INTERPARFUMS INC 10-Q

Item 1. Financial Statements In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. We have condensed such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued by filing with the SEC. These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2022, included in our annual report filed on Form 10-K. The results of operations for the six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the entire fiscal year. Page 1 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share and per share data) (Unaudited) ASSETS June 30, 2023 December 31, 2022 Current assets: Cash and cash equivalents $ 74,311 $ 104,713 Short-term investments 112,449 150,833 Accounts receivable, net 236,554 197,584 Inventories 360,018 289,984 Receivables, other 14,730 28,803 Other current assets 24,993 15,650 Income taxes receivable 386 157 Total current assets 823,441 787,724 Property, equipment and leasehold improvements, net 168,264 166,722 Right-of-use assets, net 28,005 27,964 Trademarks, licenses and other intangible assets, net 292,319 290,853 Deferred tax assets 14,333 11,159 Other assets 25,302 24,120 Total assets $ 1,351,664 $ 1,308,542 LIABILITIES AND EQUITY Current liabilities: Loans payable - banks $ 4,958 $ — Current portion of long-term debt 29,080 28,547 Current portion of lease liabilities 5,236 5,296 Accounts payable – trade 91,040 88,388 Accrued expenses 194,036 213,621 Income taxes payable 17,324 8,715 Total current liabilities 341,674 344,567 Long–term debt, less current portion 138,565 151,494 Lease liabilities, less current portion 24,491 24,335 Equity: Inter Parfums, Inc. shareholders’ equity: Preferred stock, $ .001 par; authorized 1,000,000 shares; none issued — — Common stock, $ .001 par; authorized 100,000,000 shares; outstanding 31,975,670 and 31,967,300 shares at June 30, 2023 and December 31, 2022, respectively 32 32 Additional paid-in capital 95,984 90,186 Retained earnings 669,688 620,095 Accumulated other comprehensive loss ( 48,739 ) ( 56,056 ) Treasury stock, at cost, 9,949,865 and 9,864,805 shares at June 30, 2023 and December 31, 2022, respectively ( 48,764 ) ( 37,475 ) Total Inter Parfums, Inc. shareholders’ equity 668,201 616,782 Noncontrolling interest 178,733 171,364 Total equity 846,934 788,146 Total liabilities and equity $ 1,351,664 $ 1,308,542 See notes to consolidated financial statements. Page 2 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net sales $ 309,244 $ 244,725 $ 620,967 $ 495,403 Cost of sales 120,840 90,943 229,606 182,963 Gross margin 188,404 153,782 391,361 312,440 Selling, general and administrative expenses 133,383 108,385 246,061 205,825 Income from operations 55,021 45,397 145,300 106,615 Other expenses (income): Interest expense 2,276 1,023 4,633 1,907 (Gain) loss on foreign currency ( 746 ) ( 279 ) 13 ( 2,518 ) Interest and investment (income) loss ( 1,977 ) ( 464 ) ( 7,359 ) 1,002 Other income ( 7 ) ( 328 ) ( 48 ) ( 444 ) Nonoperating Income (Expense) ( 454 ) ( 48 ) ( 2,761 ) ( 53 ) Income before income taxes 55,475 45,445 148,061 106,668 Income taxes 12,957 10,925 34,635 25,857 Net income 42,518 34,520 113,426 80,811 Less: Net income attributable to the noncontrolling interest 7,566 6,903 24,406 17,895 Net income attributable to Inter Parfums, Inc. $ 34,952 $ 27,617 $ 89,020 $ 62,916 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 1.09 $ 0.87 $ 2.78 $ 1.98 Diluted $ 1.09 $ 0.86 $ 2.77 $ 1.97 Weighted average number of shares outstanding: Basic 32,006 31,845 32,012 31,843 Diluted 32,162 31,952 32,161 31,981 Dividends declared per share $ 0.625 $ 0.50 $ 1.30 $ 1.00 See notes to consolidated financial statements. Page 3 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Comprehensive income: Net income $ 42,518 $ 34,520 $ 113,426 $ 80,811 Other comprehensive income: Net derivative instrument loss, net of tax ( 77 ) ( 1,749 ) ( 4,243 ) ( 1,488 ) Transfer from OCI into earnings — — 1,709 992 Translation adjustments, net of tax ( 454 ) ( 33,630 ) 13,035 ( 46,071 ) Comprehensive income (loss) 41,987 ( 859 ) 123,927 34,244 Comprehensive income attributable to the noncontrolling interests: Net income 7,566 6,903 24,406 17,895 Other comprehensive income (loss): Net derivative instrument loss, net of tax ( 21 ) ( 483 ) ( 227 ) ( 411 ) Translation adjustments, net of tax ( 211 ) ( 10,743 ) 3,411 ( 14,162 ) Comprehensive income (loss) attributable to the noncontrolling interests 7,334 ( 4,323 ) 27,590 3,322 Comprehensive income attributable to Inter Parfums, Inc. $ 34,653 $ 3,464 $ 96,337 $ 30,922 See notes to consolidated financial statements. Page 4 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands) ( Unaudited ) Six months ended June 30, 2023 2022 Common stock, beginning and end of period $ 32 $ 32 - - 32 32 Additional paid-in capital, beginning of period 90,186 87,132 Shares issued upon exercise of stock options 5,191 810 Share-based compensation 624 679 Purchase of subsidiary shares ( 17 ) ( 4,305 ) Additional paid-in capital, end of period 95,984 84,316 Retained earnings, beginning of period 620,095 560,663 Net income 89,020 62,916 Dividends ( 40,020 ) ( 31,844 ) Share-based compensation 593 1,632 Retained earnings, end of period 669,688 593,367 Accumulated other comprehensive loss, beginning of period ( 56,056 ) ( 38,432 ) Foreign currency translation adjustment, net of tax 9,624 ( 31,909 ) Transfer from other comprehensive income into earnings 1,709 992 Net derivative instrument loss, net of tax ( 4,016 ) ( 1,077 ) Accumulated other comprehensive loss, end of period ( 48,739 ) ( 70,426 ) Treasury stock, beginning and end of period ( 37,475 ) ( 37,475 ) Shares repurchased ( 11,289 ) — Treasury stock, end of period ( 48,764 ) ( 37,475 ) Noncontrolling interest, beginning of period 171,364 166,412 Net income 24,406 17,895 Foreign currency translation adjustment, net of tax 3,411 ( 14,162 ) Net derivative instrument loss, net of tax ( 227 ) ( 411 ) Share-based compensation (adjustment) 97 ( 389 ) Purchase of subsidiary shares ( 17 ) ( 152 ) Transfer of subsidiary shares purchased — 54 Dividends ( 20,301 ) ( 16,056 ) Noncontrolling interest, end of period 178,733 153,191 788,146 852,671 113,426 80,811 Total equity $ 846,934 $ 723,005 See notes to consolidated financial statements. Page 5 INTER PARFUMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six months ended June 30, 2023 2022 Cash flows from operating activities: Net income $ 113,426 $ 80,811 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 8,367 6,803 Provision for doubtful accounts ( 650 ) 1,241 Noncash stock compensation 1,265 1,877 Share of income of equity investment ( 48 ) ( 444 ) Noncash lease expense 2,620 3,017 Deferred tax provision (benefit) ( 2,987 ) ( 2,595 ) Change in fair value of derivatives 164 ( 2,036 ) Changes in: Accounts receivable ( 35,181 ) ( 48,085 ) Inventories ( 66,144 ) ( 81,188 ) Other assets 3,406 ( 1,872 ) Operating lease liabilities ( 2,579 ) ( 2,822 ) Accounts payable and accrued expenses ( 23,425 ) 7,916 Income taxes, net 8,531 8,869 Net cash provided by (used in) operating activities 6,765 ( 28,508 ) Cash flows from investing activities: Purchases of short-term investments ( 97,079 ) ( 2,941 ) Proceeds from sale of short-term investments 138,061 6,211 Purchases of property, equipment and leasehold improvements ( 3,202 ) ( 30,305 ) Payment for intangible assets acquired ( 228 ) ( 1,016 ) Net cash provided by (used in) investing activities 37,552 ( 28,051 ) Cash flows from financing activities: Proceeds from loans payable, bank 4,947 — Repayment of long-term debt ( 15,958 ) ( 7,522 ) Proceeds from exercise of options 5,191 810 Purchase of subsidiary shares from noncontrolling interest — ( 4,403 ) Dividends paid ( 40,020 ) ( 31,844 ) Dividends paid to noncontrolling interest ( 20,301 ) ( 16,056 ) Purchase of treasury stock ( 11,289 ) — Net cash used in financing activities ( 77,430 ) ( 59,015 ) Effect of exchange rate changes on cash 2,711 ( 578 ) Net decrease in cash and cash equivalents ( 30,402 ) ( 116,152 ) Cash and cash equivalents - beginning of period 104,713 168,387 Cash and cash equivalents - end of period $ 74,311 $ 52,235 Supplemental disclosure of cash flow information: Cash paid for: Interest $ 3,189 $ 1,581 Income taxes 30,096 16,369 See notes to consolidated financial statements. Page 6 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 1. Significant Accounting Policies: The accounting policies we follow are set forth in the notes to our consolidated financial statements included in our Form 10-K, which was filed with the Securities and Exchange Commission for the year ended December 31, 2022. 2. Impact of COVID-19 Pandemic: Our business has continued to significantly improve throughout 2022 and the first half of 2023 after the disastrous effects of the COVID-19 Pandemic starting in early 2020, as retail stores reopened, and consumers increased online purchasing. While COVID-19 had significantly restricted international travel, the travel retail business has picked up. Lastly, we experienced significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions came at a time when demand for our product lines has never been stronger or more sustained. We have addressed 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. The supply chain bottlenecks have been improving and while lead times remain longer than pre-COVID, we do not expect significant disruptions going forward. 3. Recent Agreements: Roberto Cavalli In July 2023, we closed a transaction agreement with Roberto Cavalli, whereby an exclusive and worldwide license was granted for the production and distribution of Roberto Cavalli brand perfumes and fragrance related products. 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 July 2023 and will last for 6.5 years. 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. Page 7 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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 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 - Headquarters in Paris In April 2021, Interparfums SA, our 72 % owned French Subsidiary, completed the acquisition of its 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 included the complete renovation of the site. As of June 30, 2023, $ 152 million of the purchase price, including approximately $ 3.1 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet. The purchase price has been allocated approximately $ 62.2 million to land and $ 89.6 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 $ 1.2 million of cash held in escrow is also included in property, equipment and leasehold improvements on the accompanying balance sheet as of June 30, 2023. The acquisition was financed by a 10 -year € 120 million (approximately $ 130.4 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. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1 %. 4. Recent Accounting Pronouncements: There are no recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements. Page 8 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 5. Inventories: Inventories consist of the following: (In thousands) June 30, 2023 December 31, 2022 Raw materials and component parts $ 173,660 $ 146,772 Finished goods 186,358 143,212 Inventories $ 360,018 $ 289,984 6. Fair Value Measurement: The following tables present our financial assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Fair Value Measurements at June 30, 2023 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 $ 112,449 $ 2,150 $ 109,489 $ 811 Interest rate swaps 6,780 — 6,780 — Foreign currency forward exchange contracts not accounted for using hedge accounting 165 — 165 — Total asset $ 119,394 $ 2,150 $ 116,434 $ 811 Liabilities: Foreign currency forward exchange contracts accounted for using hedge accounting $ 9 $ — $ 9 $ — Page 9 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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 asset $ 158,780 $ 19,861 $ 138,121 $ 798 Liabilities: Foreign currency forward exchange contracts not accounted for using hedge accounting 68 — 68 — Total Liabilities $ 68 $ — $ 68 $ — The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables, cash held in escrow, accounts payable and accrued expenses approximate fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value. Foreign currency forward exchange contracts are valued based on quotations from financial institutions and the value of interest rate swaps is the discounted net present value of the swaps using third party quotes from financial institutions. 7. Derivative Financial Instruments: The Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based on the dollar offset methodology and excludes the portion of the fair value of the foreign currency forward exchange contract attributable to the change in spot-forward difference which is reported in current period earnings. Any hedge ineffectiveness is also recognized as a gain or loss on foreign currency in the income statement. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses accumulated in other comprehensive income are reclassified to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated in other comprehensive income are reclassified to current-period earnings. Page 10 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a € 50 million (approximately $ 54.3 million ) 4 -year term loan with a variable interest rate. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2 % per annum. This 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 connection with the April 2021 acquisition of the office building complex in Paris, € 120 million (approximately $ 130.4 million) of the purchase price was financed through a 10 -year term loan. The Company entered into interest rate swap contracts related to € 80 million of the loan, effectively exchanging the variable interest rate to a fixed rate of approximately 1.1 %. This derivative instrument is recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income. Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial for the three and six months ended June 30, 2023 and 2022. All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps is included in other assets on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at June 30, 2023 resulted in a net asset and is included in other current assets on the accompanying balance sheet. At June 30, 2023, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $ 38.0 million and GB £ 2 .0 million which all have maturities of less than one year. 8. Leases: The Company leases its offices and warehouses, vehicles, and certain office equipment, substantially all of which are classified as operating leases. The Company currently has no material financing leases. The Company determines if an arrangement is a lease at inception. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend or terminate, depending on the lease. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date for the location in which the lease is held in determining the present value of lease payments. Page 11 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements As of June 30, 2023, the weighted average remaining lease term was 5.6 years and the weighted average discount rate used to determine the operating lease liability was 2.8 %. Rental expense related to operating leases was $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2023, respectively, as compared to $ 1.3 million and $ 3.1 million for the corresponding periods of the prior year. Operating lease payments included in operating cash flows totaled $ 2.6 million and $ 2.8 million for the six months ended June 30, 2023 and 2022, respectively, and noncash additions to operating lease assets totaled $ 2.4 million and $ 0.5 million for the six months ended June 30, 2023 and 2022, respectively. 9. Share-Based Payments: The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to five -year period. The fair value of shares vested during the six months ended June 30, 2023 and 2022 aggregated $ 0.10 million and $ 0.10 million, respectively. Compensation cost, net of forfeitures, is recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated based on historic trends. It is generally our policy to issue new shares upon exercise of stock options. The following table sets forth information with respect to nonvested options for the six months ended June 30, 2023: Number of Shares Weighted Average Grant-Date Fair Value Nonvested options – beginning of period 168,730 $ 16.31 Nonvested options granted — — Nonvested options vested or forfeited ( 23,560 ) $ 13.59 Nonvested options – end of period 145,170 $ 16.75 Share-based payment expense decreased income before income taxes by $ 0.63 million and $ 1.27 million for the three and six months ended June 30, 2023, respectively, as compared to $ 1.22 million and $ 1.88 million for the corresponding periods of the prior year. Share-base income before income d payment expense decreased income attributable to Inter Parfums, Inc. by $ 0.43 million and $ 0.86 million for the three and six months ended June 30, 2023, respectively, as compared to $ 0.74 million and $ 1.18 million for the corresponding periods of the prior year. The following table summarizes stock option information as of June 30, 2023: Shares Weighted Average Exercise Price Outstanding at January 1, 2023 441,580 $ 67.30 Options forfeited ( 15,960 ) 70.48 Options exercised ( 93,430 ) 55.57 Outstanding at June 30, 2023 332,190 $ 70.44 Options exercisable 187,020 $ 61.53 Options available for future grants 574,935 Page 12 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements As of June 30, 2023, the weighted average remaining contractual life of options outstanding is 2.40 years ( 0.6 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $ 21.5 million and $ 13.8 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $ 2.0 million. Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the six months ended June 30, 2023 and 2022 were as follows: (In thousands) June 30, 2023 June 30, 2022 Cash proceeds from stock options exercised $ 5,192 $ 810 Tax benefits 840 75 Intrinsic value of stock options exercised 5,773 698 There were no options granted during the six months ended June 30, 2023 and June 30, 2022. Expected volatility is estimated based on historic volatility of the Company’s common stock. The expected term of the option is estimated based on historic data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout as authorized by the Board of Directors would increase as the earnings of the Company and its stock price continues to increase. In December 2018, Interparfums SA approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The 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. 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 NYSE Euronext on the date of grant. The estimated number of shares to be distributed of 93,489 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $ 4.2 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. As of June 30, 2023 the Company acquired 69,609 shares at an aggregate cost of $ 3.0 million. In the first half of 2023, the Company initiated a share repurchase program with the primary intent of neutralizing the dilution impact of the stock option programs previously discussed. Over the course of the first half of 2023, the Company repurchased 85,060 shares at a cost of $ 11.3 million. These shares are classified as treasury shares on the accompanying balance sheet. The Company plans to continue repurchasing shares throughout 2023. Page 13 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements All share purchases and issuances have been classified as equity transactions on the accompanying balance sheet. 10. Net Income Attributable to Inter Parfums, Inc. Common Shareholders: Net income attributable to Inter Parfums, Inc. per common share (“basic EPS”) is computed by dividing net income attributable to Inter Parfums, Inc. by the weighted average number of shares outstanding. Net income attributable to Inter Parfums, Inc. per share assuming dilution (“diluted EPS”), is computed using the weighted average number of shares outstanding, plus the incremental shares outstanding assuming the exercise of dilutive stock options using the treasury stock method. The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows: Three months ended June 30, Six months ended June 30, (In thousands) 2023 2022 2023 2022 Numerator: Net income attributable to Inter Parfums, Inc. $ 34,952 $ 27,617 $ 89,020 $ 62,916 Denominator: Weighted average shares 32,006 31,845 32,012 31,843 Effect of dilutive securities: Stock options 156 107 149 138 Denominator for diluted earnings per share 32,162 31,952 32,161 31,981 Earnings per share: Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 1.09 $ 0.87 $ 2.78 $ 1.98 Diluted 1.09 0.86 2.77 1.97 There were no antidilutive potential common shares outstanding for the three and six months ended June 30, 2023 and June 30, 2022. Page 14 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 11. Segment and Geographic Areas: The Company manufactures and distributes one product line, fragrances and fragrance related products. The Company manages its business in two segments, European based operations and United States based operations. The European assets are located, and operations are primarily conducted, in France. Both European based operations and United States based operations primarily represent the sale of prestige brand name fragrances. Information on our operations by geographical areas is as follows: Three months ended June 30, Six months ended June 30, (In thousands) 2023 2022 2023 2022 Net sales: United States $ 111,436 $ 78,444 $ 192,890 $ 146,946 Europe 197,808 166,287 428,077 348,469 Eliminations — ( 6 ) — ( 12 ) $ 309,244 $ 244,725 $ 620,967 $ 495,403 Net income attributable to Inter Parfums, Inc.: United States $ 15,567 $ 9,991 $ 25,910 $ 16,505 Europe 19,385 17,626 63,110 46,411 $ 34,952 $ 27,617 $ 89,020 $ 62,916 June 30, December 31, 2023 2022 Total Assets: United States $ 313,261 $ 278,090 Europe 1,048,040 1,052,004 Eliminations ( 9,637 ) ( 21,552 ) $ 1,351,664 $ 1,308,542 Page 15 INTER PARFUMS, INC. AND SUBSIDIARIES