are also not a true manufacturer, but we regularly monitor our subcontractors, suppliers and fillers for their compliance. In addition, our subcontractors and fillers are subject to inspection and audit from our various licensors for compliance with all aspects of law. Environmental In connection with a new product launch in 2023, Hollister Feelin’ Good , this new fragrance highlights our ESG efforts we made in 2022: ● Glass containing 10% PCR (post-consumer recycled) glass, and is 100% recyclable. ● Our folding cartons meet the requirements of SFI, the Sustainable Forestry Initiative, and are 100% recyclable. ● Liners are 100% recyclable. ● All components sourced from North/South America – closer supply chain for Hollister brand fragrances and are filled and warehoused in the United States. In addition, all folding cartons for all licensed brands in United States operations now consist of FSC, the Forest Stewardship Council, or SFI certified paper. We are also making efforts to regionally source components to filling and warehousing locations where practicable in order to lessen shipping and thereby lower energy costs. For 2023 most giftsets will be reduced in format and size, and we have eliminated plastic from the following branded gift sets completely, Abercrombie & Fitch, Donna Karan, DKNY, Hollister, MCM and Oscar de la Renta. Our largest filler in the United States has been awarded Bronze status in 2022 from EcoVadis. One of our largest pump manufacturers is the recipient of a 2021 Gold Medal from EcoVadis for Sustainability and a 2020 Bronze Medal from EcoVadis for its corporate social responsibility rating, and a large glass bottle manufacturer was awarded gold metals from EcoVadis for its corporate social responsibility rating two years in a row. In addition in 2021, a large glass bottle manufacturer that we utilize received an “A” rating for leadership in corporate sustainability by CDP, a global environmental non-profit group, ranking ‘A’ for tackling water security and ‘A-’ for leading effort against climate change. In our U.S. operations, we do not use any banned ingredients or components and use sustainable ingredients where practicable. Some componentry (glass/folding cartons) is also recyclable where practicable. For example, our Abercrombie & Fitch Away fragrance uses glass and folding cartons that are 100% recyclable, and the carton liner is 100% recyclable and biodegradable. Lastly, our product development team works with our fragrance houses – all very sustainable in their own right – to incorporate sustainably sourced ingredients in the fragrance oils used. 18 In addition to our production operations complying with applicable law, our managers, supervisors and traffic coordinators in our New Jersey distribution center undergo training in order for us to comply with Dangerous Goods Regulations. Compliance requires training and certification to deal in hazardous materials to prevent damage to the environment. The two main certifications are: International Maritime Dangerous Goods (IMDG) Dangerous Goods Training – 3 year Certification for Ocean Shipment and International Air Transport Association (IATA) Dangerous Goods Training – 2 year Certification for Global Air Shipments. Further, our distribution center in New Jersey has in-rack sprinklers to accommodate our hazardous material products. Our fragrances, Class 9 – Consumer Commodity ID8000, are registered with American Chemistry Council, Inc. (known in the chemicals industry as Chemtrec). Chemtrec has a 24/7 hazardous materials emergency communications center, which provides immediate assistance for incidents involving hazardous materials of any kind. Social & Governance We have an Ethical Code of Conduct, which governs our behavior in the following subject matters: CSR & Governance Employer Values Social Values Corporate Governance Brand Initiatives The Environment Dangerous Goods Regulations CSR & Governance Introduction ● Responsible employment, corporate citizenship and governance practices have been an integral part of our values from day one ● In our recent past, environmental practices were mainly based on Good Manufacturing Practices and U.S. sourcing. ● Today, our aim is to elevate the issue of environmental responsibility Practices recognized in the areas of responsible employment, social responsibility and governance ● Employer values: A responsible employer ○ An “Interparfums spirit” cultivating a sense of belonging #OneIP #OneTeam #OneDream ○ A proactive employee relations policy ● Social values: Long-standing practices ○ Ethical conduct ○ Close relations with our partners ● Governance values: Long-proven practices ○ Quality of profiles, balance between independent/non-independent board members ○ Following Inter Parfums, Inc. Board of Directors’ Diversity Policy Interparfums USA contributes to protecting the environment ● Application of Good Manufacturing Practices ● Audits of packaging service providers ● U.S. sourcing: 64% 19 A value chain from design to distribution ● Approximately 40.5 million bottles were shipped in 2022 throughout the globe ● Approximately 2.5 million gift sets are to be shipped per year, throughout the globe ● Working with U.S. packaging sites: ○ 6 fragrance filling and assembly sites ○ About 20 packaging component sites ● A 150,000 sq. ft. warehouse and distribution facility in Dayton, New Jersey ● Points of sale all around the world Targets ● Reinforcing our status as socially engaged and responsible employer ● Reinforcing our corporate governance practices ● Become an active contributor to protecting the environment Recent Actions Creation of working groups to integrate an “optimized eco-design” component in products over their entire lifecycle ● Use of environmentally responsible materials ● Reducing weight and size of glass, cardboard and plastics ● Strengthening relations with design houses (natural products, sourcing, traceability) Employer values Current situation: A proactive employee relations policy Long-standing fundamentals ● A family-style management culture built on fostering close relations ● An “Interparfums spirit” promoting a sense of belonging ● Ethical values based notably on respecting people ● Welcoming and sharing new ideas ● Job preservation ● Paid time off for vacation, sick days and personal days Workplace Quality of life ● Positions that encourage responsibility and autonomy ● Respecting a proper balance between business and private life ● Managing talent (appraisal interviews, training) ● A commitment to combating all forms of discrimination ● Paid sick leave benefits, including maternity leave and caring for a family member with a serious health condition A motivating compensation policy ● Compensation levels in line with market practice ● Savings plans in the form of 401K ● Available health insurance programs with multiple coverage options ● Stock option plans available for certain officers and high-level employees 20 Targets ● Formalizing employee relations practices through an employee Workplace Safety Committee Social Values Current situation: Recognized business ethics Relations with brands under license agreements ● A focus on developing genuine partnerships through close and regular relations with the management of each brand ● Developing products that respect the codes of each brand ● Dedicated Interparfums USA marketing teams Relations with customers ● Long (or very long-term) relationships with distributors ● Taking into account the specific characteristics of each market and country ● Developing products in some cases specifically adapted to demands ● Sharing projects at a very early stage Relations with industrial partners ● Long or very long-term relationships with manufacturers in the sector ● Implementing guidelines on “Good Manufacturing Practices” ● Supporting innovation ● Financial support (2020 pandemic) Targets ● Raising awareness of our partners about CSR challenges Corporate governance Current situation: Long-proven practices Board of Directors ● 10 members: 6 independent directors (60%) Audit Committee, Executive Compensation Committee and Nominating Committee ● 3 members: 3 independent directors (100%) Important Business Policies ● Prohibition on fraud, bribes, kickbacks and other benefits to suppliers and customers ● Prohibition on trading in the company’s securities on the basis of non-public material information ● Requirement of Company-wide confidentiality for non-public sensitive or proprietary information ● Prohibition on sexual harassment ● Prohibition on use of child labor and slave labor Targets ● Consolidating our existing corporate governance practices ● Strengthening alignment with Inter Parfums, Inc. Board Diversity Policy 21 Brand initiatives MCM MCM EAU DE PARFUM PACKAGING SUSTAINABILITY ● Outer packaging is 100% recyclable and Forest Stewardship Council (FSC) certified ○ FSC sets standards for responsible forest management ○ FSC is the gold standard in forest certification ● Glass bottle is made from post-industrial recycled materials ● Only environmentally friendly ink and colorants were used for the bottle and carton HOLLISTER HOLLISTER CANYON ESCAPE named “GOOD FOR VEGAN” by Sephora ● Hollister Canyon Escape For Him and Hollister Canyon Escape For Her meet the following criteria: ○ Do not contain substances of animal origin (i.e., carmine, beeswax, honey, royal jelly, marine collagen, lanolin, fish extract, musk, silk, gelatin, milk, keratin, etc.) ○ Formula has not been tested on animals ○ Do not contain raw materials that have been tested on animals since March 11, 2009 for cosmetic purposes ABERCROMBIE & FITCH ABERCROMBIE & FITCH AWAY PACKAGING SUSTAINABILITY ● Uses glass and folding cartons that are 100% recyclable ● Carton liner is 100% recyclable and biodegradable The Environment Focus of 2022 work Today, Interparfums USA is pursuing an environmental approach in the following areas ● Manufacturing of components ● The design of fragrances (juice) ● Industrial packaging Production of components ● Glass bottles: Reducing consumption of glass and systematic use of recycled glass for launches ● Packaging: Reducing consumption of cardboard, use of sustainable FSC-certified cardboard ● Gift sets: Use of FSC cardboard Design of fragrances (“juice”) ● Continue close collaboration with fragrance houses to incorporate sustainably sourced ingredients in the fragrance oils used Industrial packaging ● Continue to work in close collaboration with EcoVadis Award Winning packaging service providers ○ Our largest filler in the United States has been awarded Bronze status in 2022 from EcoVadis. One of our largest pump manufacturers is the recipient of a 2021 Gold Medal from EcoVadis for Sustainability and a 2020 Bronze Medal from EcoVadis for its corporate social responsibility rating, and a large glass bottle manufacturer was awarded gold metals from EcoVadis for its corporate social responsibility rating two years in a row. 22 EcoVadis ● A platform used by the main perfumes & cosmetics industry players ● 4 pillars: ○ The environment ○ Social & Human Rights ○ Ethics ○ Responsible sourcing Targets ● Become an active contributor to protecting the environment as well as through our business partners As we continue in our endeavors of responsible employment, corporate citizenship and governance practices, and continue to elevate the issue of environmental responsibility, we will update our policies and procedures accordingly. As such, this Ethical Code of Conduct will be updated from time to time. Marketing and Distribution Our products are distributed in over 120 countries around the world through a selective distribution network. For our international distribution, we either contract with independent distribution companies specializing in luxury goods or distribute prestige products through our distribution subsidiaries. In each country, we designate anywhere from one to three distributors on an exclusive basis for one or more of our name brands. We also distribute our products through a variety of duty free operators, such as airports and airlines and select vacation destinations. As our business is a global one, we intend to continue to build our global distribution footprint. For the distribution of brands within our European based operations, we operate through our distribution subsidiaries or divisions in the major markets of the United States, France, Italy and Spain, in addition to our arrangements with third party distributors globally. Our third party distributors vary in size depending on the number of competing brands they represent. This extensive and diverse network together with our own distribution subsidiaries provides us with a significant presence in over 120 countries around the world. Over 50% of our European based prestige fragrance net sales are denominated in U.S. dollars. We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates. The business of our European operations has become increasingly seasonal due to the timing of shipments by our distribution subsidiaries and divisions to their customers, which are weighted to the second half of the year. For our United States operations, we distribute products to retailers and distributors in the United States as well as internationally, including duty free and other travel-related retailers. We utilize our in-house sales team to reach our third party distributors and customers outside the United States. In addition, the business of our United States operations has become increasingly seasonal as shipments are weighted toward the second half of the year. Competition The market for prestige fragrance products is highly competitive and sensitive to changing preferences and demands. The prestige fragrance industry is highly concentrated around certain major players with resources far greater than ours. We compete with an original strategy, regular and methodical development of quality fragrances for a growing portfolio of internationally renowned brand names. 23 Inventory We purchase raw materials and component parts from suppliers based on internal estimates of anticipated need for finished goods, which enables us to meet production requirements for finished goods. We generally ship products to customers within 72 hours of the receipt of their orders. 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 or directly to one of those third party fillers, which manufacture the finished products for us and then deliver them to one of our distribution centers. Product Liability Our United States operations maintain product liability coverage in an amount of $10.0 million, and our European operations maintain product liability coverage in an amount of €20 million (approximately $21 million). Based on our experience, we believe this coverage is adequate and covers substantially all of the exposure we may have with respect to our products. We have never been the subject of any material product liability claims. Government Regulation Under the Federal Food, Drug and Cosmetic Act, fragrance products are regulated as cosmetics, and fragrances include perfumes, colognes and aftershave. They must meet the same requirements for safety as other cosmetic ingredients. Compliance required of fragrance ingredients include being safe for consumers when they are used according to labeled directions or as consumers customarily use them. Under the Fair Packaging and Labelling Act, companies and individuals who manufacture or market cosmetics have the legal responsibility to ensure the products are safe and labelled according to the Act. Our fragrance products that are manufactured and marketed in Europe are also regulated as cosmetics and subject to EU Regulation 1223/2009, and after Brexit, the United Kingdom regulation of The UK Schedule 34 to the Product Safety and Metrology Regulation 2019. As of the date of this report, IP products are in compliance with these regulations. Trademarks The market for our products depends to a significant extent upon the value associated with our trademarks and brand names. We have licenses or other rights to use, or own, the material trademark and brand name rights used in connection with the packaging, marketing and distribution of our major products both in the United States and in other countries where such products are principally sold. Therefore, trademark and brand name protection are important to our business. Although most of the brand names we license, use or own are registered in the United States and in certain foreign countries in which we operate, we may not be successful in asserting trademark or brand name protection. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and brand names may be substantial. Under various licenses and other agreements, we have the right to use certain registered trademarks throughout the world for fragrance products. These registered trademarks include: ● Abercrombie & Fitch ● Anna Sui ● bebe ● Boucheron ● Coach 24 ● Donna Karan and DKNY ● Dunhill ● Emanuel Ungaro ● French Connection ● Graff ● GUESS ● Hollister ● Jimmy Choo ● Kate Spade ● Karl Lagerfeld ● MCM ● Moncler ● Montblanc ● Oscar de la Renta ● Ferragamo ● S.T. Dupont ● Van Cleef & Arpels In addition, we are the registered owner of several trademarks for fragrance and beauty products, including: ● Rochas ● Lanvin ● Intimate ● Aziza Human Capital General As of December 31, 2022, we had 527 full-time employees worldwide. Of these, 306 are full-time employees of our European operations and its subsidiaries, with 186 employees engaged in sales activities and 120 in administrative, production and marketing activities. Our United States operations have 175 full-time employees, and of these, 51 are engaged in sales activities and 124 in administrative, production and marketing activities. In addition, Interparfums Italia Srl, our wholly-owned subsidiary, has 46 full-time employees, with 21 engaged in sales activities and 25 in administrative, production and marketing activities. Other than for the employees of Interparfums Italia Srl, we do not have collective bargaining agreements relating to any of our employees, and we believe the collective bargaining agreement for our employees of Interparfums Italia Srl will not have a material adverse effect on our operations. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment and, believe that our relationship with our employees is good. Goals for our employees Company-wide are - developing a team spirit and cross-functional collaboration; - maintaining a high level of expertise; - cultivating a culture that promotes our values of entrepreneurship, commitment, creativity and passion; - developing a respectful and inclusive work environment; - ensuring equal opportunity employment; - empowering employees to develop their skills and grow their careers; - promoting dialogue between employees and management; - offering quality working conditions; - preserving the health and safety of all; - maintaining a proper balance between professional and private life. 25 United States Operations Our employees are one of our most valuable assets, and fostering long-term relationships are beneficial to the continuity of our business. After experience and expertise in the respective fields of employment, we look for dedication and loyalty among our employees, as we believe having long-term staff members benefits our Company. All of our executive senior officers have been with us for more than twenty years (other than our CFO who just joined our company in September 2022), and we have several senior and upper-level staff members, who have also been with us long-term. These long-term executives and employees believe that our Company and their co-workers are an extended family and share the same values of entrepreneurship, commitment, creativity and passion. Their efforts and dedication are what allow our Company to prosper. Every year, United States operations organizes two seminars over several days for all its global sales staff. This seminar provides an opportunity to present all the Company’s brands and products and marketing strategies. The safety of our employees is of paramount importance to us. In the early stages of the COVID-19 pandemic, we experienced brief closures at all of our locations, and adapted to working remotely. Upon reopening, we implemented prevention protocols to minimize the spread of COVID-19 in our workplaces. These protocols, which remain in place, are in compliance with the Centers for Disease Control guidelines and state requirements. As part of our increasing benefits of working at our United States operations, we provide a comprehensive benefits package (medical, dental, vision, long-term disability, accidental death and dismemberment insurance and life insurance, 401-K, commuter benefits), allow Friday remote working arrangements for our employees, have shorter hours on Fridays during the summer months, offer various gifts and “goodie bags” during various times of the year, have made available food choices for purchase in our lunchroom in New York from the “Fraîche fridge,” and hold quarterly presentations showing financial results, updates on all departments, existing product lines, as well as the development and launches of new products for all of our brands for all employees and consultants worldwide of United States operations so that all are made aware of our operations, and invite comments from those in attendance at the presentations. Interparfums Italia Srl The employees of our wholly-owned Italian subsidiary, Interparfums Italia Srl, receive both benefits required under Italian law and certain additional benefits that it provides. Below are employee benefits provided as required by law. ○ Health insurance for employees and family coverage ○ Supplementary voluntary severance plan ○ Parental leave ○ Study leave ○ Training in health and safety at work ○ Paid time off ○ Implementation of Covid anti-contagion measures and protocol Interparfums Italia also provides these additional benefits for its employees: ○ Working remotely 2 days per week ○ Flexible working hours (different start and end times for employees’ workday) ○ Onboarding Process – Welcome day (includes training on Company’s history and values, meeting with all teams, a gift and dinner with the new hire’s team) 26 ○ Welfare Plan – €500 per year to each employee that can be used through a dedicated platform that encompasses a broad range of benefits and services (transportation, education, health, culture and leisure time, supplementary pension, other fringe benefits) ○ Paid time off for medical checkups - 10 hours per year ○ Restaurant voucher to cover lunch expenses (value of €8 per each day worked) ○ Mobile phone and unlimited internet connection for specific category of employees (based on role) The following additional benefits are also provided: ○ Event celebrations to actively promote and build a sense of belonging ○ New office set up including dining area to socialize and relax (free coffee, tea and biscuits) ○ Easter - Chocolate eggs gift for charity purpose (AIL - Italian Association against Leukemia Lymphoma and Myeloma) ○ Christmas – Greeting cards and gift sets baskets for charity purpose (ANT – Medical care at home for cancer patients) European Operations Interparfums SA’s employees constitute its most important contributor for creating value. For that reason, their professional fulfillment and motivation are indispensable drivers for our development. With a family-style management culture that is close to its employees, everyone is free to share their ideas in a manner that respects the company’s values. Management attaches great importance to ensuring that each employee fully understands and supports Interparfums SA’s strategy. Through weekly memos and regular information meetings on business developments and trends, employees are kept up-to-date on expectations of management and the market. The organization’s flexibility largely made up of small teams facilitates its continuous adaptation to all changes or evolving external conditions. This sharing of the “Interparfums” spirit, also entails a commitment to and understanding of its ethical values by each employee, the fulfillment of employees at work and compliance with good working conditions. This ethical commitment is formalized by a “Code of Good Conduct” to which each employee subscribes, and that is focused in particular on health, safety, discipline, risk management, preventing harassment, respecting individual freedoms, sensitive transactions, fraud and business confidentiality. In 2017, Interparfums SA adopted a Charter relating to the right to disconnect from digital devices that was accepted by each employee. Every two to three years, Interparfums SA organizes a seminar over several days for all its distributors from throughout the world. This seminar provides an opportunity to present all the company’s brands and products, meet with all distributors and involve them in Interparfums SA’s development while giving the distributors an opportunity to meet with staff with whom they work closely on a daily basis. The Human Resources Department pays particular attention to ensuring equal opportunity and non-discrimination for each recruitment. Only skills, experience, qualifications and the personality of the candidates are taken into account in the selection process for new employees. This diversity in terms of profiles, culture, age and gender constitutes a decisive strength of its teams, the company’s most important asset. 27 Women account for 72% of Interparfums’ workforce and 52% of management positions are occupied by women in 2021. Since 2019, Interparfums SA has organized an annual disability awareness raising campaign. In 2021, employees were given an opportunity to participate role-playing workshop designed to give them a first-hand perspective of a person with a disability (hearing, visual, psychological, motor). Thanks to these opportunities for exchange, employees were able to talk about their all possible impediments and share their views and experiences. Through these awareness-raising campaigns and local support from the Human Resources teams, two employees were accorded the status of employees with disabilities through a specific procedure available in France for that purpose (Reconnaissance de la Qualité de Travailleur Handicapé or RQTH). Interparfums SA also participates indirectly in promoting the employment of persons with disabilities and combating exclusion discrimination. The company has chosen to use a sheltered work enterprise to package its perfume boxes and a global communications agency called “Les Papillons de Jour” to organize the European Week for the Employment of People with Disabilities (EWPD). In 2021, the total cost for these services amounted to €974,094. In addition, Interparfums SA has adopted action plans promoting the employment of seniors and equal opportunity between men and women. Compensation and wage increases Interparfums SA has a compensation policy as well as a system of job classifications and performance evaluations applied to all employees. These procedures guarantee the principle of fairness as well as equal treatment of men and women employees. All employees benefit from a combination of fixed and variable incentive compensation benefits linked to Interparfums SA’s performance. Profit-sharing As required by French law, a statutory employee profit-sharing agreement was implemented in 2001. In April 2015, this agreement was amended to provide more advantageous terms to employees, representing an important component of compensation and motivation for all staff and reviewed every year. Savings plan and pension plan All employees of Interparfums SA benefit from a company savings plan which proposes several types of funds corresponding to the specific projects of each. Since 2017, it has adapted its plan by proposing an Interparfums stock ownership fund allowing employees to take advantage of the growth of Interparfums’ shares under favorable tax conditions. The amounts employees pay into this fund are supplemented by an important contribution by the company. In addition, a group retirement savings plan (Plan d’Epargne Retraite Collectif or PERCOL) is available to employees as a vehicle for preparing for their retirement and to which the company contributes significantly. Employees also can transfer a portion of their unused annual vacation days into the Interparfums SA retirement savings plan. Supplemental defined contribution retirement plan contract (Article 83) Management employees benefit from a supplemental defined-contribution retirement plan. Participation in this plan is mandatory. This individual plan is funded by monthly employee and employer contributions, with the breakdown of these latter contributions freely determined. Interparfums SA has decided to assist its employees in financing this supplemental retirement benefit, by assuming an important percentage of these contributions itself. 28 Item 1A. Risk Factors. You should carefully consider these material risk factors before you decide to purchase or sell shares of our common stock. These factors could cause our future results to differ materially from those expressed or implied in forward-looking statements made by us. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. ● Fragrance Business, Brand Names and Intellectual Property We are dependent upon the continuation and renewal of various licenses and other agreements for a significant portion of our sales, and the loss of one or more licenses or agreements could have a material adverse effect on us. All of our rights relating to prestige fragrance brands, other than Lanvin and Rochas, are derived from licenses or other agreements from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses and other agreements on terms favorable to us. Each license or agreement is for a specific term and may have additional optional terms. Generally, each license is subject to us making required royalty payments (which are subject to certain minimums), minimum advertising and promotional expenditures and meeting minimum sales requirements. Other agreements are generally subject to meeting minimum sales requirements. Just as the loss of a license or other significant agreement may have a material adverse effect on us, a renewal on less favorable terms may also negatively impact us. If we are unable to acquire or license additional brands or obtain the required financing for these agreements and arrangements, then the growth of our business could be impaired. Our future expansion through acquisitions or new product licenses or distribution arrangements, if any, will depend upon the capital resources and working capital available to us. Further, we may be unable to obtain financing or credit that we may require for additional licenses, acquisitions or other transactions. We may be unsuccessful in identifying, negotiating, financing and consummating such acquisitions or arrangements on terms acceptable to us, or at all, which could hinder our ability to increase revenues and build our business. Just as the loss of a license or other significant agreement may have a material adverse effect on us, our failure to acquire rights to new brands may also negatively impact us. We may engage in future acquisitions that we may not be able to successfully integrate or manage. These acquisitions may dilute our stockholders and cause us to incur debt and assume contingent liabilities. We continuously review acquisition prospects that would complement our current product offerings, increase our size and geographic scope of operations or otherwise offer growth and operating efficiency opportunities. The financing, if available, for any of these acquisitions could significantly dilute our stockholders and/or result in an increase in our indebtedness. We may acquire or make investments in businesses or products in the future, and such acquisitions may entail numerous integration risks and impose costs on us, including: ● difficulties in assimilating acquired operations or products, including the loss of key employees from acquired businesses ● diversion of management’s attention from our core business ● adverse effects on existing business relationships with suppliers and customers 29 ● risks of entering markets in which we have no or limited prior experience ● dilutive issuances of equity securities ● incurrence of substantial debt ● assumption of contingent liabilities ● incurrence of significant amortization expenses related to intangible assets and the potential impairment of acquired assets and ● incurrence of significant immediate write-offs. Our failure to successfully complete the integration of any acquired business could have a material adverse effect on our business, financial condition and operating results. Joint arrangements or strategic alliances in geographic markets in which we have limited, or no prior experience may expose us to additional risks. We review, and from time to time may establish, arrangements and strategic alliances that we believe would complement our current product offerings, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. These business relationships may require us to rely on the local expertise of our partners with respect to market development, sales, local regulatory compliance and other matters. Further, there may be challenges with ensuring that such arrangements or strategic alliances implement the appropriate internal controls to ensure compliance with the various laws and regulations applicable to us as a U.S. public company. Accordingly, in addition to commercial and operational risk, these arrangements and strategic alliances may entail risks such as reputational risk and regulatory compliance risk. In addition, there can be no assurance that we will be able to identify suitable alliances or candidates, that we will be able to consummate any such alliances or arrangements on favorable terms, or that we will realize the anticipated benefits of entering into any such alliances or arrangements. If we are unable to protect our intellectual property rights, specifically trademarks and brand names, our ability to compete could be negatively impacted. The market for our products depends to a significant extent upon the value associated with trademarks and brand names that we license, use or own. We have licenses or other rights to use, or own the material trademark and brand name rights in connection with the packaging, marketing and distribution of our major products both in the United States and in other countries where such products are principally sold. Therefore, trademark and brand name protection are important to our business. Although most of the brand names we license, use or own are registered in the United States and in certain foreign countries in which we operate, we may not be successful in asserting trademark or brand name protection. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and brand names may be substantial. I f our intangible assets, such as trademarks and licenses, become impaired, we may be required to record a significant non-cash charge to earnings which would negatively impact our results of operations. Under United States generally accepted accounting principles, we review our intangible assets, including our trademarks and licenses, for impairment annually in the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate the carrying value of our intangible assets may not be fully recoverable. The carrying value of our intangible assets may not be recoverable due to factors such as reduced estimates of future cash flows, including those associated with the specific brands to which intangibles relate, or slower growth rates in our industry. Estimates of future cash flows are based on a long-term financial outlook of our operations and the specific brands to which the intangible assets relate. However, actual performance in the near-term or long-term could be materially different from these forecasts, which could impact future estimates and the recorded value of the intangibles. Any significant impairment to our intangible assets would result in a significant charge to earnings in our financial statements during the period in which the impairment is determined to exist. 30 The illegal distribution and sale by third parties of counterfeit versions of the Company’s products or the unauthorized diversion by third parties of the Company’s products could have an adverse effect on the Company’s revenues and a negative impact on the Company’s reputation and business. Third parties may illegally distribute and sell counterfeit versions of the Company’s products. These counterfeit products may be inferior in terms of quality and other characteristics compared to the Company’s authentic products and/or the counterfeit products could pose safety risks that the Company’s authentic products would not otherwise present to consumers. Consumers could confuse counterfeit products with the Company’s authentic products, which could damage or diminish the image, reputation and/or value of the Company’s brands and cause consumers to refrain from purchasing the Company’s products in the future. In addition, the sale of the Company’s prestige products through non-authorized “grey market” channels could damage or diminish the image, reputation and/or value of the Company’s brands and could adversely affect the Company’s revenues and have a negative impact on the Company’s reputation. Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of other parties. Our commercial success depends at least in part on our ability to operate without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of others. However, we cannot be certain that the conduct of our business does not and will not infringe, misappropriate or otherwise violate such rights. Many companies have employed intellectual property litigation as a way to gain a competitive advantage, and to the extent we gain greater visibility and market exposure, we may also face a greater risk of being the subject of such litigation. For these and other reasons, third parties may allege that our products, services or activities infringe, misappropriate or otherwise violate their trademark, patent, copyright or other proprietary rights. Defending against allegations and litigation could be expensive, take significant time, divert management’s attention from other business concerns, and delay getting our products to market. In addition, if we are found to be infringing, misappropriating or otherwise violating third party trademark, patent, copyright or other proprietary rights, we may need to obtain a license, which may not be available on commercially reasonable terms or at all, or redesign or rebrand our products, which may not be possible. We may also be required to pay substantial damages or be subject to a court order prohibiting us and our customers from selling certain products or engaging in certain activities. Our inability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of others could therefore have a material adverse effect on our business, financial condition and results of operations. 31 ● COVID-19 Pandemic and Economic Downturn Although in both 2022 and 2021 we weathered the COVID-19 pandemic and its effects to date, if the pandemic reemerges, it may have a material adverse effect on our business, results of operations, financial condition and cash flows. The public health crisis caused by the COVID-19 pandemic, its variants and the measures being taken by governments, businesses, including us, our suppliers, our distributors, retailers and the public, to limit COVID-19’s spread, have had and we expect will continue to have, certain negative impacts on our business including, but not limited to, the following: ● Deteriorating economic and political conditions in certain of our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns could cause a decrease in demand for our products. ● We may be required to record significant impairment charges with respect to noncurrent assets, including trademarks, licenses and other intangible assets whose fair values may be negatively affected by the effects of re-emergence of the COVID-19 pandemic on our operations. ● Considerable uncertainty remains regarding the potential re-emergence of COVID-19 variants, including potential reinstatement of measures by various authorities and others in response to any such re-emergence. As we continue to monitor potential COVID-19 variant developments, including the impacts on our consumers, customers and suppliers, we take further measures as necessary to protect our business and our employees. Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of a re-emergence of COVID-19 variants. ● Actions we may take, or decisions on potential actions that we did not take, as a consequence of a resurgence of a COVID-19 variant pandemic may result in claims or litigation against us. Consumers may reduce discretionary purchases of our products as a result of a general economic downturn. We believe that a high degree of global economic uncertainty could have a further negative effect on consumer confidence, demand and spending. In addition, we believe that consumer spending on beauty products is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience sustained periods of declines in sales during periods of economic downturn as it may affect consumer purchasing patterns. In addition, a further general economic downturn may result in further reduced traffic in our customers’ stores which may, in turn, result in reduced net sales to our retail store customers. Any further material reduction in our sales could have a material adverse effect on our business, financial condition and operating results. An outbreak of any other disease, epidemic or pandemic, or similar public health threat on the scope of COVID-19, could have a material adverse impact on the Company’s business, operating results and financial condition. An outbreak of disease, epidemic or pandemic, or similar public threat on the scope of COVID-19, or fear of such an event, that negatively impacts consumer spending on our products could have a material adverse impact on the Company’s business, financial condition and operating results. The extent and potential short and long-term impact of any other pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak, our customers’ willingness to travel and purchase our products, and the impact on our supply chain and the financial markets, all of which are highly uncertain and cannot be predicted. 32 ● Global Operations We are subject to risks related to our foreign operations, and a disruption in our operations or supply chain could adversely affect our business and financial results. We operate on a global basis, with a substantial portion of our net sales and net income generated outside the United States, and we anticipate for the foreseeable future that a substantial portion of our net sales and net income will be generated outside the United States. A substantial portion of our cash, cash equivalents and short-term investments that result from these earnings remain outside the United States. As a company engaged in manufacturing and distribution on a global scale, we are subject to many risks and uncertainties, including: ● changes in foreign laws, regulations and policies, including restrictions on trade, import and export license requirements, and tariffs and taxes, as well as changes in United States laws and regulations relating to foreign trade and investment; and ● industrial accidents, environmental events, strikes and other labor disputes, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, as well as natural disasters, adverse weather conditions, social, economic and geopolitical conditions, such as terrorist attacks, war or other military action and other external factors over which we have no control. These risks could have a material adverse effect on our business, prospects, results of operations and financial condition. Terrorist attacks, acts of war or military actions, other civil unrest or natural disasters may adversely affect territories in which we operate, and therefore affect our business, financial condition and operating results. Terrorist attacks such as those that have previously occurred in Paris, France where we have our European headquarters, amongst other locations, and attempted terrorist attacks, military responses to terrorist attacks, other military actions, or governmental action in response to or in anticipation of a terrorist attack, or civil unrest as occurring in the Middle East, Ukraine and Africa or natural disasters, may adversely affect prevailing economic conditions. These events could result in work stoppages, reduced consumer spending or reduced demand for our products. These developments subject our worldwide operations to increased risks and, depending on their magnitude, could reduce net sales and therefore could have a material adverse effect on our business, financial condition and operating results. The loss of or disruption in our distribution facilities could have a material adverse effect on our business, financial condition and operating results. We currently have several distribution facilities in Europe, China and the United States. The loss of any of those facilities, as well as the inventory stored in those facilities, would require us to find replacement facilities and assets. In addition, acts of God, such as extreme weather conditions, natural disasters and the like or terrorist attacks, could disrupt our distribution operations. If we cannot replace our distribution capacity and inventory in a timely, cost-efficient manner, then such failure could have a material adverse effect on our business, financial condition and operating results. Changes in foreign tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows. In addition to being subject to taxation in the United States, we are subject to income and other taxes in other foreign jurisdictions. Our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. From time to time, tax proposals are introduced or considered by the United States Congress or the legislative bodies in foreign jurisdictions that could also affect our tax rate, the carrying value of our deferred tax assets, or our other tax liabilities. Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses, funding, cross-jurisdictional transfer pricing, and other items in intercompany transactions. A negative determination or ultimate disposition in any tax audit, changes in tax laws or tax rates, or the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods. 33 The international character of our business renders us subject to fluctuation in foreign currency exchange rates and international trade tariffs, barriers and other restrictions. A substantial portion of our European operations’ net sales (over 50%) are sold in U.S. dollars. In an effort to reduce our exposure to foreign currency exchange fluctuations, we engage in a controlled program of risk management that includes the use of derivative financial instruments for all major currencies with which we operate. Despite such actions, fluctuations in foreign currency exchange rates for the U.S. dollar, particularly with respect to the euro, could have a material adverse effect on our operating results. Possible import, export, tariff and other trade barriers, which could be imposed by the United States, the European Union or other countries might also have a material adverse effect on our operating results. Changing political conditions could adversely impact our business and financial results. Changes in the political conditions in markets in which we manufacture, sell or distribute our products may be difficult to predict and may adversely affect our business and financial results. In addition, results of elections, referendums or other political processes in certain markets in which our products are manufactured, sold or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, the movement of goods, services, capital and people between countries and other matters. The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, tariffs, trade barriers and market contraction, could adversely affect the Company’s business and financial results. ● Operational Risks We are dependent upon Messrs. Jean Madar and Philippe Benacin, and the loss of their services could harm our business. Jean Madar, our Chairman and Chief Executive Officer, and Philippe Benacin, our President, and Chief Executive Officer of Interparfums SA, are responsible for day-to-day operations as well as major decisions. Termination of their relationships with us, whether through death, incapacity or otherwise, could have a material adverse effect on our operations, and we cannot assure you that qualified replacements can be found. Our reliance on third party manufacturers could have a material adverse effect on us. We rely on outside sources to manufacture our fragrances and cosmetics. The failure of such third party manufacturers to deliver either compliant, quality components or finished goods on a timely basis could have a material adverse effect on our business. Although we believe there are alternate manufacturers available to supply our requirements, we cannot assure you that current or alternative sources will be able to supply all of our demands on a timely basis. We do not intend to develop our own manufacturing capacity. As these are third parties over whom we have little or no control, the failure of such third parties to provide components or finished goods on a timely basis could have a material adverse effect on our business, financial condition and operating results. Our reliance on third party distributors could have a material adverse effect on us. We sell a substantial percentage of our prestige fragrances through independent distributors specializing in luxury goods. Given the growing importance of distribution, we have modified our distribution model by owning a controlling interest in certain of our distributors within key markets. However, we have little or no control over third party distributors and the failure of such third parties to provide services on a timely basis could have a material adverse effect on our business, financial condition and operating results. In addition, if we replace existing third party distributors with new third party distributors or with our own distribution arrangements, then transition issues could have a material adverse effect on our business, financial condition and operating results. 34 Our business is subject to governmental regulation, which could impact our operations. Under the Federal Food, Drug and Cosmetic Act, fragrance products are regulated as cosmetics, and fragrances include perfumes, colognes and aftershave. They must meet the same requirements for safety as other cosmetic ingredients. Compliance required of fragrance ingredients include being safe for consumers when they are used according to labelled directions or as consumers customarily use them. Under the Fair Packaging and Labelling Act, companies and individuals who manufacture or market cosmetics have the legal responsibility to ensure the products are safe and labelled according to the Act. Our fragrance products that are manufactured and marketed in Europe are also regulated as cosmetics and subject to EU Regulation 1223/2009, and after Brexit, the United Kingdom regulation of The UK Schedule 34 to the Product Safety and Metrology Regulation 2019. As of the date of this report, IP products are in compliance with these regulations. However, we cannot assure you that, should we use proscribed ingredients in our fragrance products that we develop or market, or develop or market fragrance products with different ingredients, or should existing regulations or requirements be revised, we would not in the future experience difficulty in complying with such requirements, which could have a material adverse effect on our results of operations. Our business could be negatively impacted by social impact and sustainability matters. There continues to be an increased focus from certain investors, customers, consumers, employees, and other stakeholders concerning social impact and environmental matters. We are spending considerable time addressing social impact and sustainability matters, which are becoming more prominent issues for certain of our institutional shareholders. From time to time, we may announce certain initiatives, including goals and commitments, regarding environmental matters, packaging, responsible sourcing and corporate social responsibility. We could fail, or be perceived to fail, in our achievement of such initiatives, or in accurately reporting our progress on such initiatives. Such failures could be due to changes in distribution channels, new licenses or other acquisitions. Moreover, the standards by which corporate social responsibility are measured are developing and evolving, and certain areas are subject to assumptions that could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any of such matters could have a material adverse effect on our business. Our business is subject to seasonal variability. Our business is somewhat seasonal due to the timing of shipments to our customers, which are weighted to the second half of the year. Accordingly, our financial performance, sales, working capital requirements, cash flow and borrowings generally experience variability during the third and fourth quarters. Our business is subject to inflationary pressures. Despite significant inflationary pressures that started during 2022 affecting many aspects of our business, especially increase component costs and shipping, we were able to offset the effects of inflation during 2022 by increasing the prices of our products. Although we believe inflation will continue to be a major factor in 2023, a further increase in sales prices should help to mitigate its impact to some degree. However, we may not be able to continue increasing our prices indefinitely without causing a reduction in the number of consumers with sufficient disposable income to buy our certain of our fragrance products, which could have a material adverse effect on our business. 35 ● Fragrance Markets The success of our products is dependent on public taste. Our revenues are substantially dependent on the success of our products, which depends upon, among other matters, pronounced and rapidly changing public tastes, factors which are difficult to predict and over which we have little, if any, control. In addition, we have to develop successful marketing, promotional and sales programs in order to sell our fragrances and fragrance related products. If we are not able to develop successful marketing, promotional and sales programs, then such failure will have a material adverse effect on our business, financial condition and operating results. We are subject to extreme competition in the fragrance industry. The market for fragrance products is highly competitive and sensitive to changing market preferences and demands. Many of our competitors in this market are larger than we are and have greater financial resources than are available to us, potentially allowing them greater operational flexibility. Our success in the prestige fragrance industry is dependent upon our ability to continue to generate original strategies and develop quality products that are in accord with ongoing changes in the market. If there is insufficient demand for our existing fragrance products, or if we do not develop future strategies and products that withstand competition or if we are unsuccessful in competing on price terms, then we could experience a material adverse effect on our business, financial condition and operating results. Changes in laws, regulations and policies that affect our business could adversely affect our financial results. Our business is subject to numerous laws, regulations and policies. Changes in the laws, regulations and policies, including the interpretation or enforcement thereof, that affect, or will affect, our business, including changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, or increased cosmetics regulation, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result could adversely affect our financial results. ● General Risk Factors Our success depends, in part, on the quality and safety of our products. Our success depends, in part, on the quality and safety of our products. If our products are found to be defective or unsafe, or if they otherwise fail to meet our consumers’ standards, then our relationships with customers or consumers could suffer, the appeal of one or more of our brands could be diminished, and we could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition. Our failure to protect our reputation, or the failure of our partners to protect their reputations, could have a material adverse effect on our brand images. Our ability to maintain our reputation is critical to our various brand images. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity or if we, or the third parties with whom we do business, do not comply with regulations or accepted practices. Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure to comply with ethical, social, product, labor and environmental standards, or related political considerations, such as animal testing, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts. Failure to comply with local laws and regulations, including applicable U.S. trade sanctions, to maintain an effective system of internal controls or to provide accurate and timely financial statement information could also hurt our reputation. We are also dependent on the reputations of our brand partners and licensors, which can be affected by matters outside of our control. Damage to our reputation or the reputations of our brand partners or licensors or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation. 36 Our information systems and websites may be susceptible to outages, hacking and other risks. We have information systems that support our business processes, including product development, production, marketing, order processing, sales, distribution, finance and intra-company communications. We also have Internet websites in the United States and Europe. These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, hacking and similar events. Despite the implementation of network security measures, our systems may be vulnerable to computer viruses, hacking and similar disruptions from unauthorized tampering. The occurrence of these or other events could disrupt or damage our information systems and adversely affect our business and results of operations. The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our earnings or other financial performance. Our business planning process is designed to maximize our long-term strength, growth and profitability, not to achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of our Company and our stockholders. At the same time, however, we recognize that it may be helpful to provide investors with guidance as to our forecast of annual net sales and diluted earnings per share. Accordingly, we provide guidance as to our expected annual net sales, and diluted earnings per share, which is updated as appropriate throughout the year. While we generally provide updates to our guidance when we report our results each fiscal quarter if called for, we assume no responsibility to update any of our forward-looking statements at such times or otherwise. In addition, longer-term guidance that we may from time to time provide is based on goals that we believe, at the time guidance is given, are reasonably attainable. In all of our public statements when we make, or update, a forward-looking statement about our sales and/or earnings expectations or expectations regarding other initiatives, we accompany such statements directly, or by reference to a public document, with a list of factors that could cause our actual results to differ materially from those we expect. Such a list is included, among other places, in our earnings press releases (by reference to our periodic filings with the Securities and Exchange Commission) and in our periodic filings with the Securities and Exchange Commission ( e.g., in our reports on Form 10-K and Forms 10-Q). These and other factors may make it difficult for outside observers, such as research analysts, to predict what our earnings will be in any given fiscal quarter or year. Outside analysts and investors have the right to make their own predictions of our financial results for any future period. Outside analysts, however, have access to no more material information about our results or plans than any other public investor, and we do not endorse or adopt their predictions as to our future performance. Nor do we assume any responsibility to correct the predictions of outside analysts or others when they differ from our own internal expectations. If and when we announce actual results that differ from those that outside analysts or others have been predicting, the market price of our securities could be affected. Investors who rely on the predictions of outside analysts or others when making investment decisions with respect to our securities do so at their own risk. We take no responsibility for any losses suffered as a result of such changes in the prices of our securities. Item 1B. Unresolved Staff Comments. None. 37 Item 2. Properties United States Operations We maintain our corporate headquarters and United States operations in approximately 32,000 square feet with a term that expires on December 31, 2029, and have been at the same location in New York City since 1992. We also have a 140,000 square foot distribution center in New Jersey, and this lease expires on October 31, 2025. In addition, we maintain office space in Hong Kong with a lease that expires in June 2023, as well as a small leased distribution center in Hong Kong through December 2023. In October 2021 we leased office space in Florence, Italy for a 6-year term with an option for an additional 6 years for Interparfums Italia Srl. European Operations Since March 2022, our European operations have maintained their corporate headquarters at 10 rue de Solférino in the 7th arrondissement of Paris. This is an office complex combining three buildings connected by two inner courtyards and consists of approximately 40,000 total sq. ft. United States distribution operations for European operations maintain their headquarters in New York City, with a lease that expires in May 2029. During 2022, we also purchased several small apartments at 96 rue de l’Université, Paris adjacent to the main office complex and have started the process of converting them into additional offices. A small office is located Singapore for Asia-Pacific distribution by European operations. In addition, European operations maintain an approximately 37,000 square meters (approximately 398,265 square feet) distribution center located in Criquebeuf sur Seine, France, with a seven year term that expires May 2027 and an option to extend the term for an additional two years. Interparfums SA also has several agreements for warehousing and distribution services which are renewed on an annual basis, as well as a one with a service provider that expires in 2024. Fees payable are partially calculated based upon a percentage of sales, which is customary in the industry. We believe our office and warehouse facilities are satisfactory for our present needs and those for the foreseeable future. Item 3. Legal Proceedings We are not a party to any material lawsuits. Item 4. Mine Safety Disclosures Not applicable. 38 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Market for Our Common Stock Our Company’s common stock, $.001 par value per share, is traded on The Nasdaq Global Select Market under the symbol “IPAR”. The following table sets forth in dollars, the range of high and low closing prices for the past two fiscal years for our common stock. Fiscal 2022 High Closing Price Low Closing Price Fourth Quarter 99.35 74.26 Third Quarter 86.78 70.02 Second Quarter 89.45 64.74 First Quarter 106.82 80.22 Fiscal 2021 High Closing Price Low Closing Price Fourth Quarter 106.90 75.89 Third Quarter 79.42 67.55 Second Quarter 77.95 69.96 First Quarter 76.75 59.17 As of February 8, 2023, the number of record holders, which include brokers and broker nominees, etc., of our common stock was 28. We believe there are approximately 32,436 beneficial owners of our common stock. Corporate Performance Graph The following graph compares the performance for the periods indicated in the graph of our common stock with the performance of the Nasdaq Market Index and the average performance of a group of the Company’s peer corporations consisting of: CCA Industries, Inc., Colgate-Palmolive Co., Estée Lauder Companies, Inc., Inter Parfums, Inc., Kimberly Clark Corp., Natural Health Trends Corp., Procter & Gamble Co., Stephan Co., Summer Infant, Inc. and United Guardian, Inc. The graph assumes that the value of the investment in our common stock and each index was $100 at the beginning of the period indicated in the graph, and that all dividends were reinvested. 39 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Inter Parfums, Inc., the NASDAQ Composite Index, and a Peer Group *$100 invested on 12/31/17 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Below is the list of the data points for each year that corresponds to the lines on the above graph. 12/17 12/18 12/19 12/20 12/21 12/22 Inter Parfums, Inc. 100.00 153.33 172.84 144.75 259.11 239.94 NASDAQ Composite 100.00 97.16 132.81 192.47 235.15 158.65 Peer Group 100.00 99.33 136.46 159.01 192.02 171.79 Dividends 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 annual cash dividend. In February 2021, the Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly. In February 2022, the Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share. Just recently, in February 2023 the Board of Directors further increased the annual dividend to $2.50 per share. The next quarterly cash dividend of $0.625 per share is payable on March 31, 2023 to shareholders of record on March 15, 2023. Item 6. [RESERVED] 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview 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 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% 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 68%, 75% and 78% of net sales for 2022, 2021 and 2020, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T. Dupont 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 32%, 25% and 22% of net sales in 2022, 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, 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, Jimmy Choo, Coach and GUESS brand names. As a percentage of net sales, product sales for the Company’s largest brands were as follows: Year Ended December 31, 2022 2021 2020 Montblanc 18 % 19 % 21 % Jimmy Choo 18 % 18 % 16 % Coach 15 % 16 % 17 % GUESS 12 % 12 % 11 % 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 and expand our shares in two distinct ways. First, 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 by 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. The 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 either received and stored directly at our third-party fillers or 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. 41 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 net sales. However, earnings are positively affected by a strong dollar, because over 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. 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 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 several jurisdictions due to both governmental restrictions and consumer health concerns. While COVID-19 had significantly restricted international travel, the travel retail business has picked 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. 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 the second half of 2023. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic might continue to have adverse effects on our results of our operations, financial position and cash flows through at least the first half of 2023. Recent Important Events Lacoste In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license becomes effective in January 2024 and will last for 15 years. Dunhill In April 2022, we announced that the Dunhill fragrance license will expire on September 30, 2023 and will not be renewed. The Company will continue to produce and sell Dunhill fragrances until the license expires and will maintain the right to sell-off remaining Dunhill fragrance inventory for a limited time as is customary in the fragrance industry. 42 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. Emanuel Ungaro In October 2021, we also entered into a 10-year exclusive global licensing agreement a 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 became effective on July 1, 2022, and we are planning to launch new fragrances under these brands in 2024. Rochas Fashion Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark after an independent expert concluded that the valuation of the trademark was $11.3 million. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value. Land and Building Acquisition - 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. The purchase price includes the complete renovation of the site. As of December 31, 2022, $148.1 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 December 31, 2022. The purchase price has been allocated approximately $61.1 million to land and $87.0 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 $3.4 million of cash held in escrow is also included in property, equipment and leasehold improvements on the accompanying balance sheet as of December 31, 2022. The acquisition was financed by a 10-year €120 million (approximately $128.0 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. Discussion of Critical Accounting Policies We make estimates and assumptions in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations. These accounting policies generally require our management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management of the Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Board of Directors. Long-Lived Assets We evaluate indefinite-lived intangible assets for impairment at least annually during the fourth quarter, or more frequently when events occur or circumstances change, such as an unexpected decline in sales, that would more likely than not indicate that the carrying value of an indefinite-lived intangible asset may not be recoverable. When testing indefinite-lived intangible assets for impairment, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 9.80%. The cash flow projections are based upon a number of assumptions, including, future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded. 43 We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable. However, if future actual results do not meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results of operations. At December 31, 2022 indefinite-lived intangible assets aggregated $105.0 million. The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2022 assuming all other assumptions remained constant: $ in millions Change Increase (decrease) to fair value Weighted average cost of capital +10% $ (7.2 ) Weighted average cost of capital -10% $ 8.1 Future sales levels +10% $ 9.7 Future sales levels -10% $ (9.7 ) Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is recorded. If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment charge would be recorded to reduce the intangible asset to its fair value. The cash flow projections are based upon a number of assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. In those cases where we determine that the useful life of long-lived assets should be shortened, we would amortize the net book value in excess of the salvage value (after testing for impairment as described above), over the revised remaining useful life of such asset thereby increasing amortization expense. We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable. In determining the useful life of our Lanvin brand names and trademarks, we applied the provisions of ASC topic 350-30-35-3. The only factor that prevented us from determining that the Lanvin brand names and trademarks were indefinite life intangible assets was Item c. “Any legal, regulatory, or contractual provisions that may limit the useful life.” The existence of a repurchase option originally in 2025 and amended to 2027, may limit the useful life of the Lanvin brand names and trademarks to the Company. However, this limitation would only take effect if the repurchase option were to be exercised and the repurchase price was paid. If the repurchase option is not exercised, then the Lanvin brand names and trademarks are expected to continue to contribute directly to the future cash flows of our Company and their useful life would be considered to be indefinite. With respect to the application of ASC topic 350-30-35-8, the Lanvin brand names and trademarks would only have a finite life to our Company if the repurchase option were exercised, and in applying ASC topic 350-30-35-8, we assumed that the repurchase option is exercised. When exercised, Lanvin has an obligation to pay the exercise price and the Company would be required to convey the Lanvin brand names and trademarks back to Lanvin. The exercise price to be received (residual value) is well in excess of the carrying value of the Lanvin brand names and trademarks, therefore no amortization is required. 44 Quantitative Analysis During the three-year period ended December 31, 2022, we have not made any material changes in our assumptions underlying these critical accounting policies or to the related significant estimates. The results of our business underlying these assumptions have not differed significantly from our expectations. While we believe the estimates we have made are proper and the related results of operations for the period are presented fairly in all material respects, other assumptions could reasonably be justified that would change the amount of reported net sales, cost of sales, and selling, general and administrative expenses as they relate to the provisions for anticipated sales returns, allowance for doubtful accounts and inventory obsolescence reserves. For 2022, had these estimates been changed simultaneously by 5% in either direction, our reported gross profit would have increased or decreased by approximately $0.8 million and selling, general and administrative expenses would have changed by approximately $0.1 million. The collective impact of these changes on 2022 operating income, net income attributable to Inter Parfums, Inc., and net income attributable to Inter Parfums, Inc. per diluted share would be an increase or decrease of approximately $0.8 million, $0.5 million and $0.02, respectively. Results of Operations Net Sales Years ended December 31, (in millions) 2022 % Change 2021 % Change 2020 European based product sales $ 744.0 12% $ 663.2 57% $ 422.9 United States based product sales 342.7 58% 216.4 86% 116.1 Total net sales $ 1,086.7 24% $ 879.6 63% $ 539.0 Net sales rebounded significantly in 2021, as compared to 2020 for both European and United States based operations and continued to increase in 2022. At comparable foreign currency exchange rates, net sales increased 30% in 2022, as compared to 2021. Net sales in 2020 reflected the negative impacts of the COVID-19 pandemic on the beauty industry. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill in early 2020. In the second half of 2020, business began rebounding thanks to retail stores reopening and a robust e-commerce business conducted by our retail customers. For European based operations, our largest brands, Montblanc, Jimmy Choo and Coach grew 2022 sales by 15%, 23% and 18%, respectively, as compared to 2021. There were also significant gains made by our mid-sized brands, including Van Cleef & Arpels and Karl Lagerfeld. The year-over-year gains, in both euro and dollars, are all the more impressive considering our new product pipeline was dominated by flankers and extensions. However, we did bring to market several entirely new lines, including our first ever Moncler duo, Kate Spade Sparkle, Singulier by Boucheron and Open Road and Wild Rose by Coach. In 2021, GUESS became our fourth brand with sales exceeding $100 million. Strong momentum on GUESS continued in 2022 with brand sales increasing another 24% as compared to 2021. There were also significant gains made by our mid-sized brands, especially Abercrombie & Fitch, Hollister and Oscar de la Renta. Additionally, 2022 saw the first full year of sales of Ferragamo products and in the second half of 2022, we also welcomed first time sales of our newest brands, Donna Karan/DKNY. Together, these new brands contributed to 38% growth of our US operations. 45 We are confident in our future as 2023 has many exciting developments for the Company. We have transitioned to a new modern enterprise resource planning system (ERP) for our US operations which will enable us to operate more efficiently and offer more scale to absorb our newer brands We have a solid line-up of new product launches in the pipeline for many of our brands. This includes the roll out of the Moncler Collection in the first quarter and a Duo flanker in the third quarter, a launch of GUESS Uomo Acqua in the second quarter, as well as Bella Vita Paradiso in the fourth quarter. Extensions of the Montblanc Legend , Jimmy Choo Man and Jimmy Choo’s I Want Choo , debut in the first, second and third quarters, respectively. Also, in the third quarter, we will unveil new men’s lines for Coach and Boucheron. Brand extensions and flankers are in the works for MCM, Abercrombie & Fitch, Hollister, Anna Sui, and Oscar de la Renta. In sum, 2023 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds, most notably inflation and supply chain disruptions. Lastly, we have recently announced the license agreement with Lacoste which will offer us another sizable building block of growth in 2024. As in the past, we hope to benefit from our strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee. However, we have no certainty that any new license or acquisition agreements will be consummated. Net Sales to Customers by Region Years ended December 31, 2022 2021 2020 (in millions) North America $ 431.9 $ 354.1 $ 193.5 Western Europe 259.2 202.0 147.1 Asia 152.7 128.0 79.7 Middle East 87.8 61.0 46.8 Eastern Europe 74.2 69.7 33.1 Central and South America 69.9 56.4 32.5 Other 11.0 8.4 6.3 $ 1,086.7 $ 879.6 $ 539.0 Our largest market, North America achieved sales growth of 22% in 2022 compared to 2021, while Western Europe and Asia grew sales by 28% and 19% in 2022, respectively, compared to 2021. Latin America and the Middle East also achieved top line growth of 24% and 44% in 2022, respectively compared to 2021. Eastern Europe saw only moderate top line growth of 6% as compared to 2021 largely related to the war in Ukraine. Gross Margins Years ended December 31, 2022 2021 2020 (in millions) European operations: Net sales $ 744.0 $ 663.2 $ 422.9 Cost of sales 236.9 221.2 152.3 Gross margin $ 507.1 $ 442.0 $ 270.6 Gross margin, as a percent of net sales 68.2 % 66.6 % 64.0 % United States operations: Net sales $ 342.7 $ 216.4 $ 116.1 Cost of sales 155.4 101.5 56.0 Gross margin $ 187.3 $ 114.9 $ 60.1 Gross margin, as a percent of net sales 54.7 % 53.1 % 51.8 % 46 For European based operations, gross profit margin as a percentage of net sales was 68.2%, 66.6% and 64.0% in 2022, 2021 and 2020, respectively. Distribution in the United States for European based operations is handled by a 100% owned subsidiary of Interparfums SA based in the United States. Therefore, sales are made at a wholesale price rather than at an ex-factory price, resulting in higher gross margins. Net sales of our U.S. based distribution subsidiary increased 16% in 2022, as compared to 2021, leading to favorable mix and giving rise to the increase in gross margin in 2022 over both 2021 and 2020. We carefully monitor movements in foreign currency exchange rates as over 50% of our European based operations net sales is denominated in U.S. 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 margin while a weak U.S. dollar has a negative effect. The average dollar/euro exchange rate was 1.05 in 2022, 1.18 in 2021, and 1.15 in 2020. Pricing action also enabled us to offset inflationary pressures. For United States operations, gross profit margin was 54.7%, 53.1% and 51.8% in 2022, 2021 and 2020, respectively. With a decline in sales in 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 year as a percentage of sales. The scale benefits coming from our significant growth in 2021 and 2022, combined with pricing actions and favorable channel/brand mix, have enabled us to more than offset the impacts of inflation and thus expand gross margin by 130 bps in 2021 and another 160 bps in 2022. Costs relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $43.1 million, $36.9 million and $26.4 million in 2022, 2021 and 2020, respectively, and represented 4.0%, 4.2% and 4.9% of net sales, respectively. Generally, we do not bill customers for shipping and handling costs and such costs, which aggregated $15.8 million, $10.0 million and $5.0 million in 2022, 2021 and 2020, respectively, are included in selling, general and administrative expenses in the consolidated statements of income. As such, our Company’s gross margins may not be comparable to other companies, which may include these expenses as a component of cost of goods sold. Selling, General & Administrative Expenses Years ended December 31, 2022 2021 2020 (in millions) European Operations Selling, general & administrative expenses $ 358.3 $ 327.5 $ 210.6 Selling, general & administrative expenses as a percent of net sales 48.2 % 49.4 % 49.8 % United States Operations Selling, general & administrative expenses $ 134.0 $ 79.0 $ 50.1 Selling, general & administrative expenses as a percent of net sales 39.1 % 36.5 % 43.1 % For European operations, selling, general and administrative expenses increased 9% and 55% in 2022 and 2021, respectively, as compared to the corresponding prior year period, and represented 48.2%, 49.4% and 49.8% of sales in 2022, 2021 and 2020, respectively as we were able to leverage our scale. As discussed in more detail below, these fluctuations, which are in line with the fluctuations in sales for European operations, are primarily from variations in promotion and advertising expenditures. For United States operations, selling, general and administrative expenses increased 70% and 58% in 2022 and 2021, respectively, as compared to the corresponding prior year period and represented 39.1%, 36.5% and 43.1% of sales in 2022, 2021 and 2020, respectively. As discussed in more detail below, the increased selling, general and administrative expenses as a percentage of net sales are primarily the result of increases in promotion and advertising expenditures. Additionally, the US based operations increased expenses related to salaries and benefits as we build the organization and infrastructure to support our new brands and future growth. 47 Promotion and advertising included in selling, general and administrative expenses aggregated $212.4 million, $171.1 million and $91.7 million in 2022, 2021 and 2020, respectively. Promotion and advertising as a percentage of sales represented 19.5%, 19.5% and 17.0% of net sales in 2022, 2021 and 2020, respectively. Promotion and advertising programs were cut significantly in 2020 in response to market conditions. Promotion and advertising are integral parts of our industry, and we continue to invest heavily in promotional spending 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, causing then to continue to grow strongly on a global basis. 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, the way brick-and-mortar stores and a business’ online operations work in tandem, and compelling content to deliver an integrated consumer experience. We anticipated 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. Royalty expense included in selling, general and administrative expenses aggregated $87.0 million, $68.9 million and $41.1 million in 2022, 2021 and 2020, respectively. Royalty expense as a percentage of sales represented 8.0%, 7.8% and 7.6% of net sales in 2022, 2021 and 2020, respectively. The increases in 2022 and 2021, as a percentage of sales, are directly related to new licenses and increased royalty-based product sales. 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. Service fees, which are fees paid within our European operations to third parties relating to the activities of our distribution subsidiaries, aggregated $7.9 million, $9.4 million and $6.8 million in 2022, 2021 and 2020, respectively. The 2022 and 2021 amounts are in line with and directly related to fluctuations in sales within our U.S. distribution subsidiary. 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 17.9%, 16.8% and 13.1% for the years ended December 31, 2022, 2021 and 2020, respectively. Other Income and Expenses In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a $53.3 million (€50 million) four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. Additionally, in April 2021, we completed the acquisition of the future headquarters of Interparfums SA. The acquisition was financed by a 10-year €120 million (approximately $128 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. Long-term debt including current maturities aggregated $186.8 million, $148.8 million and $24.7 million as of December 31, 2022, 2021 and 2020, respectively. 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. Due to the sizable swings in currency rates during 2022, we went from recognizing a gain of $2.3 million in 2021 to a loss of $1.9 million in 2022. This accounts for most of our fluctuation within Other income and expenses. Interest and investment income represents interest earned on cash and cash equivalents and short-term investments. In 2022, short-term investments include approximately $19.9 million of marketable equity securities of other companies in the luxury goods sector. Interest and investment income includes approximately $3.1 million of unrealized gains on marketable equity securities. Given our strong balance sheet and cash position, the increase in interest rates had a favorable impact on interest and investment income. Income Taxes Our effective income tax rate was 22.2%, 27.1% and 27.9% in 2022, 2021 and 2020, respectively. 48 Income tax expense represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation and the taxation of foreign income including tax settlements. Our effective tax rate will change from year-to-year based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, the tax impact of share-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions. Our effective income tax rate for European operations was 25.2%, 30.6% and 29.7% in 2022, 2021 and 2020, respectively, as the French Prime Minister reduced the French corporate income tax rate from approximately 33% to 25% over a three-year period. Our effective income tax rate for U.S. operations was 13.8%, 15.6% and 16.7% in 2022, 2021 and 2020, respectively. Our effective tax rate differs from the 21% statutory rate due to state, local and foreign 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. Additionally, in the third quarter of 2022, our U.S. operations recognized a one-time tax benefit of $2.5 million associated with the 2021 Salvatore Ferragamo acquisition. At the time of the acquisition, we had not recognized deferred tax benefits as there were uncertainties concerning its potential recoverability; however, as of September 30, 2022, the recoverability was deemed likely. The Company has determined that it has no tax liability related global intangible low-taxed income (“GILTI”) as of December 31, 2022, 2021 and 2020. The Company also estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $1.5 million, $0.6 million and $0.3 million as of December 31, 2022, 2021 and 2020, respectively. Share-based compensation resulted in a discrete tax benefit of $0.8 million, $1.3 million and $0.4 million in 2022, 2021 and 2020, respectively. Net Income Year ended December 31, 2022 2021 2020 (In thousands) Net income attributable to European operations $ 107,292 $ 80,670 $ 41,990 Net income attributable to United States operations 43,745 29,357 7,978 Net income 151,037 110,027 49,968 Less: Net income attributable to the noncontrolling interest 30,099 22,616 11,749 Net income attributable to Inter Parfums, Inc. $ 120,938 $ 87,411 $ 38,219 Net income attributable to European operations was $107.3 million, $80.7 million and $42.0 million in 2022, 2021 and 2020, respectively, while net income attributable to United States operations was $43.7 million, $29.4 million and $8.0 million in 2022, 2021 and 2020, respectively. The fluctuations in net income for both European operations and United States operations are directly related to the previous discussions concerning changes in sales, gross profit margins, selling, general and administrative expenses, most of which were caused by the effects of the COVID-19 pandemic beginning in 2020 and the recovery in 2021 and 2022. The noncontrolling interest arises primarily from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext. Net income attributable to the noncontrolling interest is directly related to the profitability of our European operations and aggregated 27.9%, 28.0% and 28.1% of European operations net income in 2022, 2021 and 2020, respectively. Net margins attributable to Inter Parfums, Inc. aggregated 11.1%, 9.9% and 7.1% in 2022, 2022 and 2020, respectively. Liquidity and Capital Resources Our conservative financial tradition has enabled us to amass significant cash balances. As of December 31, 2022, we had $256 million in cash, cash equivalents and short-term investments, most of which are held in euro by our European operations and are readily convertible into U.S. dollars. 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 December 31, 2022, short-term investments include approximately $19.9 million of marketable equity securities. 49 As of December 31, 2022, working capital aggregated $443 million, and we had a working capital ratio of 2.3 to 1. Approximately 80% of the Company’s total assets are held by European operations including approximately $249 million of trademarks, licenses and other intangible assets. The Company is party to a number of license and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2039. In connection with certain of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments. See Item 8. Financial Statements and Supplementary Data – Note 12 – Commitments in this annual report on Form 10-K. Future advertising commitments are estimated based on planned future sales for the license terms that were in effect at December 31, 2022, without consideration for potential renewal periods and do not reflect the fact that our distributors share our advertising obligations. The 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. In December 2022, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Lacoste brand. This new license takes effect January 2024. 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. The exclusive license became effective on July 1, 2022, and we are planning to launch new fragrances under these brands in 2024. 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. 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 is operating 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 total cost of the assets acquired net of liabilities assumed aggregated approximately $35.8 million. In connection with this acquisition, we agreed to pay $17.0 million in equal annual installments of $1.7 million including interest imputed at 2.0%. 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 provided by operating activities aggregated $115.2 million, $119.6 million, and $65.0 million in 2022, 2021 and 2020, respectively. In 2022, working capital items used $65.6 million in cash from operating activities, as compared to $13.7 million in 2021 and $7.3 million in 2020. Although, from a cash flow perspective, accounts receivable is up approximately 37% from year-end 2021, the balance is reasonable based upon fourth quarter 2022 record sales levels and reflects strong collection activity as day’s sales outstanding increased slightly to 64 days in 2022, as compared to 61 days in 2022 and decreased significantly as compared to 86 days in 2020. From a cash flow perspective, inventory levels are up 49% from year-end 2021. Inventory days on hand increased to 231 days in 2022, as compared to 208 days in 2021, and 277 days in 2020 as we chose to protect service level in light of the COVID driven supply chain disruptions. Cash flows used in investing activities reflect the purchase and sales of short-term investments. These investments consist of certificates of deposit with maturities greater than three months marketable equity securities and other contracts. At December 31, 2022, approximately $39 million of certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal. 50 Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we generally spend less than $5.0 million on capital expenditures including tools and molds needed to support our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers. In December 2022, to finance Interparfums SA’s acquisition of the Lacoste trademark, the Company entered into a $53.3 million (€50 million) four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. In April 2021, Interparfums SA 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. The $142 million purchase price is in line with market value and includes the complete renovation of the site. As of December 31, 2021, $136.1 million of the purchase price, including approximately $3.1 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of December 31, 2021. Approximately $8.8 million of cash held in escrow is included in other assets on the accompanying balance sheet as of December 31, 2021. In 2022 this cash was released from escrow and there is no longer any balance of cash outside of cash and cash equivalents on the accompanying balance sheet as of December 31, 2022. In addition, the Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid. The acquisition was financed by a 10-year €120 million (approximately $136 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. In 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. Our short-term financing requirements are expected to be met by available cash on hand at December 31, 2022, cash generated by operations 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 $20 million in credit lines provided by a consortium of international financial institutions. There were no balances due from short-term borrowings as of December 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. In February 2021, our Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly and in February 2022, our Board authorized a 100% increase in the annual dividend to $2.00 per share. In February 2023 the Board of Directors further increased the annual dividend to $2.50 per share. The next quarterly cash dividend of $0.625 per share is payable on March 31, 2023, to shareholders of record on March 15, 2023. Dividends paid, including dividends paid once per year to noncontrolling stockholders of Interparfums SA, aggregated $79.8 million, $41.5 million and $21.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. The cash dividends to be paid in 2023 are not expected to have any significant impact on our financial position. We believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facilities, so that they will provide us with sufficient resources to meet all present and reasonably foreseeable future operating needs. 51 Inflation rates in the U.S. and foreign countries in which we operate did not have a significant impact on operating results for the year ended December 31, 2022 as they were either offset by price increases we passed onto our respective customers or operating efficiencies. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. General We address certain financial exposures through a controlled program of risk management that primarily consists of the use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts in order to reduce the effects of fluctuating foreign currency exchange rates. We do not engage in the trading of foreign currency forward exchange contracts or interest rate swaps. Foreign Exchange Risk Management A general discussion relating to our policies on foreign exchange risk management can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 2020. As of December 31, 2022, we had foreign currency contracts in the form of forward exchange contracts with notional amounts of approximately U.S. $36.5 million which all have maturities of less than one year. We believe that our risk of loss as the result of nonperformance by any of such financial institutions is remote. Interest Rate Risk Management We mitigate interest rate risk by monitoring interest rates, and then determining whether fixed interest rates should be swapped for floating rate debt, or if floating rate debt should be swapped for fixed rate debt. Item 8. Financial Statements and Supplementary Data The required financial statements commence on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e)) as of the end of the period covered by this annual report on Form 10-K (the “Evaluation Date”). Based on their review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the Evaluation Date, our Company’s disclosure controls and procedures were effective. Management’s Annual Report on Internal Control over Financial Reporting The management of Inter Parfums, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13(a)-15(f) under the Securities Exchange Act of 1934. With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2022. 52 Our independent auditor, Mazars USA LLP, a registered public accounting firm, has issued its report on its audit of our internal control over financial reporting. This report appears on page F-2. Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the fourth quarter of 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information. None. 53 PART III Item 10. Directors, Executive Officers and Corporate Governance Executive Officers and Directors As of the date of this report, our executive officers and directors were as follows: Name Position Jean Madar Chairman of the Board, Chief Executive Officer of Inter Parfums, Inc. and Director General of Interparfums SA Philippe Benacin Vice Chairman of the Board, President of Inter Parfums, Inc. and Chief Executive Officer of Interparfums SA Michel Atwood Director and Chief Financial Officer Philippe Santi Director, Executive Vice President and Chief Financial Officer, Interparfums SA François Heilbronn Director Robert Bensoussan Director Patrick Choël Director Michel Dyens Director Veronique Gabai-Pinsky Director Gilbert Harrison Director Frederic Garcia-Pelayo Executive Vice President and Chief Operating Officer of Interparfums SA Our directors will serve until the next annual meeting of stockholders and thereafter until their successors shall have been elected and qualified. Messrs. Jean Madar and Philippe Benacin have a verbal agreement or understanding to vote their shares and the shares of their respective holding companies in a like manner. With the exception of Mr. Benacin, the officers are elected annually by the directors and serve at the discretion of the board of directors. There are no family relationships between executive officers or directors of our Company. Board of Directors Our board of directors has the responsibility for establishing broad corporate policies and for the overall performance of our Company. Although certain directors are not involved in day-to-day operating details, members of the board of directors are kept informed of our business by various reports and documents made available to them. Our board of directors held 18 meetings (or executed consents in lieu thereof), including meetings of committees of the full board of directors during 2022, and all of the directors attended at least 75% of the meetings (or executed consents in lieu thereof) of the full board of directors and committees of which they were a member. Our board of directors presently consists of ten (10) directors. We have adopted a Code of Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, as well as other persons performing similar functions, and we agree to provide to any person without charge, upon request, a copy of our Code of Business Conduct. Any person who requests a copy of our Code of Business Conduct should provide their name and address in writing to: Inter Parfums, Inc., 551 Fifth Avenue, New York, NY 10176, Att.: Shareholder Relations. In addition, our Code of Conduct is also maintained on our website, at www.interparfumsinc.com. During 2022, our board of directors had the following standing committees: ● Audit Committee – The Audit Committee has the sole authority and is directly responsible for, the appointment, compensation and oversight of the work of the independent accountants employed by our company which prepare or issue audit reports for our company. During 2022, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. The charter of the Audit Committee is posted on our Company’s website. 54 The Company does not have an “audit committee financial expert” within the definition of the applicable Securities and Exchange Commission rules. Finding qualified nominees to serve as a director of a public company without the comparable financial resources of other larger, more established companies has been challenging. In addition, despite the applicable Securities and Exchange Commission rule which states that being named as the audit committee financial expert does not impose any greater duty, obligation or liability, our company has been met with resistance from both present and former directors to being named as such, primarily due to potential additional personal liability. However, as the result of the background, education and experience of the members of the Audit Committee, our board of directors believes that such committee members are fully qualified to fulfill their obligations as members of the Audit Committee. The Chair of the Audit Committee, Mr. François Heilbronn, is a graduate of Harvard Business School with a Master of Business Administration degree and is currently the managing partner of the consulting firm of M.M. Friedrich, Heilbronn & Fiszer which is specialized in business strategy and complex financial operations and investments. ● Executive Compensation and Stock Option Committee – The Executive Compensation and Stock Option Committee oversees the compensation of our Company’s executives and administers our company’s stock option plans. During 2022, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. The charter of the Executive Compensation and Stock Option Committee is posted on our company’s website. ● Nominating Committee – During 2022, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. The purpose of the Nominating Committee is to determine and recommend qualified persons to the Board of Directors who will be put forth as management’s slate of directors for vote of the Corporation’s stockholders, as well as to fill vacancies in the Board of Directors. The charter of the Nominating Committee is posted on our Company’s website. We have adopted a board diversity policy, which provides that the selection of candidates for appointment to our board will be based on an overriding emphasis on merit, but the Nominating Committee will seek to fill board vacancies by considering candidates that bring a diversity of background and industry or related expertise to our board. The Nominating Committee is to consider an appropriate level of diversity having regard for factors such as skills, business and other experience, education, gender, age, ethnicity and geographic location. A copy of the board diversity policy is posted on our company’s website. In addition, Nasdaq has adopted a Board Diversity Rule, which requires Nasdaq listed companies to publicly disclose board-level diversity statistics using a standardized template during 2022. By the 2025 annual meeting, we will be required to disclose whether or not we have two directors that are diverse under the applicable Nasdaq rule, and if not, then why not. We do not foresee any issue in complying with Nasdaq Board Diversity Rule at this time. 55 Nasdaq Board Diversity As required by the the Nasdaq Diversity Rule, the board of directors of our company presently has one (1) member who self-identifies as a female and one (1) member who identifies as Hispanic, which is in compliance with the Nasdaq Board Diversity rule. Below is the Nasdaq Board Diversity Matrix, which shows the gender identity and demographic background of our board of directors as they have self-identified. Board Diversity Matrix for INTER PARFUMS INC. As of February 28, 2023 Total Number of Directors 10 Part I: Gender Identity Female Male Non-Binary Did Not Disclose Gender Directors 1 9 0 0 Part II: Demographic Background African American or Black 0 0 0 0 Alaskan Native or American Indian 0 0 0 0 Asian 0 0 0 0 Hispanic or Latinx 0 1 0 0 Native Hawaiian or Pacific Islander 0 0 0 0 White 1 8 0 0 Two or More Races or Ethnicities 0 0 0 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 Business Experience The following sets forth biographical information as to the business experience of each executive officer and director of our company for at least the past five years. Jean Madar Jean Madar, age 62, a Director, has been the Chairman of the Board since our Company’s inception, and is a co-founder of our Company with Mr. Philippe Benacin. From inception until December 1993 he was the President of our Company; in January 1994, he became Director General of Interparfums SA, our Company’s subsidiary; and in January 1997, he became Chief Executive Officer of our Company. Mr. Madar was previously the managing director of Interparfums SA, from September 1983 until June 1985. At such subsidiary, he had the responsibility of overseeing the marketing operations of its foreign distribution, including market research analysis and actual marketing campaigns. Mr. Madar graduated from The French University for Economic and Commercial Sciences (ESSEC) in 1983. We believe that Mr. Madar’s skills in guiding, leading and determining the strategic direction of our company since its inception together with Mr. Benacin, in addition to his contacts in the fragrance and cosmetic industry, render him qualified to serve as a member of our board of directors. Philippe Benacin Mr. Benacin, age 64, a Director, is President of our Company and the Chief Executive Officer of Interparfums SA, has been the Vice Chairman of the Board since September 1991, and is a co-founder of our Company with Mr. Madar. He was elected the Executive Vice President in September 1991, Senior Vice President in April 1993, and President of the Company in January 1994. In addition, he has been the President of our Company and Chief Executive Officer of Interparfums SA for more than the past five years. Mr. Benacin graduated from The French University for Economic and Commercial Sciences (ESSEC) in 1983. In June 2014 Mr. Benacin was elected as a member of the Supervisory Board of Vivendi, and Chairman of its Corporate Governance, Nominations and Remuneration Committee. We believe that Mr. Benacin’s skills in guiding, leading and determining the strategic direction of our company since its inception together with Mr. Madar, in addition to his contacts in the fragrance and cosmetic industry, render him qualified to serve as a member of our board of directors. 56 Michel Atwood Mr. Atwood, age 53, became our Chief Financial Officer on September 6, 2022, succeeding Mr. Russell Greenberg, the former Chief Financial Officer, who retired on that same date. Mr. Atwood was first elected to our Board of Directors at the 2022 Annual Meeting held in September 2022. From September 2018 through March 2022 while at Estée Lauder, Mr. Atwood had strategic oversight for the fragrance category across that company and operational accountability for several of its fragrance brands. He also had senior level merger and acquisition (“M&A”) duties, including acquisition integration and brand divestitures/discontinuations. Over his nearly four years at Estée Lauder, he also drove cross-brand synergies across research and development and supply chain for the fragrance category. From February 2017 to August 2018, he was an independent consultant as an M&A advisor on multiple fragrance license acquisitions and also acted as a private investor. From 1995 to 2017, Mr. Atwood has held several executive positions at Procter & Gamble (“P&G”) in France, Switzerland, Italy and Germany. His final title at P&G was Divisional CFO of Global Prestige Fragrances, leading a 90 member team, and ultimately spearheading the divestiture of that division to Coty. Earlier he was CFO Global Markets – Prestige Fragrances, a business generating over $2 billion in sales, where he headed a globally dispersed team of 60 people supporting the go-to-market organization (affiliates, Travel Retail and distributors) of the Prestige Division. Before that, he was Global Prestige Director of Strategic Planning, Licensing and Acquisition shaping and executing the overall business direction and licensing and acquisition strategy of P&G’s Global Fragrance and Premium skin and cosmetics businesses. Michel Atwood holds a Master’s degree in Software Engineering from the Institut National des Sciences Appliquées of Lyon, and a Master’s in International Finance from HEC Paris, the prestigious French business school. He also earned the designation of Certified Management Accountant from the Institute of Management Accountants. He has a truly international background, working/living in France, Switzerland, the U.S., Canada, Turkey and Italy. We believe that Mr. Atwood’s skills and experience in accounting, international tax, mergers and acquisitions, as well as his knowledge of the fragrance industry, render him qualified to serve as a member of our board of directors. Philippe Santi Philippe Santi, age 61, and a Director since December 1999, is the Executive Vice President and Chief Financial Officer of Interparfums SA. Mr. Santi, who is a Certified Accountant and Statutory Auditor in France, has been the Chief Financial Officer of Interparfums SA since February 1995. Prior to February 1995, Mr. Santi was the Chief Financial Officer for Stryker France and an Audit Manager for Ernst and Young. We believe that Mr. Santi’s skills in accounting and tax, as well as his knowledge of the fragrance industry and our Company’s European operations, render him qualified to serve as a member of our board of directors. Francois Heilbronn Mr. Heilbronn, age 61, a Director since 1988, an independent director and a member of the Audit Committee, Nominating Committee and the Executive Compensation and Stock Option Committee, is a graduate of Harvard Business School with a Master of Business Administration degree and is currently the managing partner of the consulting firm of M.M. Friedrich, Heilbronn & Fiszer. He was formerly employed by The Boston Consulting Group, Inc. from 1988 through 1992 as a manager. Mr. Heilbronn graduated from Institut d’ Etudes Politiques de Paris in June 1983. From 1984 to 1986, he worked as a financial analyst for Lazard Freres & Co. In addition, during 2009, Mr. Heilbronn became an Associate Professor in Business Strategy at Sciences Po, Paris, France. As the result of his business and financial acumen, as well as his experience as managing partner of a business consulting firm in the area of mergers and acquisitions of large international companies in retail, consumer goods and consumer services throughout the world, we believe Mr. Heilbronn is qualified to serve as a member of our board of directors. 57 Robert Bensoussan Robert Bensoussan, age 65, has been a Director since March 1997, and is also an independent director. Mr. Bensoussan is the founder of Sirius Equity Consultants, a retail and branded luxury goods investment company. To date, Mr. Bensoussan remains as an investor in Hapy Sweet Bee Ltd, natural health food products, He was previously Chairman of Camaïeu, the French retail conglomerate, a board member of Celio International, the French retail conglomerate and Vivarte representing the GLG hedge fund. In the latter part of 2019, Mr. Bensoussan resigned after 6 years as the only non-North American board member of lululemon athletica Inc. Following the successful sale in 2021, Mr. Bensoussan stepped down from the board of Feelunique.com, one of Europe’s largest online beauty retailers after serving 9 years. He is a member of the Advisory Board of Pictet Bank Premium Brands Fund and sits on the board of Pronovias, the worldwide leader of wedding dresses. Yonderland, Europe’s largest premium outdoor retailer and SNS, a prominent aspirational streetwear and entertainment hub. Previously Mr. Bensoussan was as director of, and had an indirect ownership interest in, J. Choo Limited until July 2011, and was CEO from 2001 to 2007, and was a member of the Board of Jimmy Choo Ltd, from 2001 to 2011, which had been a privately held luxury shoe wholesaler and retailer. We believe Mr. Bensoussan is qualified to serve as a member of our board of directors due to his business and financial acumen, as well as his experience in the retail and branded luxury goods market. Patrick Choël Mr. Choël, age 79, was appointed to the board of directors in June 2006 as an independent director, and is a member of the Audit Committee, Nominating Committee and the Executive Compensation and Stock Option Committee. Mr. Choël is a director of our majority-owned subsidiary, Interparfums SA, a publicly held company, and Christian Dior a privately held company. For approximately 10 years, through March 2004, Mr. Choël was the President and CEO of two divisions of LVMH Moet Hennessy Louis Vuitton S.A., first Parfums Christian Dior, a leading world-wide prestige beauty/fragrances business, and later, the LVMH Perfumes and Cosmetics Division, which included such well-known brands as Parfums Christian Dior, Guerlain, and Parfums Givenchy, among others. Prior to such time, for approximately 30 years, he held various executive positions at Unilever, including President and CEO of Elida Fabergé France and President and CEO of Chesebrough Pond’s USA. Because of this experience, especially in the prestige beauty business, we believe that Mr. Choël is qualified to serve as a member of our board of directors. Michel Dyens Michel Dyens, age 82 and an independent director, is the Founder, Chairman and Chief Executive Officer of Michel Dyens & Co., which he founded over 25 years ago. With headquarters in New York and Paris, Michel Dyens & Co. is a leading independent investment banking firm focused on mergers and acquisitions. Michel Dyens & Co. has vast experience in luxury goods, beauty, spirits and other premium branded consumer goods in which it has concluded numerous landmark deals. Michel Dyens & Co. has advised in such deals as the sale of the Grey Goose ultra-premium vodka brand to Bacardi, the acquisition of the luxury Swiss watchmaker Hublot by LVMH, the sale of the Harry Winston to Aber Diamond Corporation and Boucheron to Kering. Michel Dyens & Co. represented the owners of Liaigre, the luxury furniture brand, in the sale to Symphony International and Navis Capital, and Casa Dragones, the ultra-premium tequila, in the sale to BDT Partners (Byron Trott). In 2021, Michel Dyens & Co. represented the owners of Buly, the luxury French fragrance and beauty brand, in the sale to LVMH and the owners of Blissim, the French leader in beauty subscription e-commerce, and online beauty retail for an investment by Raise Investissement. In addition, he has just sold We11done, the Korean contemporary fashion and lifestyle brand, to Sequoia Capital. 58 Michel Dyens & Co. was the exclusive advisor to Creed in the sale of the ultra-luxury fragrance company Creed BlackRock Long Term Private Capital, and represented Mr. Chin Wook Lee, the founder and CEO of Dr. Jart+, in the sale of Have & Be Co. Ltd. to The Estée Lauder Companies. Michel Dyens & Co. also advised the owner of the ultra-luxury fragrance brand By Kilian, in the sale to Estée Lauder. Michel Dyens & Co. advised the shareholders of the largest independent hair color and hair care company in Brazil, Niely Cosmeticos in the sale of the company to L’Oréal, as well as the owner of the super-premium liqueur St-Germain in the sale of the brand to Bacardi, the Colomer Group (American Crew and CND/Shellac brands) in its sale to Revlon, and Sidney Frank Importing Company in the sale of the company to Jaegermeister. Other transactions include the sale of the Essie cosmetics business to L’Oréal, the sale of TIGI (BedHead and Catwalk brands) to Unilever, the luxury hair care brand Christophe Robin to The Hut Group, the thinning hair brand NIOXIN Research Laboratories to Procter & Gamble, John Frieda Professional Hair Care and Molton Brown to the Kao Corporation, the Svedka vodka brand to Constellation Brands and Chambord liqueur to Brown-Forman. In the mission-driven field, Michel Dyens & Co. recently represented ClimateCare, a prominent UK carbon-offset business, in the sale to Averna Capital and represented the founders of Caboo Paper Products a Vancouver, Canada-based tree-free household paper products brand, for an investment by sustainability-focused venture capital firm Renewal Funds. Among other recent transactions, Michel Dyens & Co. recently represented the Fairtrade and organic coffee brand Ethical Bean Coffee in the sale to Kraft Heinz, and as well as Alter Eco Americas, a leading organic chocolate brand, which we sold to NextWorld Evergreen. In healthy and premium food, Michel Dyens & Co. represented the Fairtrade and organic coffee brand Ethical Bean Coffee in the sale to Kraft Heinz, and as well as Alter Eco Americas, a leading organic chocolate brand, which it sold to NextWorld Evergreen. From April 2004 to September 2014, Mr. Dyens was an independent director of Interparfums SA. We believe Mr. Dyens is qualified to serve as a member of our board of directors thanks to his knowledge of our Company’s luxury business, his business and financial acumen, as well as his experience in the luxury goods market. Veronique Gabai-Pinsky Ms. Gabai-Pinsky, age 57, was elected for the first time to our board in September 2017. She became a director of Interparfums SA in April 2017. She is currently operating a startup specialty fragrance business, and a director of Lifetime Brands (Nasdaq: LCUT), which is in the home goods business. She was President of Vera Wang Group from January 2016 through June 2018, after a year of consulting with the company and she oversaw all product categories and markets. Prior to joining Vera Wang, from 2006 to December 2014, Ms. Gabai-Pinsky was the Global President for Aramis and Designers Fragrances as well as Beauty Bank and Idea Bank at The Estée Lauder Companies, reporting to the Chief Executive Officer of such company. During her tenure, Ms. Gabai-Pinsky developed and ensured the growth of several beauty and skin care brands, including Lab Series for Men. She was highly instrumental in the evolution of the fragrance category for such company, as she improved its overall business model, globally grew brands such as Donna Karan and Michael Kors, evolved and harmonized the portfolio, divested dilutive brands and brought in Tory Burch, Zegna and Marni under licenses. She ultimately actively participated in the acquisitions of Le Labo, Frederic Malle, and By Kilian and assisted in the transformation of the long-term strategic direction of such company. In the earlier years of her career, Ms. Gabai-Pinsky served as Vice President of Marketing and Communication for Guerlain, a division of LVMH Moet Hennessy Louis Vuitton S.A., where she led the successful re-launch of Shalimar, the introduction of Aqua Allegoria, and contributed to the re-focus of the beauty category around its pillars, Terracotta, Meteorites and Issima, while redesigning all communication strategies and content. She started her career at L’Oréal, and was also Vice President of Marketing for Giorgio Armani, where she was instrumental in the overall development of its fragrance business by developing the successful Acqua di Gio for men and introducing the Emporio Armani franchise. A graduate from ESSEC Business School in Paris, France, she has received several awards, including Marketer of the Year by Women’s Wear Daily in December 2013. 59 Ms. Gabai-Pinksy is an independent director, and is a member of the Audit Committee, Executive Compensation and Stock Option Committee and the Nominating Committee of our Company. We believe Ms. Gabi-Pinsky is qualified to serve as a member of our board of directors due to her more than 25 years of experience in the luxury, fashion, beauty and fragrance fields, success as a brand builder, creative thinker, business acumen, and a broad understanding of consumers, brands and business models. Gilbert Harrison Mr. Harrison, age 82, an independent director, was appointed to our board in April 2018. Mr. Harrison has more than 50 years of experience in corporate finance and strategic transactions, specializing in the consumer products space. He began his career in 1965 practicing corporate and securities law in New York and Philadelphia. In 1971 he founded Financo, which he grew to become one of the leading independent middle market transaction firms in the country. In 1985, Financo was acquired by Lehman Brothers, where the firm’s primary efforts were focused on increasing its expertise in retail, apparel and other merchandising transactions of all types. At Lehman, Mr. Harrison was Chairman of the Merchandising Group and on the firm’s Investment Banking Operating Committee while continuing as Chairman of Financo, which was renamed the Middle Market Group of Lehman. In 1989, he re-acquired Financo from Lehman, re-establishing Financo as one of the leading investment banking firms handling transactions and providing strategic advice in connection with merchandising companies. Mr. Harrison retired as Chairman of Financo in December of 2017, after which he formed the Harrison Group, a firm that provides consulting and financial advisory services to merchandising and products companies. Mr. Harrison’s other activities include his membership on the Advisory Council of the World Retail Congress, Shoptalk and the Financial Times Business of Luxury Summit. Additionally, he has created a course on mergers and acquisitions at The Wharton School and has published various articles and academic studies on the state of retailing and mergers and acquisitions, including a chapter in the book entitled, “The Mergers and Acquisitions Handbook.” Mr. Harrison lectures throughout the country, including chairing seminars for Retail Week as well as for the International Council of Shopping Centers, the National Retail Federation, Young President’s Center, The Wharton Aresty Institute of Executive Education and The President’s Association of the American Management Association. He also appears frequently on Bloomberg TV and CNBC as an expert on retail and apparel. Mr. Harrison received a Bachelor of Science in Economics from The Wharton School of The University of Pennsylvania in 1962 and his Juris Doctor from The University of Pennsylvania Law School in 1965. He is also Chairman of the Fashion Division of UJA, Treasurer and a Board member of the Southampton Hospital, Director of the Peggy Guggenheim Collection, and former Board member of the Wharton School of the University of Pennsylvania. We believe Mr. Harrison is qualified to serve as a member of our board of directors due to his tremendous depth and breadth of knowledge about the merchandising and consumer industry, and he has a long track record of facilitating value-creating transactions for companies in this sector. Mr. Harrison’s autobiography, Deal Junky , was published in January 2022. Frederic Garcia-Pelayo Frederic Garcia-Pelayo, age 61, has been with Interparfums SA for more than the past 20 years. He is currently the Executive Vice President and Chief Operating Officer of Interparfums SA, and was previously the Director of its Luxury and Fashion division beginning in March 2005. He was also previously the Director of Marketing and Distribution for Perfume and Cosmetics and was first named Executive Vice President in 2004. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of Forms 3, 4 and 5 and any amendments to such forms furnished to us, and written representations from various reporting persons furnished to us, we are not aware of any reporting person who has failed to file the reports required to be filed under Section 16(a) of the Securities Exchange Act of 1934 on a timely basis. 60 Item 11. Executive Compensation Compensation Discussion and Analysis General The executive compensation and stock option committee of our board of directors is comprised entirely of independent directors and oversees all elements of compensation (base salary, annual bonus, long-term incentives and perquisites) of our company’s executive officers and administers our company’s stock option plans, other than the non-employee directors stock option plan, which is self-executing. The objectives of our compensation program are designed to strike a balance between offering sufficient compensation to either retain existing or attract new executives on the one hand, and maintaining compensation at reasonable levels on the other hand. We do not have the resources comparable to the cosmetic giants in our industry, and, accordingly, cannot afford to pay excessive executive compensation. In furtherance of these objectives, our executive compensation packages generally include a base salary, as well as annual incentives tied to individual performance and long-term incentives tied to our operating performance. During 2022 and prior years, Mr. Madar, the Chairman and Chief Executive Officer, took the initiative after discussions with Mr. Russell Greenberg, the former Executive Vice President, Chief Financial Officer and board member, and recommended executive compensation levels for executives for United States operations. Mr. Benacin, the Chief Executive Officer of Interparfums SA, took the initiative after discussions with Philippe Santi, the Chief Financial Officer of Interparfums SA, and recommended executive compensation levels for executives for European operations. The recommendations are presented to the compensation committee for its consideration, and the compensation committee makes a final determination regarding salary adjustments and annual award amounts to executives, including Jean Madar and Philippe Benacin. Messrs. Madar and Benacin are not present during deliberations or determination of their executive compensation by the compensation committee. Further, Messrs. Madar and Benacin, in addition to being executive officers and directors, are our largest beneficial shareholders, and therefore, their interests are aligned with our shareholder base in keeping executive compensation at a reasonable level. The compensation committee was pleased that the most recent shareholder advisory vote on executive compensation held at our last annual meeting of shareholders in September 2022 overwhelmingly approved the compensation policies and decisions of the compensation committee. The compensation committee has determined to continue its present compensation policies in order to determine similar future decisions. Our compensation committee believes that individual executive compensation is at a level comparable with executives in other companies of similar size and stage of development that operate in the fragrance industry, and takes into account our company’s performance as well as our own strategic goals. Further, the compensation committee believes that its present policies to date, with its emphasis on rewarding performance, has served to focus the efforts of our executives, which in turn has permitted our company to weather the COVID-19 pandemic, supply chain disruptions and geopolitical turmoil in certain parts of the world, which resulted in the Company’s record results for 2022. During 2022, the members of such committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. Elements of Compensation General The compensation of our executive officers is generally comprised of base salaries, including a fee paid to the holding companies of each of Messrs. Madar and Benacin, annual cash bonuses and long-term equity incentive awards. In determining specific components of compensation, the compensation committee considers individual performance, level of responsibility, skills and experience, other compensation awards or arrangements and overall company performance. The compensation committee reviews and approves all elements of compensation for all of our executive officers taking into consideration recommendations from the Chief Executive Officer of our company and the Chief Executive Officer of Interparfums SA, as well as information regarding compensation levels at competitors in our industry. 61 Our named executive officers have all been with the Company for more than the past ten (10) years, other than Mr. Atwood who joined our Company in September 2022, with Messrs. Madar and Benacin being founders of the Company. As Messrs. Madar and Greenberg, the former Chief Financial Officer and Executive Vice President for United States operations, and Benacin and Santi for European operations, were most familiar with the individual performance, level of responsibility, skills and experience of each executive officer in their respective operating segments, the compensation committee relies upon the information provided by such executive officers in determining individual performance, level of responsibility, skills and experience of each executive officer. The compensation committee views the competitive marketplace very broadly, which would include executive officers from both public and privately held companies in general, including fashion and beauty companies, but not limited to the peer companies contained in the corporate performance graph contained in our annual report. Generally, rather than tie the compensation committee’s determination of compensation proposals to any specific peer companies, the members of our committee have used their business experience, judgment and knowledge to review the executive compensation proposals recommended to them by Mr. Madar for United States operations and Mr. Benacin for European operations. As such, as a general rule the compensation committee did not determine the need to benchmark of any material item of compensation or overall compensation. However, in connection with the salary increase to Mr. Madar that occurred in February 2020, surveys of both peer companies and companies with comparable market capitalizations were used by the compensation committee as one of the factors in reaching such determination. The members of the compensation committee have extensive experience and business acumen and are well qualified in determining the appropriateness of executive compensation levels. Mr. Heilbronn is a managing partner of a business consulting firm in the area of mergers and acquisitions of large international companies in retail, consumer goods and consumer services throughout the world. Mr. Choël previously worked as President and Chief Executive Officer of two divisions of LVMH Moet Hennessy Louis Vuitton S.A., which included such well-known brands as Parfums Christian Dior, Guerlain, and Parfums Givenchy. Mr. Choël has also been President and CEO of both Elida Fabergé France and Chesebrough Ponds USA. Ms. Gabai-Pinsky, the final committee member, has executive experience as the former President of Vera Wang Group, as well as the Global President for Aramis and Designers Fragrances in addition to Beauty Bank and Idea Bank at The Estée Lauder Companies. Base Salary Base salaries for executive officers are initially determined by evaluating the responsibilities of the position held and the experience of the individual, and by reference to the competitive marketplace for executive talent. Base salaries for executive officers are reviewed on an annual basis, and adjustments are determined by evaluating our operating performance, the performance of each executive officer, as well as whether the nature of the responsibilities of the executive has changed. As stated above, as Messrs. Madar and Greenberg for United States operations, and Messrs. Benacin and Santi for European operations, were most familiar with the individual performance, level of responsibility, skills and experience of each executive officer in their respective segments, the committee relied upon the information provided by such executive officers in determining individual performance, level of responsibility, skills and experience of each executive officer. For executive officers of United States operations, the bulk of their annual compensation is in base salary including a fee paid to the holding company for Mr. Madar for services rendered outside the United States. However, for executive officers of European operations base salary comprises a smaller percentage of overall compensation. We have paid a lower percentage of overall compensation in the form of base salary to executive officers of European operations for several years, principally because European operations historically have had higher profitability than United States operations, and European operations are run differently from United States operations by the Chief Executive Officer of European operations, Mr. Benacin. As the result of this historically higher profitability, European operations have had the ability to pay higher bonus compensation in addition to base salary. As bonus compensation is and has historically been discretionary, no targets were set in order to maintain flexibility. Further, if results of operations for European operations were not satisfactory (again, no target amounts were set to maintain flexibility), then bonus compensation, as well as overall compensation could be lowered without otherwise affecting base salary. Finally, by keeping annual bonus compensation at a higher percentage of overall compensation and base salary at a lower percentage, our company benefits because the base amount for annual salary adjustments would be smaller. 62 For the impact of COVID-19 on executive compensation in 2020 and 2021, please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, under Item 11, Item 11. Executive Compensation, Compensation Discussion and Analysis , Covid-19 Impact , which is incorporated by reference herein. For 2022, Mr. Benacin received a base salary of $756,000, (included an increase of €12,000 but due to the foreign currency conversion this is showing as a decrease when compared to 2021), and Mr. Benacin’s holding company received $250,000 paid by the Company’s United States operations, which is included the calculation of his base salary. This same consulting fee has been paid for more than each of the past three years, in accordance with the consulting agreement with Mr. Benacin’s holding company, which provides for review on an annual basis of the amount of compensation payable to such company. For 2021, although Mr. Benacin received the same base salary as he did in 2020, his salary was affected by foreign currency conversion rates and was $804,000 for 2021. For 2020, Mr. Benacin received a modest increase in base salary of $14,000 to $789,000. The compensation committee considered the following salient factors in authorizing payment to Mr. Benacin’s holding company— services rendered to United States operations for several years by Mr. Benacin in connection with licensing and distribution of international brands, as well as future services to be performed by Mr. Benacin internationally relating to licensing and distribution of international brands for United States operations. As Mr. Benacin values the services of two named executive officers of Interparfums SA, Mr. Philippe Santi, Executive Vice President and the Chief Financial Officer, and Mr. Frederic Garcia-Pelayo, Executive Vice President and Chief Operating Officer, equally, their base salaries, as well as their bonus compensation discussed below, have been in lockstep. For 2022, the base salary of each of Messrs. Santi and Garcia-Pelayo was €432,000, and increase of €24,000. For 2021, the base salary of each of Messrs. Santi and Garcia-Pelayo was €408,000, as no executive officer received any increase in base salary due the continuing impact of the COVID-19 pandemic. However, the base salaries of Messrs. Santi and Garcia-Pelayo in 2021 were affected by foreign currency conversion rates and were both $483,000 for 2021. For 2020, each of Messrs. Santi and Garcia-Pelayo received an increase in base salary of $14,000 to $470,000. Increases in prior years were awarded primarily to reward these two executive officers for their contributions in European Operations achieving increases in both the sales and earnings. The compensation committee considered the recommendations of Mr. Benacin, results of operations for the year, as well as the services performed for European operations by Messrs. Santi and Garcia-Pelayo in authorizing these salary levels. A different approach is taken for United States operations as that segment is smaller and less profitable. A more significant base salary is paid in order to attract and retain employees with the skills and talents needed to run the operation with a lesser emphasis placed on bonuses. Neither of the executive officers for United States operations have employment agreements (although Mr. Madar’s personal holding company has a consulting agreement that provides for review on an annual basis of the amount of compensation payable to such company), as we believe that having flexibility in structuring annual base salary is a benefit, which permits us to act quickly to meet a changing economic environment. As previously reported, from 2013 until 2019 the annual aggregate base salary paid to Mr. Madar individually and fees paid to his holding company remained unchanged at $630,000, which was substantially below the amounts indicated by two surveys of chief executive officer salaries for 2019 (collectively the “CEO Salary Surveys”). The CEO Salary Surveys indicated that the annual and median average CEO salaries for peer companies (excluding the Madar salary) were $2,854,656 and $1,540,000, respectively, and $2,604,346 and $1,750,000 for comparable market capitalization companies, respectively. In recognition of the efforts of Mr. Madar and his holding company as one of the prime causes for our substantial increase in net sales and net income, as well as market capitalization from 2014 through 2019, thus substantially increasing shareholder value, on February 4, 2020 the Committee jointly authorized the aggregate annual increase in Mr. Madar’s base salary by $600,000 to $1.23 million effective as of January 1, 2020. For 2022 and 2021, Mr. Madar did not receive any increase in base salary. 63 Russell Greenberg, the former Executive Vice President and Chief Financial Officer, received a $30,000 increase in base salary for 2022 to $750,000 on an annualized basis, also did not have any salary increase for 2021, when his base salary remained at $720,000. Previously, he had received the same $30,000 increase in base salary for 2020 and 2019. In connection with the previous increases in salary, the Compensation Committee considered the following material factors in granting Mr. Greenberg his salary increases: his individual performance, level of responsibility, skill and experience, as well as the recommendation of the Chief Executive Officer. Mr. Atwood, who became the Chief Financial Officer in September 2022 after the retirement of Mr. Greenberg, was granted a $500,000 annual base salary, as well as a signing bonus of $100,000 that was paid in September 2022. An additional bonus of $50,000 was also paid in December 2022 for the September-December period. The Compensation Committee considered the following material factors in approving the base salary and guaranteed annual bonus of Mr. Atwood for 2022: his individual performances, level of responsibilities, skill and experience with other companies in the fragrance and cosmetic industry, as well as the recommendation of the Chief Executive Officer. Bonus Compensation/Annual Incentives In recognition of the Company’s turnaround from the effects of the COVID-19 pandemic, supply chain disruptions and geopolitical turmoil in 2022 and record results in 2022, and after the recommendations of Messrs. Madar and Benacin, the compensation committee determined that Mr. Benacin receive a bonus of $211,000. Also, in recognition of record results in 2021 while dealing with the effects of the COVID-19 pandemic, supply chain disruptions and geopolitical turmoil, and after the recommendations of Messrs. Madar and Benacin, the compensation committee determined that Mr. Benacin receive a bonus of $166,000. For 2020 Mr. Benacin, the chief decision maker for European operations, proposed and the compensation committee concurred in the payment of discretionary bonus compensation of $131,000. Discretionary bonus compensation for Mr. Benacin has been approximately 28%, 30% and 17% of his base salary in 2022, 2021 and 2020, respectively. In addition, the Compensation Committee agreed with the recommendation of Mr. Benacin and the contributions made by Messrs. Santi and Garcia-Pelayo to the Company’s success and growth. Bonus compensation for Messrs. Santi and Garcia-Pelayo have remained in lockstep, and each was awarded a discretionary bonus of $437,000, $378,000 and $296,000 in 2022, 2021 and 2020, respectively, or 96%, 78% and 63%of their base salary for those years. A different approach is taken for United States operations as that segment is smaller and less profitable. As discussed above, a more significant base salary is paid in order to attract and retain employees with the skills and talents needed to run United States operations with a lesser emphasis placed on bonuses. In 2022, as Mr. Greenberg retired, he did not receive a discretionary bonus. In 2021, although Mr. Greenberg did not receive any increase in base salary due to the continuing impact of the COVID-19 pandemic, he did receive a discretionary bonus of $70,000 based upon the recommendation of the Chief Executive Officer. Mr. Greenberg was paid a discretionary bonus of $35,000 in 2020 and $50,000 for each of the several years prior thereto. The Compensation Committee considered the following material factors in granting Mr. Greenberg his bonuses: his individual performance, level of responsibility, skill and experience, as well as the recommendation of the Chief Executive Officer. Mr. Atwood, who became the Chief Financial Officer in September 2022 after the retirement of Mr. Greenberg, received a sign on bonus of $100,000. His compensation arrangement also entitles him to a guaranteed annual bonus of $100,000, as well as a $100,000 bonus based upon achieving certain milestones. For 2022, Mr. Atwood received his $100,000 sign on bonus and $50,000 pro-rated performance bonus related to the September-December period. The Compensation Committee considered the same factor in granting these two bonuses as in approving his initial annualized salary. Mr. Madar, the Chief Executive Officer has not received any cash bonus in the past three years. 64 As required by French law, Interparfums SA maintains its own profit sharing plan for all French employees who have completed three months of service, including executive officers of our European operations other than Mr. Benacin, the Chief Executive Officer of Interparfums SA. Benefits are calculated based upon a percentage of taxable income of Interparfums SA and allocated to employees based upon salary. The maximum amount payable per year per employee is approximately $32,485. Calculation of the total annual benefits contribution is made according to the following formula: 67% of (Interparfums SA net income, less 2.5% of shareholders’ equity without net income for the year) times a fraction, the numerator of which is wages, and the denominator of which is net income before tax + wages + taxes (other than income tax) + valuation allowances + amortization expenses + interest expenses. Contribution to individual employees is then made pro rata based upon their individual salaries for the year. Long-Term Incentives Stock Options . In prior years, we had linked long-term incentives with corporate performance through the grant of stock options. However, no options were granted in 2021 or 2020 to either employees of United States operations or European operations, as other compensation arrangements were being considered as part of a review of the executive compensation strategy. In December 2022, at the recommendation of the Chief Executive Officer, the Compensation Committee authorized the grant of a stock option to purchase 5,000 shares to Mr. Atwood at the fair market value on the date of grant as part of his long-term incentives. Unless the market price of our common stock increases, Mr. Atwood will have no tangible benefit from this option. Thus, the option holder is provided with the additional incentive to increase individual performance with the ultimate goal of increasing our overall performance. We believe that enhanced executive incentives that result in increased corporate performance tend to build company loyalty. No other stock option grants were made to other executive officers in 2022, including Messrs. Jean Madar and Philippe Benacin. Interparfums SA Stock Compensation Plans 2022 Free Share Plan – On March 16, 2022, the Board of Interparfums SA (“IPSA”) decided to grant 88,400 free shares of its capital stock to all of the IPSA’s employees and corporate officers having more than 6 months seniority at the grant date. The free shares are to be issued in June 2025. Issuance of those shares are based on satisfaction of performance conditions, relating to the 2024 IPSA sales for 50% of the shares and 2024 operating income for the balance. IPSA used the services of third party to assist them in the valuation of the plan, with the calculations and assumptions as follows: - Management expects the rate of staff turnover to be 12%, - Using the Monte Carlo method, management expects the performance rate to be 80% on the consolidated sales and 80.8% on the consolidated operating income. Based on the above assumptions, the total expenses related to this plan is valued at $3.3 million. As of December 31, 2022: - 63,281 shares of IPSA Capital Stock, representing $3.0 million were purchased in the open market and allocated to this plan. $1.0 million of expense was recorded (or $1.2 million including social contributions). 2019 Plan – 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, were distributed in June 2022. Under this plan in June 2022, Messrs. Benacin, Madar, Garcia Pelayo and Santi received 4,000 shares each (5,857 shares as adjusted for stock splits). In June 2020, the performance conditions were modified effecting 96 employees. As of December 31, 2021, the number of shares to be distributed, after forfeited shares and adjusted for stock splits, increased to 172,343. The increase in shares anticipated to be distributed were transferred from treasury shares at the Interparfums SA level. The modification resulted in a revised cost of the grant to approximately $4.6 million. 65 In connection with the 2019 Plan referred to above, an incentive plan was established by Interparfums SA for certain employees of Interparfums Luxury Brands, Inc. (“IPLB”), Interparfums Singapore (“IP Singapore”) and Inter Parfums, Inc. The proposed incentive plan would not provide shares but rather, would give a cash payment or bonus (“incentive” or “award”) that mirrors the shares that Interparfums SA employees will receive. An aggregate of 42,140 “phantom” shares have been awarded in 2022, with Mr. Greenberg being awarded 1,000 of such “phantom” shares, all subject to adjustment for stock splits, with a value of approximately $69,839. Stock Appreciation Rights Our stock option plans authorize us to grant stock appreciation rights, or SARs. A SAR represents a right to receive the appreciation in value, if any, of our common stock over the base value of the SAR. To date, we have not granted any SARs under our plans. While the compensation committee currently does not plan to grant any SARs under our plans, it may choose to do so in the future as part of a review of the executive compensation strategy. Restricted Stock We have not in the past, and we do not have any future plans to grant restricted stock to our executive officers. However, while the compensation committee currently does not plan to authorize any restricted stock plans, the compensation committee may choose to do so in the future as part of a review of the executive compensation strategy. Our French operating subsidiary, Interparfums, SA, however, has instituted its 2022 and 2019 Stock Compensation Plans as discussed above. Other Compensation For 2022, each of Messrs. Benacin and Garcia-Pelayo received an automobile allowance of $11,372. No Stock Ownership Guidelines We do not require any minimum level of stock ownership by any of our executive officers. As stated above, Messrs. Madar and Benacin, are our largest beneficial shareholders, which aligns their interests with our shareholder base in keeping executive compensation at a reasonable level. Retirement and Pension Plans We maintain a 401(k) plan for United States operations. Commencing in October 2021 we started matching the first $6,000 of contribution for each employee, as we have determined that base compensation together with annual bonuses, are sufficient incentives to retain talented employees. Our European operations maintain a pension plan for its employees as required by French law. For each of 2022, 2021and 2020, each of Messrs. Benacin, Santi and Garcia-Pelayo received an increase of $16,006, $17,773 and $17,500, respectively, in their value of deferred compensation earnings. Compensation Committee Report We have reviewed and discussed with management the Compensation Discussion and Analysis provisions to be included in this Annual Report on Form 10-K for fiscal year ended December 31, 2022 and the proxy statement for the upcoming annual meeting of shareholders. Based on this review and discussion, we recommend to the board of directors that the Compensation Discussion and Analysis referred to above be included in this Annual Report on Form 10-K as well as the proxy statement for the upcoming annual meeting of shareholders. Francois Heilbronn Patrick Choël and Veronique Gabai-Pinsky 66 The following table sets forth a summary of all compensation awarded to, earned by or paid to our “named executive officers,” who are our principal executive officer, our principal financial officer, and each of the three most highly compensated executive officers of our company. This table covers all such compensation during fiscal years ended December 31, 2022, December 31, 2021 and December 31, 2020. For all compensation related matters disclosed in the summary compensation table, and elsewhere where applicable, all amounts paid in euro have been converted to U.S. dollars at the average rate of exchange in each year. SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($)(1) Non-Equity Incentive Plan Compensation ($)(2) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($)(3) Total ($) Jean Madar, 2022 1,230,000 -0- -0- -0- -0- -0- -0- 1,230,000 Chairman and 2021 1,230,000 -0- -0- -0- -0- -0- -0- 1,230,000 Chief Executive Officer 2020 1,230,000 -0- -0- -0- -0- -0- -0- 1,230,000 Russell Greenberg, (4) 2022 750,000 -0- -0- -0- -0- -0- -0- 750,000 Chief Financial Officer and 2021 720,000 70,000 -0- -0- -0- -0- -0- 790,000 Executive Vice President 2020 720,000 35,000 -0- -0- -0- -0- -0- 755,000 Michel Atwood (5) 2022 161,218 150,000 -0- 101,814 -0- -0- -0- 413,032 Chief Financial Officer Philippe Benacin, President Inter 2022 755,440 210,600 -0- -0- -0- 16,006 11,372 993,418 Parfums, Inc., Chief Executive 2021 803,504 165,578 -0- -0- -0- 17,733 12,774 999,589 Officer of Interparfums SA 2020 788,808 130,673 -0- -0- -0- 17,500 12,434 949,415 Philippe Santi, Executive Vice 2022 454,896 436,995 -0- -0- -0- 16,006 -0- 907,897 President and Chief Financial 2021 482,542 378,464 -0- -0- -0- 17,733 -0- 878,739 Officer, Interparfums SA 2020 469,730 295,596 -0- -0- -0- 17,500 -0- 782,826 Frédéric Garcia-Pelayo, 2022 454,896 436,995 -0- -0- -0- 16,006 11,372 919,269 Executive Vice President and 2021 482,542 378,464 -0- -0- -0- 17,733 12,774 891,513 Chief Operating Officer Interparfums SA 2020 469,730 295,596 -0- -0- -0- 17,500 8,980 791,806 67 1 Amounts reflected under Option Awards represent the grant date fair values in 2022, 2021 and 2020 based on the fair value of stock option awards using a Black-Scholes option pricing model. The assumptions used in this model are detailed in Footnote 13 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 and filed with the SEC. 2 As required by French law, Interparfums SA maintains its own profit sharing plan for all French employees who have completed three months of service, including executive officers of our European operations other than Mr. Benacin, the Chief Executive Officer of Interparfums SA. Benefits are calculated based upon a percentage of taxable income of Interparfums SA and are allocated to employees based upon salary. The maximum amount payable per year is approximately $32,485. Calculation of total annual benefits contribution is made according to the following formula: 67% of (Interparfums SA net income, less 2.5% of shareholders’ equity without net income for the year) times a fraction, the numerator of which is wages, and the denominator of which is net income before tax + wages + taxes (other than income tax) + valuation allowances + amortization expenses + interest expenses. Contribution to individual employees is then made pro rata based upon their individual salaries for the year. 3 The following table identifies (i) perquisites and other personal benefits provided to our named executive officers in fiscal 2022, and quantifies those required by SEC rules to be quantified and (ii) all other compensation that is required by SEC rules to be separately identified and quantified. 4 Mr. Greenberg retired in September 2022. 5 Mr. Atwood replaced Mr. Greenberg on September 6, 2022. His base salary was prorated from $500,000, annually. Name and Principal Position Perquisites and other Personal Benefits ($) Personal Automobile Expense ($) Lodging Expense ($) Total ($) Jean Madar, Chairman Chief Executive Officer -0- -0- -0- -0- Russell Greenberg, Chief Financial Officer and Executive Vice President -0- -0- -0- -0- Philippe Benacin, President of Inter Parfums, Inc. and Chief Executive Officer of Interparfums SA -0- 11,372 -0- 11,372 Philippe Santi, Executive Vice President and Chief Financial Officer, Interparfums SA -0- -0- -0- -0- Frédéric Garcia-Pelayo, Executive Vice President and Chief Operating Officer, Interparfums SA -0- 11,372 -0- 11,372 68 Plan Based Awards The following table sets certain information relating to each grant of an award made by our company to the executive officers of our company listed in the Summary Compensation Table during the past fiscal year. Grants of Plan-Based Awards Name Grant Date Estimated Future Payouts Under Non-Equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards All Other Stock Awards: Number of Shares of Stock or All Other Option Awards: Number of Securities Underlying Exercise or Base Price of Option Closing Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) Units (#) Options (#) Awards ($/Sh) Price ($/Sh) Jean Madar NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Russell Greenberg NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Michel Atwood 07/22/2022 100,000 100,000 100,000 -0- -0- -0- - 0- -0- NA NA Michel Atwood 12/30/202 -0- -0- -0- -0- -0- -0- -0- 5,000 $97.84 $96.52 Philippe Benacin NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Philippe Santi NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Frédéric Garcia-Pelayo NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Interparfums SA Stock Compensation Plan 69 The following table sets certain information relating to each grant of an award made by Interparfums SA to the executive officers of our company listed in the Summary Compensation Table during the past fiscal year. Equity awards relate to the shares of Interparfums SA. Grants of Plan-Based Awards Name Grant Date Estimated Future Payouts Under Non-Equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards All Other Stock Awards: Number of Shares of Stock or All Other Option Awards: Number of Securities Underlying Exercise or Base Price of Option Closing Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) Units (#) Options (#) Awards ($/Sh) Price ($/Sh) Jean Madar 3/16/22 NA NA NA -0- -0- -0- 3,000 -0- -0- 49,89 € Russell Greenberg NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Michel Atwood NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Philippe Benacin 3/16/22 NA NA NA -0- -0- -0- 3,000 -0- NA NA Philippe Santi 3/16/22 NA NA NA -0- -0- -0- 6,000 -0- -0- 49,89 € Philippe Santi 12/31/22 NA NA 32,485 -0- -0- -0- -0- -0- NA NA Frédéric Garcia-Pelayo 3/16/22 NA NA NA -0- -0- -0- 6,000 -0- 49,89 € Frédéric Garcia-Pelayo 12/31/22 NA NA 32,485 -0- -0- -0- -0- -0- NA NA NA means not applicable. Interparfums SA Profit Sharing Plan Also as discussed above and required by French law, Inter Parfums, SA maintains its own profit sharing plan for all French employees who have completed three months of service, including executive officers of our European operations other than Mr. Benacin, the Chief Executive Officer of Inter Parfums, SA. Benefits are calculated based upon a percentage of taxable income of Interparfums SA and allocated to employees based upon salary. The maximum amount payable per year per employee is approximately $32,485. Calculation of total annual benefits contribution is made according to the following formula: 67% of (Interparfums SA net income, less 2.5% of shareholders equity without net income for the year) times a fraction, the numerator of which is wages, and the denominator of which is net income before tax + wages + taxes (other than income tax) + valuation allowances + amortization expenses + interest expenses. The following table sets certain information relating to each grant of a non-equity award made by Interparfums SA to the executive officers of our company listed in the Summary Compensation Table during the past fiscal year. Equity awards relate to the shares of Interparfums SA. 70 Outstanding Equity Awards at Fiscal Year-End The following table sets forth certain information relating to outstanding equity awards of our Company held by the executive officers listed in the Summary Compensation Table as of December 31, 2022. Option Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable (1) Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Jean Madar 25,000 (2) 0 (2) 0 43.80 12/29/23 20,000 (2) 5,000 (2) 0 65.25 12/30/24 15,000 (2) 10,000 (2) 0 73.09 12/30/25 Russell Greenberg 15,000 0 0 43.80 12/29/23 5,000 5,000 0 65.25 12/30/24 5,000 10,000 0 73.09 12/30/25 Michel Atwood 0 5,000 0 97.84 12/30/28 Philippe Benacin 25,000 (2) 0 (2) 0 43.80 12/29/23 20,000 (2) 5,000 (2) 0 65.25 12/30/24 15,000 (2) 10,000 (2) 0 73.09 12/30/25 Philippe Santi 1,200 0 0 43.80 12/29/23 800 800 0 46.903 1/18/24 2,400 2,000 0 65.25 12/30/24 4,000 4,000 0 73.09 12/30/25 Frédéric Garcia-Pelayo 2,400 0 0 43.80 12/29/23 800 800 0 46.903 1/18/24 4,000 2,000 0 65.25 12/30/24 4,000 4,000 0 73.09 12/30/25 [ Footnotes from table above ] 1 All options expire 6 years from the date of grant, and vest 20% each year commencing one year after the date of grant. 2 Options are held in the name of personal holding company. 71 The following table sets certain information relating to outstanding equity awards granted by Interparfums SA, our majority-owned French subsidiary which has its shares traded on the NYSE Euronext, held by the executive officers of our company listed in the Summary Compensation Table as of the end of the past fiscal year. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END OF INTERPARFUMS SA Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable) Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock that Have Not Vested (#)(1) Market Value of Shares or Units of Stock that Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($) Jean Madar -0- 0 -0- NA NA 3,000 175,640 -0- -0- Russell Greenberg -0- 0 -0- NA NA -0- -0- -0- -0- Michel Atwood -0- 0 -0- NA NA -0- -0- -0- -0- Philippe Benacin -0- 0 -0- NA NA 3,000 175,640 -0- -0- Philippe Santi -0- 0 -0- NA NA 6,000 351,281 -0- -0- Frédéric Garcia-Pelayo -0- 0 -0- NA NA 6,000 175,640 -0- -0- 1 Estimated number of shares are to be issued only to the extent that the performance conditions have been met. 2 As of December 31, 2022, the closing price of Interparfums SA as reported by Euronext was 55.60 euros, and the exchange rate was 1.053 U.S. dollars to 1 euro. 72 Option Exercises and Stock Vested The following table sets forth certain information relating to each option exercise affected during the past fiscal year, and each vesting of stock, including restricted stock, restricted stock units and similar instruments of our company during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table. OPTION EXERCISES AND STOCK VESTED Option Awards Stock Awards Name Number of Shares Acquired on Exercise (#) Value Realized on Exercise ($) 1 Number of Shares Acquired on Vesting (#) Value Realized On Vesting ($) Jean Madar 19,000 1,230,315 -0- -0- Russell Greenberg 60,000 2,475,744 -0- -0- Michel Atwood -0- -0- -0- -0- Philippe Benacin 19,000 1,191,374 -0- -0- Philippe Santi 4,000 199,588 -0- -0- Frédéric Garcia-Pelayo 1,200 82,973 -0- -0- [Footnotes from table above] 1 Total value realized on exercise of options in dollars is based upon the difference between the fair market value of the common stock on the date of exercise, and the exercise price of the option. Regarding Interparfums SA, our majority-owned French subsidiary which has its shares traded on the Euronext, no options were exercised during the past fiscal year, and there was no vesting of stock, including restricted stock, restricted stock units and similar instruments during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table. Pension Benefits The following table sets forth certain information relating to payment of benefits in connection with retirement plans during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table. PENSION BENEFITS Name Plan Name Number of Years Credited Service (#) Present Value of Accumulated Benefit* ($) Payments During Last Fiscal Year ($) Jean Madar NA NA -0- -0- Russell Greenberg NA NA -0- -0- Michel Atwood NA NA -0- -0- Philippe Benacin Inter Parfums SA Pension Plan NA 331,239 16,006 Philippe Santi Inter Parfums SA Pension Plan NA 321,239 16,006 Frédéric Garcia-Pelayo Inter Parfums SA Pension Plan NA 321,239 16,006 * Does not include any contributions made by prior employers, or individually by the recipients as such information is confidential under French law. Interparfums SA maintains a pension plan for all of its employees, including all executive officers. The calculation of commitments for severance benefits involves estimating the probable present value of projected benefit obligations. This projected benefit obligations are then prorated to take into account seniority of the employees of Interparfums SA on the calculation date. In calculating benefits, the following assumptions were applied: - voluntary retirement at age 65; - a rate of 45% for employer payroll contributions for all employees; - a 3% average annual salary increase; - an annual rate of turnover for all employees under 55 years of age and nil above; - the TH 00-02 mortality table for men and the TF 00-02 mortality table for women; - a discount rate of 3.8%. 73 The normal retirement age is 65 years, but employees, including Messrs. Benacin, Santi and Garcia-Pelayo, can collect reduced benefits if they retire at age 62. Nonqualified Deferred Compensation We do not maintain any nonqualified deferred compensation plans. CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our mean employee and the annual total compensation of Mr. Jean Madar, Chief Executive Officer (the “CEO”): For 2022, our last completed fiscal year: ● Our median employee’s compensation was $66,402 ● Our Chief Executive Officer’s total 2022 compensation was $2,460,315 ● Accordingly, our 2022 CEO to Median Employee Pay Ratio was 37.05 to 1 This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records. We identified our median employee using our total employee population as of December 31, 2022 by applying a consistently applied compensation measure across our global employee population. For our consistently applied compensation measure, we used all compensation, including actual base salary, bonuses, commissions, and any overtime paid during the 12-month period ending December 31, 2022. We did not use any material estimates, assumptions, adjustments or statistical sampling to determine the worldwide median employee. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Employment and Consulting Agreements Please see our Annual Report on Form 10-K for the year ended December 31, 2021, Item 11 under the heading “ Employment and Consulting Agreements ” for a material terms of the employment agreement with Philippe Benacin, individually, and the consulting agreements with, and fees and stock options previously granted to, Philippe Benacin Holding SAS and Jean Madar Holding SAS, which is incorporated by reference herein. 74 Compensation of Directors The following table sets forth certain information relating to the compensation for each of our directors who is not an executive officer of our Company named in the Summary Compensation Table for the past fiscal year. DIRECTOR COMPENSATION Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings All Other Compensation ($) 1 Total ($) Francois Heilbronn 2 15,000 -0- 30,544 -0- -0- -0- 45,544 Robert Bensoussan 3 18,000 -0- 30,544 -0- -0- 66,480 115,024 Patrick Choël 4 15,000 -0- 30,544 -0- -0- 13,246 58,790 Michel Dyens 5 21,000 -0- 30,544 -0- -0- -0- 51,544 Veronique Gabai-Pinsky 6 18,000 -0- 30,544 -0- -0- 84,308 132,852 Gilbert Harrison 7 18,000 -0- 30,544 -0- -0- 120,000 168,544 [Footnotes from table above] 1. Represents gain from exercise of stock options, except for Mr. Harrison, which consists of a $120,000 payment made in 2022 to the company controlled by Mr. Harrison in connection with the acquisition of the Donna Karan license. See “Fee for Director’s Company” in Item 13, Certain Relationships and Related Transactions, and Director Independence, in this annual report on Form 10-K. 2. As of the end of the last fiscal year, Mr. Heilbronn held options to purchase an aggregate of 6,500 shares of our common stock. 3. As of the end of the last fiscal year, Mr. Bensoussan held options to purchase an aggregate of 7,500 shares of our common stock. 4. As of the end of the last fiscal year, Mr. Choël held options to purchase an aggregate of 5,750 shares of our common stock. 5. As of the end of the last fiscal year, Mr. Dyens held options to purchase an aggregate of 6,500 shares of our common stock. 6. As of the end of the last fiscal year, Ms. Gabai-Pinsky held options to purchase an aggregate of 7,500 shares of our common stock. 7. As of the end of the last fiscal year, Mr. Harrison held options to purchase an aggregate of 7,500 shares of our common stock. All nonemployee directors receive $6,000 for each board meeting at which they participate in person, and $3,000 for each meeting held by conference telephone. In addition, the annual fee for each member of the audit committee is $8,000. The compensation for the nonemployee directors remained the same for 2021 and 2022, except for Mr. Harrison. During 2021, a company owned by Mr. Harrison received a fee equal to $300,000, in connection with the Donna Karan license agreement, which is effective on July 1, 2022. A payment of $120,000 was made in 2021 to Mr. Harrison’s company, $120,000 was paid one year later in 2022, and $60,000 will be paid one year thereafter in 2023. We maintain a stock option plan for our nonemployee or independent directors. The purpose of this plans is to assist us in attracting and retaining key directors who are responsible for continuing the growth and success of our company. Under such plan, until 2022 options to purchase 1,500 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date. However, if a nonemployee director does not attend certain of the board meetings, then such option grants are reduced according to a schedule. However, our board of directors cancelled the automatic grant of options to the nonemployee directors effective with the grant that had been scheduled for February 1, 2022. After discussions Mr. Atwood had with certain financial consultants relating to potential compensation plans in lieu of stock option grants to the Company’s independent directors, and consultation between Messrs. Madar and Atwood, it was determined that the most favorable way for the nonemployee directors to be compensated was to amend the 2016 Stock Option Plan to reinstate the automatic grant of stock options previously provided to nonemployee directors, commencing with a new automatic grant on the last business day of 2022, December 30, and continuing on the last business day of each year thereafter, subject to the approval of the shareholders of this Corporation at the 2023 annual meeting of shareholders. The automatic option grants to independent directors were approved by the Board of Directors with the following changes: Reinstatement of the automatic grant of nonqualified stock options to all nonemployee directors was made without any discretion on the part of the Executive Compensation and Stock Option Committee, with the right to purchase 1,500 shares of the our common stock under our 2016 Stock Option Plan, as amended (the “2016 Stock Option Plan”), at the purchase per share on the date of grant equal to the fair market value as determined in accordance with the 2016 Stock Option Plan, each exercisable for a six (6) year period; provided that, such options shall vest and become exercisable to purchase shares of Common Stock as follows: 20% one year after the date of grant, and then 20% on each of the second, third, fourth and fifth consecutive years from the date of grant on a cumulative basis, so that each option shall become fully vested and exercisable on the first day of the sixth year from the date of grant, with the automatic grant date to commence on the last business day of this year, December 30, 2022 and continuing on the last business day of each year thereafter, in lieu of the grant date on each February 1 st . 75 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information with respect to the beneficial ownership of our common stock by (a) each person we know to be the beneficial owner of more than 5% of our outstanding common stock, (b) our executive officers and directors and (c) all of our directors and officers as a group. Messrs. Madar and Benacin own 99.99% of their respective personal holding companies. As of February 28, 2023, we had 32,109,360 shares of common stock outstanding. Name and Address of Beneficial Owner Amount of Beneficial Ownership 1 Approximate Percent of Class Jean Madar c/o Interparfums SA 10 rue de Solférino 75007 Paris, France 7,116,741 2 22.2 % Philippe Benacin c/o Interparfums SA 10 rue de Solférino 75007 Paris, France 6,906,064 3 21.5 % Michel Atwood c/o Inter Parfums, Inc. 551 Fifth Avenue New York, NY 10176 0 NA Philippe Santi Interparfums SA 10 rue de Solférino 75008, Paris, France 800 4 Less than 1 % Francois Heilbronn 60 Avenue de Breteuil 75007 Paris, France 28,938 5 Less than 1 % Robert Bensoussan c/o Sirius Equity LLP 52 Brook Street W1K 5DS London, UK 10,375 6 Less than 1 % Patrick Choël 140 Rue de Grenelle 75007, Paris, France 7,125 7 Less than 1 % Michel Dyens Michel Dyens & Co. 17 Avenue Montaigne 75007 Paris, France 7,875 8 Less than 1 % Veronique Gabai-Pinsky 200 East End Avenue New York, NY 10128 2,875 9 Less than 1 % Gilbert Harrison Harrison Group 745 Fifth Avenue, Suite 514 New York, NY 10151 4,875 10 Less than 1 % Frederic Garcia-Pelayo Interparfums SA 10 rue de Solférino 75008, Paris, France 12,000 11 Less than 1 % Blackrock, Inc. 55 East 52 nd Street New York, NY 10055 2,789,318 12 8.8 % The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 1,983,427 13 6.2 % All Directors and Officers (As a Group 10 Persons) 14,097,668 14 43.7 % 1 All shares of common stock are directly held with sole voting power and sole power to dispose, unless otherwise stated. Options which are exercisable within 60 days are included in beneficial ownership calculations. 2 Consists of 24,400 shares held directly, 7,032,341 shares held indirectly through Jean Madar Holding SAS, a personal holding company, and options to purchase 60,000 shares. 3 Consists of 6,846,064 shares held indirectly through Philippe Benacin Holding SAS, a personal holding company, and options to purchase 60,000 shares. 4 Consists of shares of common stock underlying options for Mr. Santi. 5 Consists of 26,063 shares held directly and options to purchase 2,875 shares for Mr. Heilbronn. 6 Consists of 7,500 shares held directly and options to purchase 2,875 shares for Mr. Bensoussan. 7 Consists of 4,250 shares held directly and options to purchase 2,825 shares for Mr. Choël. 8 Consists of 5,000 shares held directly and options to purchase 2,875 shares for Mr. Dyens. 9 Consists of shares of common stock underlying options for Ms. Gabai-Pinsky. 10 Consists of shares of common stock underlying options for Mr. Harrison. 11 Consists of shares of common stock underlying options for Mr. Garcia-Pelayo. 12 Information based upon Schedule 13G of Blackrock, Inc. dated January 25, 2023 as filed with the Securities and Exchange Commission. 13 Information based upon Schedule 13G Amendment 5 of The Vanguard Group, an investment advisor, dated February 9, 2023 as filed with the Securities and Exchange Commission. 14 Consists of 13,945,618 shares held directly or indirectly, and options to purchase 152,050 shares. 76 The following table sets forth certain information as of the end of our last fiscal year regarding all equity compensation plans that provide for the award of equity securities or the grant of options, warrants or rights to purchase our equity securities. Equity Compensation Plan Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 441,580 $67.30 558,975 Equity compensation plans not approved by security holders -0- N/A -0- Total 441,580 $67.30 558,975 Item 13. Certain Relationships and Related Transactions, and Director Independence Transactions with European Subsidiaries We also provide (or had provided on our behalf) certain financial, accounting and legal services for Interparfums SA, and during 2022, 2021 and 2020 fees for such services were $491,300, $443,625 and $450,750, respectively. In September 2021, Interparfums Luxury Brands, Inc., an indirect majority-owned subsidiary of the Company, loaned the Company $24 million, which is repayable in 12 equal monthly payments with interest at 2% per annum commencing on January 31, 2022. In December 2021, Inter Parfums USA, LLC, a United States subsidiary, renewed a license agreement for five years that was initially signed in 2012 on the same terms with Interparfums Suisse (SARL), a Swiss subsidiary of Interparfums SA, for the right to sell amenities under the Lanvin brand name to luxury hotels, cruise lines and airlines in return for royalty payments as are customary in our industry. In September 2022, Interparfums Luxury Brands, Inc. loaned the Company $10 million, which is repayable in one lump sum on June 30, 2023 with interest at 3.5% per annum. In addition, the $2 million payment due on September 30, 2022 by the Company against the loan made in September 2021 was postponed to January 31, 2023 together with interest at 2% per annum. Fee for Director’s Company In connection with the acquisition of the Donna Karan license, which became effective on July 1, 2022 as discussed above, we agreed to pay to a company controlled by Mr. Gilbert Harrison, a director, the sum of $300,000, payable over time, with $120,000 paid in 2021, $120,000 paid one year later in 2022 and $60,000 due two years later in 2023. Consulting Agreements Please see our Annual Report on Form 10-K for the year ended December 31, 2021, Item 11 under the heading “ Employment and Consulting Agreements ” for a material terms of the employment agreement with Philippe Benacin, individually, and the consulting agreements with, and fees and stock options previously granted to, Philippe Benacin Holding SAS and Jean Madar Holding SAS, which is incorporated by reference herein. Procedures for Approval of Related Person Transactions Transactions between related persons, such as between an executive officer or director and our company, or any company or person controlled by such officer or director, are required to be approved by our Audit Committee of our board of directors. Our Audit Committee Charter contains such explicit authority, as required by the applicable rules of The Nasdaq Stock Market. 77 The following are our directors who are independent directors within the applicable rules of The Nasdaq Stock Market: Francois Heilbronn Robert Bensoussan Patrick Choël Michel Dyens Veronique Gabai-Pinsky Gilbert Harrison We follow and comply with the independent director definitions as provided by The Nasdaq Stock Market rules in determining the independence of our directors, which are posted on our company’s website. In addition, such rules are also available on The Nasdaq Stock Market’s website. In addition, The Nasdaq Stock Market maintains more stringent rules relating to director independence for the members of our Audit Committee, and the members of our Audit Committee, Messrs. Heilbronn and Choël, as well as Ms. Gabai-Pinsky, are independent within the meaning of those rules. Board Leadership Structure and Risk Management Please see our Annual Report on Form 10-K for the year ended December 31, 2021, Item 13. Certain Relationships and Related Transactions, and Director Independence, under the heading “ Board Leadership Structure and Risk Management ,” for prior disclosure on this topic, which is incorporated by reference herein. Item 14. Principal Accountant Fees and Services Fees The following sets forth the fees billed to us by Mazars USA LLP, as well as discusses the services provided for the past two fiscal years, fiscal years ended December 31, 2022 and December 31, 2021. Audit Fees Fees billed by Mazars USA LLP and its affiliate, Mazars S.A. for audit services and review of the financial statements contained in our Quarterly Reports on Form 10-Q were $1.4 million and $1.2 and million for 2022 and 2021, respectively. Audit-Related Fees Mazars USA LLP did not bill us for any audit-related services during 2022 and 2021. Tax Fees Mazars USA did not bill us in 2022 for any tax services. Tax services billed to us during 2021 was $49,300. All Other Fees Mazars S.A. billed us $6,000 and $3,000 for other services during 2022 and 2021, respectively. Audit Committee Pre-Approval Policies and Procedures The Audit Committee has the sole authority for the appointment, compensation and oversight of the work of our independent accountants, who prepare or issue an audit report for us. 78 During the first quarter of 2022, the audit committee authorized the following non-audit services to be performed by Mazars USA LLP. ● We authorized the engagement of Mazars USA LLP if deemed necessary to provide tax consultation in the ordinary course of business for fiscal year ended December 31, 2022. ● We authorized the engagement of Mazars USA LLP if deemed necessary to provide tax consultation as may be required on a project by project basis that would not be considered in the ordinary course of business, up to a $10,000 fee limit per project (or €10,000 in the case of Interparfums SA), subject to an aggregate fee limit of $50,000 for fiscal year ended December 31, 2022. If we require further tax services from Mazars USA LLP, then the approval of the audit committee must be obtained. ● We authorized the engagement of Mazars USA LLP if deemed necessary to provide attestation or other services as may be required on a project by project basis that would not be considered in the ordinary course of business, up to a $10,000 fee limit per project (or €10,000 in the case of Interparfums SA), subject to an aggregate fee limit of $50,000 for fiscal year ended December 31, 2022. If we require further tax services from Mazars USA LLP, then the approval of the audit committee must be obtained. ● If we require other services by Mazars USA LLP on an expedited basis such that obtaining pre-approval of the audit committee is not practicable, then the Chairman of the Committee has authority to grant the required pre-approvals for all such services. ● We imposed a cap of $100,000 on the fees that Mazars USA LLP can charge for services on an expedited basis that are approved by the Chairman without obtaining full audit committee approval. ● None of the non-audit services of either of the Company’s auditors had the pre-approval requirement waived in accordance with Rule 2-01(c)(7)(i)(C) of Regulation S-X. 79 PART IV Item 15. Exhibits, Financial Statement Schedules Page ( a)(1) Financial Statements annexed hereto Report of Independent Registered Public Accounting Firm F-2 Audited Financial Statements: Consolidated Balance Sheets as of December 31, 2022 and 2021 F-5 Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2022 F-6 Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2022 F-7 Consolidated Statements of Changes in Shareholders’ Equity for each of the years in the three-year period ended December 31, 2022 F-8 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2022 F-9 Notes to Consolidated Financial Statements F-10 (a)(2) Financial Statement Schedule: Schedule II – Valuation and Qualifying Accounts F-34 (a)(3) Exhibits – The list of exhibits is contained in the Exhibit Index, which follows the signature page of this report. Item 16. Form 10-K Summary None. 80 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Financial Statements and Schedule Index Page Report of Independent Registered Public Accounting Firm F-2 ( Mazars USA LLP, New York, New York, PCAOB ID 339 ) Audited Financial Statements: Consolidated Balance Sheets as of December 31, 2022, and 2021 F-5 Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2022, F-6 Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2022, F-7 Consolidated Statements of Changes in Shareholders’ Equity for each of the years in the three-year period ended December 31, 2022, F-8 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2022, F-9 Notes to Consolidated Financial Statements F-10 Financial Statement Schedule: Schedule II – Valuation and Qualifying Accounts F-34 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To Shareholders and the Board of Directors of Inter Parfums, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Inter Parfums, Inc. (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and the schedule listed in the Index in Item 15(a)(2) (collectively referred to as the “financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework: (2013) issued by COSO. Basis for Opinion The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. F- 2 Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. As described in Notes 1 and 8 to the consolidated financial statements, the Company’s consolidated indefinite and finite - life intangible assets balance was $291 million at December 31, 2022. Indefinite lived intangible assets principally consist of trademarks and finite-lived intangible assets represent fees to acquire or enter into a license. Those intangible assets are tested for impairment as follows: - Indefinite - life intangible assets are tested for impairment at least annually at the reporting unit level or more frequently when events occur, or circumstances change. The evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair value is estimated based upon discounted future cash flow projections. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded. F- 3 - Finite - life intangible assets are tested for impairment testing whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If impairment indicators exist, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If the projection of undiscounted cash flows is less than the carrying value of a finite-lived intangible asset, an impairment charge would be recorded. The determination of the future cash flows of the intangible assets requires management to make significant estimates and assumptions related to forecasts of future revenues, operating margins, and discount rates. As disclosed by management, changes in these assumptions could have a significant impact on the future cash flows and therefore, on the amount of any impairment charge. The determination of an impairment indicator on the finite - life intangible assets requires management judgments and involves assumptions. We identified the impairment assessment of intangible assets as a critical audit matter as auditing management’s judgments regarding the evaluation of impairment indicators, forecasts of future revenue, operating margin, and the discount rate to be applied involve a high degree of subjectivity. The primary procedures we performed to address this critical audit matter included: ► Reviewing the analysis of the identification of impairment evidence for each indefinite and finite-life asset based on three indicators (sales analysis, new products launches, and payment of minimum guarantees), and then corroborating that analysis with external information and evidence obtained in other areas of the audit. ► Testing the effectiveness of controls relating to management’s impairment tests, including controls over the impairment indicators and determination of the future cash flows. ► In testing management’s process for determining the future cash flows we evaluated the reasonableness of management’s forecasts of future revenue and operating margin by performing a retrospective review in comparing these forecasts to historical operating results, evaluating whether the assumptions used were reasonable considering current information as well as future expectations, and using additional evidence obtained in other areas of the audit. ► Utilizing a valuation specialist to assist in auditing the discount rate. It includes evaluating whether the assumptions used were reasonable by comparing to third party market data. Mazars USA LLP /s/ Mazars USA LLP We have served as the Company's auditor since 2004. New York, New York February 28, 2023 F- 4 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2022, and 2021 (In thousands except share and per share data) Assets 2022 2021 Current assets: Cash and cash equivalents $ 104,713 $ 159,613 Short-term investments 150,833 160,014 Accounts receivable, net 197,584 159,281 Inventories 289,984 198,914 Receivables, other 28,803 10,308 Other current assets 15,650 21,375 Income taxes receivable 157 210 Total current assets 787,724 709,715 Property, equipment and leasehold improvements, net 166,722 149,352 Right-of-use assets, net 27,964 33,728 Trademarks, licenses and other intangible assets, net 290,853 214,047 Deferred tax assets 11,159 7,936 Other assets 24,120 30,586 Total assets $ 1,308,542 $ 1,145,364 Liabilities and Equity Current liabilities: Current portion of long-term debt $ 28,547 $ 15,911 Current portion of lease liabilities 5,296 6,014 Accounts payable - trade 88,388 81,980 Accrued expenses 213,621 136,677 Income taxes payable 8,715 4,328 Total current liabilities 344,567 244,910 Long–term debt, less current portion 151,494 132,902 Lease liabilities, less current portion 24,335 29,220 Equity: Inter Parfums, Inc. shareholders’ equity: Preferred stock, $ 0.001 par value. Authorized 1,000,000 shares: none issued — — Common stock, $ 0.001 par value. Authorized 100,000,000 shares: outstanding, 31,967,300 and 31,830,420 shares on December 31, 2022, and 2021, respectively 32 32 Additional paid-in capital 90,186 87,132 Retained earnings 620,095 560,663 Accumulated other comprehensive loss ( 56,056 ) ( 38,432 ) Treasury stock, at cost, 9,864,805 common shares on December 31, 2022, and 2021 ( 37,475 ) ( 37,475 ) Total Inter Parfums, Inc. shareholders’ equity 616,782 571,920 Noncontrolling interest 171,364 166,412 Total equity 788,146 738,332 Total liabilities and equity $ 1,308,542 $ 1,145,364 See accompanying notes to consolidated financial statements. F- 5 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2022, 2021, and 2020 (In thousands except share and per share data) 2022 2021 2020 Net sales $ 1,086,653 $ 879,516 $ 539,009 Cost of sales 392,231 322,614 208,278 Gross margin 694,422 556,902 330,731 Selling, general, and administrative expenses 492,370 406,459 260,648 Impairment loss 7,749 2,393 — Income from operations 194,303 148,050 70,083 Other expenses (income): Interest expense 3,599 2,825 1,970 Loss (gain) on foreign currency 1,921 ( 2,338 ) 2,178 Interest and investment income ( 5,486 ) ( 3,403 ) ( 2,865 ) Other loss (income) 49 ( 53 ) ( 549 ) Nonoperating Income (Expense) 83 ( 2,969 ) 734 Income before income taxes 194,219 151,019 69,349 Income taxes 43,182 40,992 19,381 Net income 151,037 110,027 49,968 Less: Net income attributable to the noncontrolling interest 30,099 22,616 11,749 Net income attributable to Inter Parfums, Inc. $ 120,938 $ 87,411 $ 38,219 Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 3.80 $ 2.76 $ 1.21 Diluted $ 3.78 $ 2.75 $ 1.21 Weighted average number of shares outstanding: Basic 31,859,417 31,676,796 31,536,659 Diluted 31,988,753 31,835,408 31,654,544 Dividends declared per share $ 2.00 $ 1.00 $ 0.33 See accompanying notes to consolidated financial statements. F- 6 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Years ended December 31, 2022, 2021, and 2020 (In thousands except share and per share data) 2022 2021 2020 Net income $ 151,037 $ 110,027 $ 49,968 Other comprehensive income: Net derivative instrument income (loss), net of tax 2,356 ( 1,367 ) ( 19 ) Transfer of OCI into earnings 992 — ( 52 ) Translation adjustments, net of tax ( 29,683 ) ( 42,967 ) 47,912 Other comprehensive income (loss), before tax ( 26,335 ) ( 44,334 ) 47,841 Comprehensive income 124,702 65,693 97,809 Comprehensive income attributable to noncontrolling interests: Net income 30,099 22,616 11,749 Net derivative instrument income (loss), net of tax 647 ( 375 ) ( 19 ) Translation adjustments, net of tax ( 9,358 ) ( 11,524 ) 14,004 Comprehensive income (loss), net of tax, atributable to noncontrolling interest 21,388 10,717 25,734 Comprehensive income attributable to Inter Parfums Inc. $ 103,314 $ 54,976 $ 72,075 See accompanying notes to consolidated financial statements. F- 7 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Shareholders’ Equity Years ended December 31, 2022, 2021, and 2020 (In thousands except share and per share data) 2022 2021 2020 Common stock, beginning of year $ 32 $ 32 $ 31 Shares issued upon exercise of stock options — — 1 Common stock, end of year 32 32 32 Additional paid-in capital, beginning of year 87,132 75,708 70,664 Shares issued upon exercise of stock options 6,004 5,393 2,771 Share-based compensation 1,355 1,566 1,711 Purchase of subsidiary shares from noncontrolling interests — — — Shares issued for license acquisition — 5,000 — Transfer of subsidiary shares purchased ( 4,305 ) ( 535 ) 562 Additional paid-in capital, end of year 90,186 87,132 75,708 Retained earnings, beginning of year 560,663 503,567 474,637 Net income 120,938 87,411 38,219 Dividends ( 63,743 ) ( 31,690 ) ( 10,406 ) Share-based compensation 2,237 1,375 1,117 Retained earnings, end of year 620,095 560,663 503,567 Accumulated other comprehensive loss, beginning of year ( 38,432 ) ( 5,997 ) ( 39,853 ) Foreign currency translation adjustment, net of tax ( 20,325 ) ( 31,443 ) 33,908 Transfer from other comprehensive income into earnings 992 — ( 52 ) Net derivative instrument income (loss), net of tax 1,709 ( 992 ) — Accumulated other comprehensive loss, end of year ( 56,056 ) ( 38,432 ) ( 5,997 ) Treasury stock, beginning and end of year ( 37,475 ) ( 37,475 ) ( 37,475 ) Net income - - - Treasury stock, beginning and end of year ( 37,475 ) ( 37,475 ) ( 37,475 ) Noncontrolling interest, beginning of year 166,412 166,615 140,994 Net income 30,099 22,616 11,749 Foreign currency translation adjustment, net of tax ( 9,358 ) ( 11,524 ) 14,004 Net derivative instrument income (loss), net of tax 647 ( 375 ) ( 19 ) Dividends ( 16,056 ) ( 9,836 ) ( 324 ) Share-based compensation ( 282 ) ( 293 ) 350 Transfer of subsidiary shares purchased ( 98 ) ( 791 ) ( 139 ) Noncontrolling interest, end of year 171,364 166,412 166,615 738,332 702,450 608,998 151,037 110,027 49,968 Total equity $ 788,146 $ 738,332 $ 702,450 See accompanying notes to consolidated financial statements. F- 8 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2022, 2021, and 2020 (In thousands) 2022 2021 2020 Cash flows from operating activities: Net income $ 151,037 $ 110,027 $ 49,968 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization including impairment loss 22,539 12,698 9,067 Provision for doubtful accounts 2,353 853 4,824 Noncash stock compensation 3,143 2,853 3,029 Share of income of equity investment 49 ( 53 ) ( 549 ) Lease expense 4,980 7,302 5,483 Deferred tax expense (benefit) ( 3,604 ) ( 465 ) 581 Change in fair value of derivatives 227 65 ( 137 ) Changes in: Accounts receivable ( 59,640 ) ( 45,395 ) 13,157 Inventories ( 98,297 ) ( 49,815 ) 19,333 Other assets ( 13,651 ) ( 16,725 ) 1,176 Operating lease liabilities ( 4,795 ) ( 7,503 ) ( 5,421 ) Accounts payable and accrued expenses 106,857 103,046 ( 32,239 ) Income taxes, net 3,952 2,698 ( 3,279 ) Net cash provided by operating activities 115,150 119,586 64,993 Cash flows from investing activities: Purchases of short-term investments ( 1,038 ) ( 55,691 ) ( 7,582 ) Proceeds from sale of short-term investments 896 10,644 11,513 Purchase of property, equipment and leasehold improvements ( 33,756 ) ( 141,274 ) ( 11,011 ) Payment for intangible assets acquired ( 98,865 ) ( 1,545 ) ( 1,251 ) Purchase of equity investment — — ( 13,998 ) Net cash used in investing activities ( 132,763 ) ( 187,866 ) ( 22,329 ) Cash flows from financing activities: Repayment of long-term debt ( 19,861 ) ( 43,056 ) ( 13,725 ) Proceeds from issuance of long-term debt 52,492 157,382 13,438 Proceeds from exercise of options 6,003 5,393 2,771 Dividends paid ( 63,743 ) ( 31,690 ) ( 20,805 ) Dividends paid to noncontrolling interests ( 16,056 ) ( 9,836 ) ( 324 ) Purchase of subsidiary shares from noncontrolling interests ( 4,403 ) — — Net cash provided by (used in) financing activities ( 45,568 ) 78,193 ( 18,645 ) Effect of exchange rate changes on cash ( 493 ) ( 11,207 ) 12,245 Net increase (decrease) in cash and cash equivalents ( 63,674 ) ( 1,294 ) 36,264 Cash and cash equivalents – beginning of year 168,387 169,681 133,417 Cash and cash equivalents – end of year $ 104,713 $ 168,387 $ 169,681 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 2,987 $ 2,468 $ 1,105 Income taxes 38,492 40,497 21,772 See accompanying notes to consolidated financial statements. F- 9 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (1) The Company and its Significant Accounting Policies Business of the Company Inter Parfums, Inc. and its subsidiaries (the “Company”) are in the fragrance business and manufacture and distribute a wide array of fragrances and fragrance related products. 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, Jimmy Choo, Coach and GUESS brand names. As a percentage of net sales, product sales for the Company’s largest brands were as follows: Schedule of lanvin brand name for our class Year Ended December 31, 2022 2021 2020 Montblanc 18 % 19 % 21 % Jimmy Choo 18 % 18 % 16 % Coach 15 % 16 % 17 % GUESS 12 % 12 % 11 % No other brand represented 10% or more of consolidated net sales. Basis of Preparation The consolidated financial statements include the accounts of the Company and its subsidiaries, including 72 % owned Interparfums SA, a subsidiary whose stock is publicly traded in France. All material intercompany balances and transactions have been eliminated . Management Estimates Management makes assumptions and estimates to prepare financial statements in conformity with accounting principles generally accepted in the United States of America. Those assumptions and estimates directly affect the amounts reported and disclosures included in the consolidated financial statements. Actual results could differ from those assumptions and estimates. Significant estimates for which changes in the near term are considered reasonably possible and that may have a material impact on the financial statements are disclosed in these notes to the consolidated financial statements. Foreign Currency Translation For foreign subsidiaries with operations denominated in a foreign currency, assets and liabilities are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the year. Gains and losses from translation adjustments are accumulated in a separate component of shareholders’ equity. Cash and Cash Equivalents and Short-Term Investments All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents. The Company also has short-term investments which consist of certificates of deposit and other contracts with maturities greater than three months and available for sale marketable equity securities. The Company monitors concentrations of credit risk associated with financial institutions with which the Company conducts significant business. The Company believes its credit risk is minimal, as the Company primarily conducts business with large, well-established financial institutions. Substantially all cash and cash equivalents are primarily held at financial institutions outside the United States and are readily convertible into U.S. dollars. F- 10 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Accounts Receivable Accounts receivable represent payments due to the Company for previously recognized net sales, reduced by allowances for doubtful accounts or balances which are estimated to be uncollectible, which aggregated $ 4.7 million and $ 2.2 million as of December 31, 2022, and 2021, respectively. Accounts receivable balances are written-off against the allowance for doubtful accounts when they become uncollectible. Recoveries of accounts receivable previously recorded against the allowance are recorded in the consolidated statement of income when received. We generally grant credit based upon our analysis of the customer’s financial position, as well as previously established buying patterns. Inventories Inventories, including promotional merchandise, only include inventory considered saleable or usable in future periods, and are stated at the lower of cost and net realizable value, with cost being determined on the first-in, first-out method. Cost components include raw materials, direct labor and overhead (e.g., indirect labor, utilities, depreciation, purchasing, receiving, inspection and warehousing) as well as inbound freight. Promotional merchandise is charged to cost of sales at the time the merchandise is shipped to the Company’s customers. Derivatives All derivative instruments are recorded as either assets or liabilities and measured at fair value. The Company uses derivative instruments to principally manage a variety of market risks. For derivatives designated as hedges of the exposure to changes in fair value of the recognized asset or liability or a firm commitment (referred to as fair value hedges), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to include in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in equity (as a component of accumulated other comprehensive income) and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately. The Company also holds certain instruments for economic purposes that are not designated for hedge accounting treatment. For these derivative instruments, changes in their fair value are recorded in earnings immediately. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives for equipt, which range between three and ten years and the shorter of the lease term or estimated useful asset lives for leasehold improvements. Depreciation has not yet begun on property recently purchased, as it has not yet been put into service. Depreciation provided on equipment used to produce inventory, such as tools and molds, is included in cost of sales. F- 11 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Long-Lived Assets Indefinite-lived intangible assets principally consist of trademarks which are not amortized. The Company evaluates indefinite-lived intangible assets for impairment at least annually during the fourth quarter, or more frequently when events occur or circumstances change, such as an unexpected decline in sales, that would more-likely-than-not indicate that the carrying value of an indefinite-lived intangible asset may not be recoverable. When testing indefinite-lived intangible assets for impairment, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 9.8 % and 7.47 % in 2022 and 2021, respectively. The cash flow projections are based upon a number of assumptions, including future sales levels, future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded. Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is recorded. If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment charge would be recorded to reduce the intangible asset to its fair value. Revenue Recognition The Company sells its products to department stores, perfumeries, specialty stores and domestic and international wholesalers and distributors. Our revenue contracts represent single performance obligations to sell our products to customers. Sales of such products by our domestic subsidiaries are denominated primarily in U.S. dollars, and sales of such products by our foreign subsidiaries are primarily denominated in either euro or U.S. dollars. The Company recognizes revenues when contract terms are met, the price is fixed and determinable, collectability is reasonably assured, and control of the assets has passed to the customer based on the agreed upon shipping terms. Net sales are comprised of gross revenues less returns, trade discounts and allowances. The Company does not bill its customers’ freight and handling charges. All shipping and handling costs, which aggregated $ 15.8 million , $1 0.0 million and $ 5.0 million in 2022, 2021 and 2020, respectively, are included in selling, general and administrative expenses in the consolidated statements of income. The Company grants credit to all qualified customers and does not believe it is exposed significantly to any undue concentration of credit risk. No one customer represented 10 % or more of net sales in 2022, 2021 or 2020. F- 12 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Sales Returns Generally, the Company does not permit customers to return their unsold products. However, for U.S. based customers, we allow returns if properly requested, authorized and approved. The Company regularly reviews and revises, as deemed necessary, its estimate of reserves for future sales returns based primarily upon historic trends and relevant current data including information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that we consider include, but are not limited to, the financial condition of our customers, store closings by retailers, changes in the retail environment and our decision to continue to support new and existing products. The Company records its estimate of potential sales returns as a reduction of sales and cost of sales with corresponding entries to accrued expenses, to record the refund liability, and inventory, for the right to recover goods from the customer. The refund liability associated with estimated returns was $ 8.6 million and $ 5.1 million at December 31, 2022 and 2021, respectively, and the amounts recognized for the rights to recover products was $ 3.2 million and $ 1.9 million at December 31, 2022 and 2021, respectively. The physical condition and marketability of returned products are the major factors we consider in estimating realizable value. Actual returns, as well as estimated realizable values of returned products, may differ significantly, either favorably or unfavorably, from our estimates, if factors such as economic conditions, inventory levels or competitive conditions differ from our expectations. Payments to Customers The Company records revenues generated from purchase with purchase and gift with purchase promotions as sales and the costs of its purchase with purchase and gift with purchase promotions as cost of sales. Certain other incentive arrangements require the payment of a fee to customers based on their attainment of pre-established sales levels. These fees have been recorded as a reduction of net sales. Advertising and Promotion Advertising and promotional costs are expensed as incurred and recorded as a component of cost of goods sold (in the case of free goods given to customers) or selling, general and administrative expenses. Advertising and promotional costs included in selling, general and administrative expenses were $ 212.4 million , $ 171.1 million and $ 91.7 million for 2022, 2021 and 2020, respectively. Costs relating to purchase with purchase and gift with purchase promotions that are reflected in cost of sales aggregated $ 43.1 million , $ 36.9 million and $ 26.4 million in 2022, 2021 and 2020, respectively. Package Development Costs Package development costs associated with new products and redesigns of existing product packaging are expensed as incurred. Operating 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. F- 13 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) License Agreements The Company’s license agreements generally provide the Company with worldwide rights to manufacture, market and sell fragrance and fragrance related products using the licensors’ trademarks. The licenses typically have an initial term of approximately 5 to 15 years, and are potentially renewable subject to the Company’s compliance with the license agreement provisions. The remaining terms, excluding potential renewal periods, range from approximately 1 to 12 years. Under each license, the Company is required to pay royalties in the range of 6 % to 10 % to the licensor, at least annually, based on net sales to third parties. In certain cases, the Company may pay an entry fee to acquire, or enter into, a license where the licensor or another licensee was operating a pre-existing fragrance business. In those cases, the entry fee is capitalized as an intangible asset and amortized over its useful life. Most license agreements require minimum royalty payments, incremental royalties based on net sales levels and minimum spending on advertising and promotional activities. Royalty expenses are accrued in the period in which net sales are recognized while advertising and promotional expenses are accrued at the time these costs are incurred. In addition, the Company is exposed to certain concentration risk. Most of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. Income Taxes The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements or tax returns. The net deferred tax assets assume sufficient future earnings for their realization, as well as the continued application of currently enacted tax rates. Included in net deferred tax assets is a valuation allowance for deferred tax assets, where management believes it is more-likely-than-not that the deferred tax assets will not be realized in the relevant jurisdiction. If the Company determines that a deferred tax asset will not be realizable, an adjustment to the deferred tax asset will result in a reduction of net earnings at that time. Accrued interest and penalties are included within the related tax asset or liability in the accompanying financial statements. Issuance of Common Stock by Consolidated Subsidiary The difference between the Company’s share of the proceeds received by the subsidiary and the carrying amount of the portion of the Company’s investment deemed sold, is reflected as an equity adjustment in the consolidated balance sheets. Treasury Stock The Board of Directors may authorize share repurchases of the Company’s common stock (Share Repurchase Authorizations). Share repurchases under Share Repurchase Authorizations may be made through open market transactions, negotiated purchase or otherwise, at times and in such amounts within the parameters authorized by the Board. Shares repurchased under Share Repurchase Authorizations are held in treasury for general corporate purposes, including issuances under various employee stock option plans. Treasury shares are accounted for under the cost method and reported as a reduction of equity. Share Repurchase Authorizations may be suspended, limited or terminated at any time without notice. F- 14 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (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 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, the travel retail business is beginning to pick up. 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 the second half of 2023. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic might continue to have adverse effects on our results of our operations, financial position and cash flows through at least the first half of 2023. (3) Recent Agreements Lacoste In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license becomes effective in January 2024 and will last for 15 years. Dunhill In April 2022, we announced that the Dunhill fragrance license will expire on September 30, 2023 and will not be renewed. The Company will continue to produce and sell Dunhill fragrances until the license expires and will maintain the right to sell-off remaining Dunhill fragrance inventory for a limited time as is customary in the fragrance industry. F- 15 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) 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. Emanuel Ungaro In October 2021, we also entered into a 10-year exclusive global licensing agreement a 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 2024. Rochas Fashion Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $ 2.4 million impairment charge on our Rochas fashion trademark. In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark after an independent expert concluded that the valuation of the trademark was $11.3 million. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value. Land and Building Acquisition - 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. The purchase price includes the complete renovation of the site. As of December 31, 2022, $ 148.1 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 December 31, 2022. The purchase price has been allocated approximately $ 61.1 million to land and $ 87.0 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 $ 3.4 million of cash held in escrow is also included in property, equipment and leasehold improvements on the accompanying balance sheet as of December 31, 2022. The acquisition was financed by a 10 -year € 120 million (approximately $ 128.0 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. F- 16 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (4) Inventories Schedule of inventories December 31, 2022 2021 Raw materials and component parts $ 146,772 $ 111,312 Finished goods 143,212 87,602 Inventories $ 289,984 $ 198,914 Overhead included in inventory aggregated $ 3.4 million and $ 3.7 million as of December 31, 2022 and 2021, respectively. Included in inventories is an inventory reserve, which represents the difference between the cost of the inventory and its estimated realizable value, based upon sales forecasts and the physical condition of the inventories. In addition, and as necessary, specific reserves for future known or anticipated events may be established. Inventory reserves aggregated $ 11.4 million and $ 15.8 million as of December 31, 2022 and 2021, respectively. (5) Fair Value of Financial Instruments 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. Schedule of fair value, assets measured on recurring basis Fair Value Measurements at December 31, 2022 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Short-term investments $ 150,833 $ 19,861 $ 130,174 $ 798 Interest rate swaps 6,758 — 6,758 — Foreign currency forward exchange contracts accounted for using hedge accounting 1,189 — 1,189 — Total Assets $ 158,780 $ 19,861 $ 138,122 $ 798 Liabilities: Foreign currency forward exchange contracts not accounted for using hedge accounting 68 — 68 — Total liabilities $ 68 $ — $ 68 $ — F- 17 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Fair Value Measurements at December 31, 2021 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Short-term investments $ 160,014 $ — $ 160,014 $ — 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 including marketable equity securities, accounts receivable, other receivables, accounts payable and accrued expenses approximates fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the variable interest rates on the Company’s indebtedness approximate current market rates. 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. (6) 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. F- 18 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income (loss) and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial in each of the years in the three-year period ended December 31, 2022. Interest expense includes a gain of $ 6.3 million and $ 0.2 million in 2022 and 2021, respectively, resulting from an interest rate swap. All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swap is included in other assets on the accompanying balance sheet for the period ended December 31, 2022 and was included in long-term debt on the accompanying balance sheet for the period ended December 31, 2021. The valuation of foreign currency forward exchange contracts at December 31, 2022 and December 31, 2021, resulted in an asset and is included in other current assets on the accompanying balance sheets. At December 31, 2022, the Company had foreign currency contracts in the form of forward exchange contracts with notional amounts of approximately U.S. $ 36.5 million , which all have maturities of less than one year. (7) Property, Equipment and Leasehold Improvements Schedule of equipment and leasehold improvements December 31, 2022 2021 Land and Building (construction in progress) $ 148,137 $ 136,131 Equipment 59,689 52,036 Leasehold improvements 2,293 2,082 210,119 190,249 Less accumulated depreciation and amortization 43,397 40,897 $ 166,722 $ 149,352 Depreciation and amortization expense was $ 7.5 million , $ 4.4 million and $ 3.8 million in 2022, 2021, and 2020, respectively. F- 19 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (8) Trademarks, Licenses and Other Intangible Assets Schedule of trademarks, licenses and other intangible assets 2022 Gross Amount Accumulated Amortization Net Book Value Trademarks (indefinite lives) $ 105,022 $ — $ 105,022 Trademarks (finite lives) 41,267 64 41,203 Licenses (finite lives) 205,235 63,535 141,700 Other intangible assets (finite lives) 17,849 14,921 2,928 Subtotal 264,351 78,520 185,831 Total $ 369,373 $ 78,520 $ 290,853 2021 Gross Amount Accumulated Amortization Net Book Value Trademarks (indefinite lives) $ 119,712 $ — $ 119,712 Trademarks (finite lives) 43,820 68 43,752 Licenses (finite lives) 109,682 62,286 47,396 Other intangible assets (finite lives) 17,775 14,588 3,187 Subtotal 171,277 76,942 94,335 Total $ 290,989 $ 76,942 $ 214,047 Amortization expense was $ 6.8 million , $ 5.9 million and $ 5.3 million in 2022, 2021 and 2020, respectively. Amortization expense is expected to approximate $ 7.0 million in 2023, $ 13.3 million in 2024, $ 12.3 million in 2025, $ 10.5 million in 2026 and 2027. The weighted average amortization period for trademarks, licenses and other intangible assets with finite lives are 18 years, 14 years and 2 years, respectively, and 14 years on average. The Company reviews intangible assets with indefinite lives for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There was an impairment charge for trademarks with indefinite useful lives of $ 6.8 million and $ 2.4 million in 2022 and 2021, respectively, relating to our Rochas fashion business and an impairment charge for trademarks with indefinite useful lives of $ 0.9 million in 2022 relating to our Intimate trademark. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 9.80 %, 7.47 %, and 6.99 % as of December 31, 2022, 2021 and 2020, respectively. The cash flow projections are based upon a number of assumptions, including, future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. The Company believes that the assumptions it has made in projecting future cash flows for the evaluations described above are reasonable and currently no other impairment indicators exist for our indefinite-lived assets. However, if future actual results do not meet our expectations, the Company may be required to record an impairment charge, the amount of which could be material to our results of operations. F- 20 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) The cost of trademarks, licenses and other intangible assets with finite lives is being amortized by the straight-line method over the term of the respective license or the intangible assets estimated useful life which range from three to twenty years . If the residual value of a finite life intangible asset exceeds its carrying value, then the asset is not amortized. The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Trademarks (finite lives) primarily represent Lanvin brand names and trademarks and in connection with their purchase, Lanvin was granted the right to repurchase the brand names and trademarks on July 1, 2027 for €70 million (approximately $ 7 5 million) (residual value) in accordance with an amendment signed in 2021. Because the residual value of the intangible asset exceeds its carrying value, the asset is not being amortized. (9) Accrued Expenses Accrued expenses consist of the following: December 31, 2022 2021 Advertising liabilities $ 42,338 $ 31,215 Salary (including bonus and related taxes) 21,128 19,993 Royalties 26,532 19,154 Due vendors (not yet invoiced) 105,869 45,707 Retirement reserves 8,001 10,234 Refund (return) liability 8,604 5,128 Other 1,149 5,246 Total $ 213,621 $ 136,677 (10) Loans Payable – Banks Loans payable – banks consist of the following: The Company and its domestic subsidiaries have available a $ 20 million unsecured revolving line of credit due on demand, which bears interest at the daily Secured Overnight Financing Rate (“SOFR”) plus 2 % (the SOFR was 4.3 % as of December 31, 2022). The line of credit which has a maturity date of December 15, 2023 , is expected to be renewed on an annual basis. Borrowings outstanding pursuant to lines of credit were zero as of December 31, 2022 and 2021. The Company’s foreign subsidiaries have available credit lines, including several bank overdraft facilities totaling approximately $ 20 million. These credit lines bear interest at EURIBOR plus between 0.6 % and 0.9 % (EURIBOR was minus 0.576 % at December 31, 2022). Borrowings outstanding pursuant to these bank overdraft facilities were zero as of December 31, 2022 and 2021. As there were no borrowings outstanding as of December 31, 2022 and 2021, there is no weighted average interest rate on short-term borrowings as of December 31, 2022 and 2021. F- 21 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (11) Long-Term Debt Long-term debt consists of the following: December 31, 2022 2021 $ 53.3 million payable in 48 equal monthly installments of $ 1.1 million beginning in December 2022, bearing interest at one-month Euribor plus 0.825 % $ 52,061 $ — $ 135.9 million payable in 120 equal monthly installments of $ 1.1 million beginning in April 2021, bearing interest at one-month Euribor plus 0.75 % 104,758 124,375 $ 15.0 million payable in 14 equal annual installments of $ 1.1 million beginning in January 2020 including interest imputed at 4.1 % per annum 9,890 10,569 $ 17 million payable in 10 equal annual installments of $ 1.7 million beginning in October 2021 including interest imputed at 2.0 % per annum 13,332 13,859 180,041 148,803 Less current maturities 28,547 15,911 Total $ 151,494 $ 132,892 In December 2022, to finance Interparfums SA’s acquisition of the Lacoste trademark, the Company entered into a $53.3 million (€ 50 million) four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. The swap is a hedged derivative instrument and is therefore recorded at fair value and changes in fair value are reflected in other comprehensive income. In April 2021, to finance the acquisition of Interparfums SA’s future corporate headquarters, the Company entered into a $ 128.0 million (€ 120 million) ten-year credit agreement. Approximately $85.3 million (€80.0 million) of the variable rate debt was swapped for variable interest rate debt with maximum rate of 2% per annum. The swap is a derivative instrument and is therefore recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income. Maturities of long-term debt subsequent to December 31, 2022 are approximately $ 30.4 million in 2023 and $ 28.7 million per year thereafter through 2033. F- 22 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (12) Commitments Leases The Company leases its offices, warehouses and vehicles, 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 December 31, 2022, the weighted average remaining lease term was 5.8 years and the weighted average discount rate used to determine the operating lease liability was 2.6 %. Rental expense related to operating leases was $ 5.6 million , $ 8.2 million , and $ 6.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Operating lease payments included in operating cash flows totaled $ 4.9 million and noncash additions to operating lease assets totaled $ 0.3 million . Maturities of lease liabilities subsequent to December 31, 2022 are as follows: (In thousands) 2023 $ 5,723 2024 5,971 2025 4,847 2026 4,049 2027 4,060 Thereafter 6,913 31,563 Less imputed interest (based on 2.6% weighted-average discount rate) ( 1,932 ) $ 29,631 F- 23 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) License Agreements The Company is party to a number of license and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2033. In connection with certain of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments as follows: (In thousands) 2023 $ 217,852 2024 224,201 2025 218,047 2026 139,348 2027 132,502 Thereafter 986,434 $ 1,918,384 Future advertising commitments are estimated based on planned future sales for the license terms that were in effect at December 31, 2022, without consideration for potential renewal periods. The above figures do not reflect the fact that our distributors share our advertising obligations. Royalty expense included in selling, general, and administrative expenses, aggregated $ 87.0 million , $ 68.9 million and $ 41.1 million , in 2022, 2021 and 2020, respectively, and represented 8.0 %, 7.8 % and 7.6 % of net sales for the years ended December 31, 2022, 2021 and 2020, respectively. (13) Equity 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 aggregated $ 1.3 million , $ 1.4 million and $ 1.7 million in 2022, 2021 and 2020, respectively. Compensation cost, net of estimated 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 the Company’s policy to issue new shares upon exercise of stock options. The following table sets forth information with respect to nonvested options for 2022: Number of Shares Weighted Average Grant Date Fair Value Nonvested options – beginning of year 209,510 $ 13.45 Nonvested options granted 62,000 $ 20.36 Nonvested options vested or forfeited ( 102,780 ) $ 12.93 Nonvested options – end of year 168,730 $ 16.31 F- 24 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) The effect of share-based payment expenses decreased income statement line items as follows: Year Ended December 31, 2022 2021 2020 Income before income taxes $ 3,143 $ 2,850 $ 3,030 Net income attributable to Inter Parfums, Inc. 2,036 1,880 2,040 Diluted earnings per share attributable to Inter Parfums, Inc. 0.06 0.06 0.06 The following table summarizes stock option activity and related information for the years ended December 31, 2022, 2021 and 2020: Year ended December 31, 2022 2021 2020 Options Weighted Average Exercise Price Options Weighted Average Exercise Price Options Weighted Average Exercise Price Shares under option - beginning of year 524,900 $ 57.58 713,210 $ 52.74 815,800 $ 49.89 Options granted 62,000 97.84 9,000 62.18 9,000 69.11 Options exercised ( 136,880 ) 43.86 ( 156,490 ) 34.46 ( 95,570 ) 28.99 Options forfeited ( 8,440 ) 67.65 ( 40,820 ) 62.57 ( 16,020 ) 58.38 Shares under option - end of year 441,580 67.30 524,900 57.58 713,210 52.74 At December 31, 2022, options for 558,975 shares were available for future grant under the plans. The aggregate intrinsic value of options outstanding is $ 13.0 million as of December 31, 2022 and unrecognized compensation cost related to stock options outstanding aggregated $ 2.7 million , which will be recognized over the next five years. The weighted average fair values of options granted by Inter Parfums, Inc. during 2022, 2021 and 2020 were $ 20.36 , $ 11.35 and $ 12.16 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value. The assumptions used in the Black-Scholes pricing model are set forth in the following table: Year Ended December 31, 2022 2021 2020 Weighted-average expected stock-price volatility 26 % 25 % 25 % Weighted-average expected option life 4.0 years 5.0 years 5.0 years Weighted-average risk-free interest rate 4.0 % 0.4 % 1.4 % Weighted-average dividend yield 2.4 % 1.6 % 2.5 % F- 25 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) 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 maintain its current payout ratio as a percentage of earnings. Proceeds, tax benefits and intrinsic value related to stock options exercised were as follows: Year Ended December 31, 2022 2021 2020 Proceeds from stock options exercised $ 6,003 $ 5,393 $ 2,771 Tax benefits $ 800 $ 1,300 $ 400 Intrinsic value of stock options exercised $ 6,760 $ 7,800 $ 2,873 The following table summarizes additional stock option information as of December 31, 2022: Exercise prices Options outstanding Options outstanding weighted average remaining contractual life Options exercisable $ 40.15 - $ 46.90 103,460 0.96 years 101,860 $ 62.18 - $ 69.11 139,900 2.04 years 97,210 $ 73.09 136,220 3.00 years 73,780 $ 97.84 62,000 5.85 years — Totals 441,580 2.62 years 272,850 As of December 31, 2022, the weighted average exercise price of options exercisable was $ 59.46 and the weighted average remaining contractual life of options exercisable is 1.88 years. The aggregate intrinsic value of options exercisable at December 31, 2022 is $ 10.1 million . In December 2018, Interparfums SA approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The corporate performance conditions were met and therefore in June 2022, 211,955 shares, adjusted for stock splits, were distributed. The aggregate cost of the grant of approximately $ 4.8 million was recognized as compensation cost on a straight-line basis over the requisite three -year service period. F- 26 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) In March 2022, Interparfums SA approved an additional plan to grant an aggregate of 88,400 shares to all Interparfums SA employees and corporate officers having more than six months of employment at grant date, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2025 and will follow the same guidelines as the December 2018 plan. The fair value of the grant had been determined based on the quoted stock price of Interparfums SA shares as reported by the Euronext on the date of grant. The estimated number of shares to be distributed of 85,062 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $ 4.1 million will be recognized as compensation cost on a straight-line basis over the requisite three and a quarter year service period. Similar to the December 2018 plan, in order to avoid dilution of the Company’s ownership of Interparfums SA, all shares distributed or to be distributed pursuant to these plans will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. During the year ended December 31, 2022, the Company acquired 63,281 shares at an aggregate cost of $ 3.0 million. All share purchases and issuances have been classified as equity transactions on the accompanying balance sheet. Dividends In October 2019, our Board of Directors authorized a 20 % increase in the annual dividend to $ 1.32 per share on an annual basis. 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 annual cash dividend. In February 2021, the Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly. In February 2022, the Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share and in February 2023, the Board of Directors further increased the annual dividend to $ 2.50 per share. The next quarterly cash dividend of $ 0.625 per share is payable on March 31, 2023 to shareholders of record on March 15, 2023. (14) 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. F- 27 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows: Year ended December 31, 2022 2021 2020 Numerator for diluted earnings per share $ 120,938 $ 87,411 $ 38,219 Denominator: Weighted average shares 31,859,417 31,676,796 31,536,659 Effect of dilutive securities: Stock options 129,336 158,612 117,885 Denominator for diluted earnings per share 31,988,753 31,835,408 31,654,544 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 3.80 $ 2.76 $ 1.21 Diluted 3.78 2.75 1.21 Not included in the above computations is the effect of anti-dilutive potential common shares, which consist of outstanding options to purchase 38,000 , 175,000 , and 450,000 shares of common stock for 2022, 2021, and 2020, respectively. (15) Segments 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 and United States operations primarily represent the sale of prestige brand name fragrances. Information on the Company’s operations by segments is as follows: Year ended December 31, 2022 2021 2020 Net sales: United States $ 342,644 $ 216,559 $ 117,489 Europe 744,075 663,290 422,947 Eliminations of intercompany sales ( 66 ) ( 333 ) ( 1,427 ) $ 1,086,653 $ 879,516 $ 539,009 Net income attributable to Inter Parfums, Inc.: United States $ 43,745 $ 29,359 $ 7,942 Europe 77,193 57,869 30,241 Eliminations — 183 36 $ 120,938 $ 87,411 $ 38,219 Depreciation and amortization expense including impairment loss: United States $ 6,355 $ 3,835 $ 3,354 Europe 16,184 8,863 5,713 $ 22,539 $ 12,698 $ 9,067 Interest and investment income: United States $ 66 $ 3 $ 24 Europe 5,769 3,526 2,971 Eliminations ( 349 ) ( 126 ) ( 130 ) $ 5,486 $ 3,403 $ 2,865 Interest expense: United States $ 1,100 $ 636 $ 604 Europe 2,848 2,315 1,496 Eliminations ( 349 ) ( 126 ) ( 130 ) $ 3,599 $ 2,825 $ 1,970 Income tax expense: United States $ 6,920 $ 5,336 $ 1,590 Europe 36,262 35,607 17,782 Eliminations — 49 9 $ 43,182 $ 40,992 $ 19,381 F- 28 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) December 31, 2022 2021 2020 Total assets: United States $ 278,090 $ 247,703 $ 141,316 Europe 1,052,004 931,735 758,812 Eliminations ( 21,552 ) ( 34,074 ) ( 9,983 ) $ 1,308,542 $ 1,145,364 $ 890,145 Additions to long-lived assets: United States $ 2,318 $ 2,711 $ 1,004 Europe 31,438 138,563 11,259 $ 33,756 $ 141,274 $ 12,263 Total long-lived assets: United States $ 61,539 $ 63,094 $ 40,656 Europe 423,999 334,033 217,766 $ 485,538 $ 397,127 $ 258,422 Deferred tax assets: United States $ 2,906 $ 870 $ 886 Europe 8,253 7,066 7,106 Eliminations — — 49 $ 11,159 $ 7,936 $ 8,041 United States export sales were approximately $ 169.1 million , $ 126.2 million and $ 71.5 million in 2022, 2021 and 2020, respectively. Consolidated net sales to customers by region are as follows: Consolidated net sales to customers by region are as follows: Year ended December 31, 2022 2021 2020 North America $ 431,900 $ 354,100 $ 193,500 Europe 333,400 271,600 180,200 Asia 152,700 128,000 79,700 Middle East 87,800 61,000 46,800 Central and South America 69,900 56,400 32,500 Other 11,000 8,400 6,300 $ 1,086,700 $ 879,500 $ 539,000 F- 29 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Consolidated net sales to customers in major countries are as follows: Year Ended December 31, 2022 2021 2020 United States $ 420,900 $ 351,300 $ 187,300 France $ 44,800 $ 44,000 $ 37,600 Russia $ 33,964 $ 43,400 $ 14,100 United Kingdom $ 37,900 $ 38,500 $ 24,600 (16) Income Taxes The Company and its subsidiaries file income tax returns in the U.S. federal, and various states and foreign jurisdictions. The Company assessed its uncertain tax positions and determined that it has no material uncertain tax position at December 31, 2022. The components of income before income taxes consist of the following: Year ended December 31, 2022 2021 2020 U.S. operations $ 50,250 $ 34,742 $ 9,577 Foreign operations 143,969 116,277 59,772 $ 194,219 $ 151,019 $ 69,349 The provision for current and deferred income tax expense (benefit) consists of the following: Year ended December 31, 2022 2021 2020 Current: Federal $ 6,829 $ 4,825 $ 1,685 State and local 658 518 90 Foreign 39,458 36,164 17,024 46,945 41,507 18,799 Deferred: Federal ( 802 ) 4 ( 215 ) State and local ( 49 ) 11 44 Foreign ( 2,912 ) ( 530 ) 753 ( 3,763 ) ( 515 ) 582 Total income tax expense $ 43,182 $ 40,992 $ 19,381 F- 30 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: December 31, 2022 2021 Net deferred tax assets: Foreign net operating loss carry-forwards $ 554 $ 1,292 Inventory and accounts receivable 3,880 4,508 Profit sharing 2,871 3,787 Stock option compensation 716 732 Effect of inventory profit elimination 9,342 5,112 Other 266 407 Total gross deferred tax assets, net 17,629 15,838 Valuation allowance ( 554 ) ( 3,582 ) Net deferred tax assets 17,075 12,256 Deferred tax liabilities (long-term): Building expenses ( 1,356 ) ( 1,082 ) Trademarks and licenses ( 2,160 ) ( 2,551 ) Unrealized gain on marketable equity securities ( 1,745 ) ( 436 ) Other ( 655 ) ( 251 ) Total deferred tax liabilities ( 5,916 ) ( 4,320 ) Net deferred tax assets $ 11,159 $ 7,936 Valuation allowances have been provided for deferred tax assets relating to foreign net operating loss carry-forwards as future profitable operations from certain foreign subsidiaries might not be sufficient to realize the full amount of the deferred tax assets. No other valuation allowances have been provided as management believes that it is more likely than not that the asset will be realized in the reduction of future taxable income. The Company estimated of the effect of global intangible low-taxed income (“GILTI”) and has determined that it has no tax liability related to GILTI as of December 31, 2022, 2021 and 2020. The Company also estimated the effect of foreign derived intangible income (“FDII”) and recorded a tax benefit of approximately $ 1.5 million , $ 0.9 million and $ 0.3 million as of December 31, 2022, 2021 and 2020, respectively. The Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2019. F- 31 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) Differences between the United States federal statutory income tax rate and the effective income tax rate were as follows: Year ended December 31, 2022 2021 2020 Statutory rates 21.0 % 21.0 % 21.0 % State and local taxes, net of Federal benefit 0.2 0.3 0.2 Windfall benefit from exercise of stock options ( 0.4 ) ( 0.9 ) ( 0.6 ) Benefit of Foreign Derived Intangible Income ( 0.8 ) ( 0.6 ) ( 0.4 ) Effect of foreign taxes greater than U.S. statutory rates 3.1 7.4 7.5 Other ( 0.9 ) ( 0.1 ) 0.2 Effective rates 22.2 % 27.1 % 27.9 % (17) Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss consist of the following: Year ended December 31, 2022 2021 2020 Net derivative instruments, beginning of year $ ( 992 ) $ — $ 52 Net derivative instrument loss, net of tax 2,701 ( 992 ) ( 52 ) Net derivative instruments, end of year 1,709 ( 992 ) — Cumulative translation adjustments, beginning of year ( 37,440 ) ( 5,997 ) ( 39,905 ) Translation adjustments ( 20,325 ) ( 31,443 ) 33,908 Cumulative translation adjustments, end of year ( 57,765 ) ( 37,440 ) ( 5,997 ) Accumulated other comprehensive loss $ ( 56,056 ) $ ( 38,432 ) $ ( 5,997 ) F- 32 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2022, 2021 and 2020 (In thousands except share and per share data) (18) Net Income Attributable to Inter Parfums, Inc. and Transfers from the Noncontrolling Interest Schedule of net income attributable to transfers from the noncontrolling interest Year ended December 31, 2022 2021 2020 Net income attributable to Inter Parfums, Inc. $ 120,938 $ 87,411 $ 38,219 Decrease in Inter Parfums, Inc.’s additional paid-in capital for subsidiary share transactions — — — Change from net income attributable to Inter Parfums, Inc. and transfers from noncontrolling interest $ 120,938 $ 87,411 $ 38,219 (19) Reconciliation of Cash and Cash Equivalents to the Statement of Cash Flows The following table summarizes cash and cash equivalents as of December 31, 2021: December 31, 2021 Cash and cash equivalents per balance sheet $ 159,613 Cash held in escrow included in other assets (see note 3) 8,774 Cash and cash equivalents per statement of cash flows $ 168,387 F- 33 Schedule II - Valuation and Qualifying Accounts Schedule II INTER PARFUMS, INC. AND SUBSIDIARIES Schedule of Valuation and Qualifying Accounts Valuation and Qualifying Accounts (In thousands) Column A Column B Column C Column D Column E Additions (1) (2) Description Balance at beginning of period Charged to costs and expenses Charged to other accounts – describe Deductions describe Balance at end of period Allowance for doubtful accounts: Year ended December 31, 2022 $ 2,247 2,353 1,134 (d) 1,044 (a) 4,690 Year ended December 31, 2021 $ 5,550 877 ( 843 )(d) 3,336 (a) 2,247 Year ended December 31, 2020 $ 2,452 4,824 381 (d) 2,107 (a) 5,550 Allowance for sales returns, net of inventory: Year ended December 31, 2022 $ 3,242 4,997 — 2,829 (b) 5,410 Year ended December 31, 2021 $ 2,242 3,042 — 2,042 (b) 3,242 Year ended December 31, 2020 $ 2,587 1,978 — 2,323 (b) 2,242 Inventory reserve: Year ended December 31, 2022 $ 15,777 8,742 ( 378 )(d) 12,710 (c) 11,431 Year ended December 31, 2021 $ 9,371 8,217 7,041 (d)(e) 8,852 (c) 15,777 Year ended December 31, 2020 $ 4,909 7,212 616 (d) 3,366 (c) 9,371 (a) Write-off of bad debts. (b) Write-off of sales returns. (c) Disposal of inventory (d) Foreign currency translation adjustment (e) Inventory reserves acquired of $7,639 See accompanying reports of independent registered public accounting firm. F- 34 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Inter Parfums, Inc. By: /s/ Jean Madar Jean Madar, Chief Executive Officer Date: February 28, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Jean Madar Chairman of the Board of Directors Jean Madar and Chief Executive Officer February 28, 2023 /s/ Michel Atwood Michel Atwood Chief Financial Officer and Director February 28, 2023 /s/ Philippe Benacin Philippe Benacin Director February 24, 2023 /s/ Philippe Santi Philippe Santi Director February 24, 2023 /s/ François Heilbronn François Heilbronn Director February 24, 2023 /s/ Robert Bensoussan Robert Bensoussan Director February 24, 2023 /s/ Patrick Choël Patrick Choël Director February 24, 2023 Michel Dyens Director February __, 2023 /s/ Veronique Gabai-Pinsky Veronique Gabai-Pinsky Director February 24, 2023 /s/ Gilbert Harrison Gilbert Harrison Director February 24, 2023 Exhibit Index The following documents previously filed with the Commission are incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017: Exhibit No. Description 10.166 Form of Option Agreement for Options Granted to Executive Officers on December 29, 2017 with Schedule of Option Holders and Options Granted 10.167 Form of Option Agreement for Options Granted to Executive Officers on January 19, 2018 with Schedule of Option Holders and Options Granted The following documents previously filed with the Commission are incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018: Exhibit No. Description 10.156 Consulting Agreement with Jean Madar Holding SAS 10.168 Eighth Modification of Lease for portions of 551 5 th Avenue, New York, NY 10.168.1 Exhibits to Eighth Modification of Lease for portions of 551 5 th Avenue, New York, NY 10.169 Fourth Amendment to Lease for 60 Stults Road, South Brunswick, NJ 10.171 Form of Option Agreement for Options Granted to Executive Officers on December 31, 2018 with Schedule of Option Holders and Options Granted The following document previously filed with the Commission is incorporated by reference to the Company’s Current Report on Form 8-K as filed on February 7, 2020: Exhibit No. Description 10.171 Form of Amendment to Consulting Agreement for Jean Madar Holding SAS 81 The following documents previously filed with the Commission are incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019: Exhibit No. Description 10.160 Consulting Agreement with Philippe Benacin Holding SAS 3.1.1 Restated Certificate of Incorporation dated September 3, 1987 3.1.2 Amendment to Restated Certificate of Incorporation dated July 31, 1992 3.1.3 Amendment to Restated Certificate of Incorporation dated July 9, 1993 3.1.4 Amendment to Restated Certificate of Incorporation, as amended, dated July 13, 1999 3.1.5 Amendment to Restated Certificate of Incorporation, as amended, dated July 12, 2000 3.1.6 Amendment to Restated Certificate of Incorporation dated August 6, 2004 3.3 Articles of Incorporation of Inter Parfums Holdings, S.A. 3.3.1 Articles of Incorporation of Inter Parfums Holdings, S.A. (English translation) 3.4 Articles of Incorporation of Interparfums SA 3.4.1 Articles of Incorporation of Interparfums SA (English translation) 10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991 10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York 10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, LP, and Jean Philippe Fragrances, Inc. dated July 10, 1995 10.61.1 Third Amendment to Lease for 60 Stults Road, South Brunswick, NJ 10.172 Form of Option Agreement for Options Granted to Executive Officers on December 31, 2019 with Schedule of Option Holders and Options Granted 10.173 Lease for Interparfums SA Distribution Center (confidential information in this exhibit was omitted) The following documents previously filed with the Commission are incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020: Exhibit No. Description 23 Consent of Mazars USA LLP 31.1 Certification Required by Rule 13a-14 of Chief Executive Officer 31.2 Certification Required by Rule 13a-14 of Chief Financial Officer 32.1 Certification Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive Officer 32.2 Certification Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive Officer 101 Interactive data files 82 The following documents previously filed with the Commission are incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021: Exhibit No. Description 4.33 2016 Stock Option Plan 21 List of Subsidiaries 23 Consent of Mazars USA LLP 31.1 Certification Required by Rule 13a-14 of Chief Executive Officer 31.2 Certification Required by Rule 13a-14 of Chief Financial Officer 32.1 Certification Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive Officer 32.2 Certification Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive Officer Exhibits Filed and Attached to this report: The following documents are filed with this report, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022: Exhibit No. Description Page Nos. 21 List of Subsidiaries 23 Consent of Mazars USA LLP 31.1 Certification Required by Rule 13a-14 of Chief Executive Officer 31.2 Certification Required by Rule 13a-14 of Chief Financial Officer 32.1 Certification Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive Officer 32.2 Certification Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive Officer 83