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, 2023 or pro ☐ 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) IPAR 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 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. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ 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. $ 2,437,984,859 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 26, 2024: 32,021,700 . Documents Incorporated by Reference: None. TABLE OF CONTENTS Page Forward Looking Statements ii PART I 1 Item 1. Business 1 Item 1A. Risk Factors 35 Item 1B. Unresolved Staff Comments 45 Item 1C Cybersecurity 45 Item 2. Properties 46 Item 3. Legal Proceedings 46 Item 4. Mine Safety Disclosures 46 PART II 47 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 47 Item 6. RESERVED 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Financial Statements and Supplementary Data 59 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 60 Item 9A. Controls and Procedures 60 Item 9B. Other Information 60 PART III 61 Item 10. Directors, Executive Officers and Corporate Governance 61 Item 11. Executive Compensation 70 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 85 Item 13. Certain Relationships and Related Transactions, and Director Independence 86 Item 14. Principal Accountant Fees and Services 87 PART IV 89 Item 15. Exhibits and Financial Statement Schedules 89 Item 16. Form 10-K Summary 89 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; impact of 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; 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 Introduction Founded in 1982, we operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrances, and fragrance related products. Our worldwide headquarters and the office of our wholly owned United States subsidiary, 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 as follows: Country Subsidiary Function Italy for organization, and France for seat of management Interparfums Italia Srl Manufacture, market and distribute a wide array of prestige fragrances, and fragrance related products Switzerland Interparfums, USA Swiss Ltd Sales Office United Arab Emirates Interparfums Middle East DMCC Sales Office Hong Kong, special administrative region of the Peoples Republic of China Inter Parfums USA Hong Kong Limited Sales Office 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 also has wholly owned subsidiaries as follows: Country Subsidiary Function Italy Inter Parfums Srl Distribution USA Interparfums Luxury Brands, Inc. Distribution of prestige brands in the United States Switzerland Interparfums (Suisse) Sarl Holds and manages certain brand names Republic of Singapore Interparfums Singapore Pte., Ltd. Sales and marketing office 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. Two Publicly Held Companies 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. 1 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 Business Development We operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrances and fragrance related products. We manage our business in two based operations, our European based operations and our United States based operations. Certain prestige fragrance products are produced and marketed by our European based 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. 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, 2023, and the reports that we file from time to time with the SEC. European Based Operations We produce and distribute our fragrance products primarily under license agreements with brand owners, and fragrance product sales through our European based operations represented approximately 65% of net sales for the year ended December 31, 2023. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lacoste, Lanvin, Moncler, Montblanc, Rochas, and Van Cleef & Arpels , whose products are distributed in over 120 countries around the world. The Lacoste fragrance license became effective on January 1, 2024. United States Based Operations Prestige brand fragrance products are also produced and marketed through our United States based operations and represented approximately 35% of net sales for the year ended December 31, 2023. 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, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta, Roberto Cavalli, and Ungaro . 2 Recent Developments Abercrombie & Fitch In 2023, we announced our agreement to distribute Abercrombie & Fitch’s number one men's fragrance, Fierce, in selected markets. The first phase of the agreement, which became effective on September 1, 2023, covers Fierce distribution in certain major markets, including Europe, Mexico and Australia. The second phase, which activated in February 2024, covers distribution in additional markets in Western Europe and Latin America, and may include other flankers of the Fierce family of products. Roberto Cavalli We entered into an exclusive worldwide fragrance license for the Roberto Cavalli brand, for 6.5 years, effective July 6, 2023. Our Roberto Cavalli fragrance license is held and operated by our Italian subsidiary, Interparfums Italia, Srl, in keeping with the Company’s strategy to develop an Italian brand hub, and is managed out of Paris, France. The first seven months of the license have been focused on producing finished goods, and we actively started distributing these products with key customers in February 2024. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. 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 became effective in January 2024 and will last for 15 years. Dunhill The Dunhill fragrance license expired on September 30, 2023 and was not renewed. The Company has now entered the twelve-month sell-off period during which it will maintain the right to sell-off remaining Dunhill fragrance inventory, which is customary in the fragrance industry. All usable components have been converted to finished goods, and any remaining components will be destroyed. 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 have gained 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 . 3 Rochas Fashion As a result of operational challenges faced by the Rochas Fashion business we took a $2.4 million impairment charge on our Rochas fashion trademark in the first quarter of 2021. 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. In 2023, the Rochas teams underwent a strategic shift to take over their own brand operations, exiting contracts with manufacturers and distributors to make this new structure operational beginning in 2024. An independent expert concluded that the valuation based on this new business model was consistent with prior valuations and no additional impairments were needed. 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 represented 73% of sales in 2023 up from 71% in 2022 with a split by brand as follows: Year Ended December 31, 2023 2022 2021 Montblanc 17% 18% 19% Jimmy Choo 17% 18% 18% Coach 15% 15% 16% GUESS 12% 12% 12% Donna Karan/DKNY 7% 3% — Ferragamo 5% 5% 1% In 2023, Macys, our top retail customer, accounted for approximately 12% of net sales. No one customer represented 10% or more of net sales in 2022 and 2021. 4 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 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 Expired September 30, 2023, sell off period until September 30, 2024 Emanuel Ungaro 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 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 Jimmy Choo December 31, 2031 Kate Spade June 30, 2030 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 Roberto Cavalli December 31, 2029 Van Cleef & Arpels December 31, 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 $77 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. 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. In 2023, we announced our agreement to distribute Abercrombie & Fitch’s number one men's fragrance, Fierce, in selected markets. The first phase of the agreement, which became effective on September 1, 2023, covers Fierce distribution in certain major markets, including Europe, Mexico and Australia. The second phase, which activated in February 2024, covers distribution in additional markets in Western Europe and Latin America, and may include other flankers of the Fierce family of products. 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. The Anna Sui brand is mostly popular in 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 , Sky, and Sundae , a new three fragrance collection. 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. 5 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, a new men’s fragrance, Singulier, along with several special editions, a growing collection of unique scents aptly named, La Collection , and Serpent Bohème. 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 , Coach Wild Rose , and Coach Open Road , a new fragrance for men. In 2023, we continued to enrich the Coach fragrance lines with the roll-out of a number of flankers. 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 have been excellent additions to our portfolio. With this agreement, we have gained several well-established and valuable fragrance franchises. The most notable fragrances for the fashion house duo include Donna Karan Cashmere Mist and DKNY Be Delicious. Upon joining our portfolio in July 2022, these brands now rank among our largest. In 2023, we enriched DKNY with the newest extension, Be Delicious Orchard St . and plan to launch new blockbuster fragrances under these brands in 2024. Donna Karan and DKNY are part of the G-III house of brands. Dunhill — The Dunhill fragrance license expired on September 30, 2023, and was not renewed. After the expiration of this license, the Company has a twelve-month period to sell-off its remaining Dunhill fragrance inventory, which is customary in the fragrance industry. All usable components have been converted to finished goods, and any remaining components will be destroyed. 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 detail. Season after season, Emanuel Ungaro dared to be different, combining unexpected yet sensual clashes of bright colors and prints with beautiful draping. Ungaro fragrances uphold the same values of audacity and elegance, and the brand is best known internationally, and such presence will remain our sales focus as we continue to produce and distribute the brand’s legacy scents, notably Diva. In 2023, we unveiled an extension, Diva Rouge , and plan to launch a new fragrance in 2024. 6 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, has now extended to only the most exclusive, limited, ultra-high end retail outlets. New members of the collection have been regularly added since the Lesedi La Rona launch. 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 United States based operations, with legacy fragrances dominating the sales mix. Since joining our portfolio, we have introduced several new blockbuster scents, including Bella Vita , Effect, and Uomo , the newest men’s fragrance for GUESS, which came to market in 2022 with a flanker debuting in 2023. In 2024, we plan to launch a new blockbuster scent for women, in addition to the roll-out of an innovative extension. 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. 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. In 2016, we launched our first men’s and women’s fragrance duo, Wave, which led to several extensions, as did subsequent fragrance families Festival and Canyon Escape . In 2023, we launched a new blockbuster scent, Feelin’ Good, with plans to enrich the line with a new flanker in 2024. 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. 7 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, fragrances 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. On August 10, 2023, Tapestry, Inc. entered into a definitive agreement under which Tapestry will acquire Capri Holdings, with the final closing date expected to come in 2024. There is no current information that would indicate this purchase would have any material impact on the Company’s operations. 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, Rose Passion , was unveiled in 2023. Established fragrance collections, including Jimmy Choo , Jimmy Choo Man, and Jimmy Choo I Want Choo continue to see international success. 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 reflect 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 collection, Les Parfums Matières, and more recently, Karl Cities, a new collection featuring entries for New York, Paris, Hamburg, Tokyo and Vienna was unveiled. A new fragrance due is unveiling in 2024. 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. 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. Our first original scent, Kate Spade New York , debuted in January 2021. We have continued to enrich the collection with flankers, including Kate Spade Sparkle, and more recently, Kate Spade Cherie . 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. At the juncture of sport and fashion, Lacoste frees us up, creates movement in our lives, and liberates our self-expression. In every collection, in every line, Lacoste’s timeless elegance is captured through a combination of the creative and the classic. Since its beginnings, the crocodile’s aura has grown more powerful with every generation who has worn it, becoming a rallying sign beyond style. Passed from country to country, from one generation to the next, from one friend to another, Lacoste pieces become imbued with an emotional connection that raises them to the status of icons. The Lacoste license took into effect in January 2024, and we have been using the time since the license was signed to develop go-forward strategies, curate the collection, and produce entirely new fresh goods. 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. 8 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, A Girl in Capri, and Les Fleurs de Lanvin. 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 success. In 2023, we debuted our first ever men’s scent, MCM Onyx , and have plans to enrich the fragrance line with extensions in 2024. 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 had a revolutionary LED design, and the flask-shaped bottles of Moncler Pour Femme and Moncler Pour Homme forged 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. In March 2023, we launched Les Sommets Moncler and Home collections, exploring a rich, woody olfactory palette. 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 to December 31, 2025 and in 2023, we extended the agreement for a second time through December 31, 2030. Montblanc has achieved a world-renowned position in the luxury-based operations 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 , Legend Spirit, and Legend Red. 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 numerous flankers including Ultra Blue and Platinum . A four-scent premium collection will debut in 2024. 9 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. 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. 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, Bella Essence, Bella Bouquet, and Bella Night . In 2021, we debuted an entirely new fragrance pillar, Alibi, which welcomed sister scents, Alibi Eau de Toilette, and more recently, Alibi Eau Sensuelle . In 2024, we will unveil the Alibi ‘Pop’ three-scent collection. 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. The license became effective in July 2023 and will last for 6.5 years. Roberto Cavalli scents are sophisticated, luxurious, and flamboyant, while Just Cavalli fragrances are designed to appeal to contemporary, urban customers that are young or young at heart. In addition to the two core lines, the house launched the Roberto Cavalli Gold Collection , an ultra-premium fragrance collection, in 2014. Cavalli fragrances are distributed globally, with a concentration in Europe, the Middle East and the United States. Additionally, we partnered with one of the top luxury retailers and distributors in the Middle East, a concentrated market for the brand, to further expand the brand. We began shipping new freshly produced goods in February 2024, and plan to launch our first signature flanker in the summer of 2024, which is planned to be followed by a Just Cavalli duo and a new collection of hair and body mists. 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. With Rochas, nature is synonymous with French-style gardens, eternal springs, freshness, and innocence. Never dry, these gardens are constantly irrigated by the water of dreams and lit by the sun of the imagination. Rochas’ birds and flowers are regularly revisited in the ready-to-wear creations and perfumes. They are part of the natural lifeblood of Rochas, a constant presence thronging with a multitude of colors and a very Parisian spirit. 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. The first flanker for both came to market in 2022 as well as one for L’Homme Rochas. In 2023, we rolled-out pillar extensions Eau de Rochas Citron Soleil and Rochas Girl Life. 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. 10 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. In 2023, we rolled out new flankers for the Signoria collection, Liberia , a Storie di Seta duo, Cieli & Foreste , and a four-scent collection for Ferragamo . New flankers are in the works for 2024. 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. Since its founding in 1906, Van Cleef & Arpels has often turned to nature as an inexhaustible source of inspiration. Enthralled by the constant metamorphoses of flora and fauna, the Maison creates pieces that echo the blooming of flowers and the lushness of gardens. Over the decades, the excellence and creativity of the High Jewelry Maison established its reputation across the world. 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 , Rêve de Matiere, and Patchouli Blanc, with further additions planned. 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 based operations 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 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. 11 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 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. Also in 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. 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 effective January 1, 2024. During 2023, we closed on 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. This license became effective in July 2023. As of December 31, 2023, we had cash, cash equivalents and short-term investments of approximately $182.8 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. 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 12 ● 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 (DiFarco, Bansard, Bolloré Logistics for storage, order preparation and shipment) Suppliers’ accounts for our European based operations are primarily settled in euro and for our United States based operations, suppliers’ accounts are primarily settled in U.S. dollars. For our European based operations components for our prestige fragrances are purchased from many suppliers around the world and are primarily manufactured in France. For United States based 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, Poland and Turkey. Environmental, Social & Governance Both our United States based operations and our European based 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 based operations have led the way on this initiative, but our US operations are actively catching up. ESG Strategy Inter Parfums, Inc., our parent company, is using a multi-step process for Environment, Social, Governance (“ESG”) related activities and reporting. Following the work done in ESG by our French based subsidiary, Interparfums SA, in September 2022 we launched our United States ESG program for our subsidiaries, Interparfums, USA LLC in the United States and Interparfums, Italia Srl in Italy. Environmental data regarding our regional sales offices in Geneva, Dubai and Hong Kong are not yet included in the ESG strategy. The final step in our ESG reporting will be the combination of both ESG programs into a single cohesive report. 13 United States based operations ESG This section of our annual report discusses our United States based operations ESG program, and when we refer to ESG activities of Interparfums in the rest of the report, we are referring solely to our United States based operations ESG program. The ESG report by our French based subsidiary Interparfums SA, follows in the next section. When we refer to Inter Parfums, Inc., or the Company, we are referring to our Nasdaq publicly traded parent company. ESG related information is as of December 31, 2022, unless otherwise noted. Introduction We have defined Interparfums’ United States based operations ESG strategy and have been developing new projects and activities to reflect the United Nations’ sustainable development goals (https://sdgs.un.org/fr/goals), which are present throughout the document. Our ESG strategy is based upon the challenges we face, our risk analysis and the expectations of our stakeholders. We are committed to: ● Creating a more diverse and inclusive culture and impacting our community : Our human capital is our greatest asset. We want to build a culture genuinely focused on listening to employees, supporting their development, and leveraging their value. ● Reducing and optimizing our environmental footprint: Climate change requires urgent action. We want to improve our environmental footprint and measure our carbon footprint to disclose it for all its scopes. ● Sustainable fragrances throughout their whole life cycle . Sustainability is at the heart of our product creation to respond to evolving social and environmental challenges. The procurement of materials should consider all those aspects. ● Transparency and compliance : Interparfums complies with all applicable laws, rules and regulations in general, and in particular with regard to chemicals and hazardous materials. Act as a Climate Stakeholder and Anticipate Future Regulations The first step is to know where we are starting from by measuring our carbon footprint across the board. It will enable us to initiate a low-carbon trajectory compatible with the Paris Agreements. As we do not own manufacturing facilities, our scope 1 is negligible and our scope 2 is restricted to the electricity consumption of our offices and warehouse. Finally, our scope 3 represents most of our emissions. 14 Measure the Carbon Footprint of Our Activities The carbon footprint has been calculated for scopes 1, 2, and 3 for 2022. Scope 1 covers direct greenhouse gas emissions associated with consumption for heating and fuel for company vehicles. Scope 2 covers indirect energy-related greenhouse gas emissions, i.e. electricity consumption of our offices and warehouses. Scope 3 refers to indirect emissions in an organization’s supply chain, i.e. those indirectly related to its activity, both upstream and downstream. Inter Parfums, Inc. has calculated its total carbon footprint in accordance with international standards, and namely the International Green House Gas Protocol (GHG Protocol) for the conversion of all emission sources into tons of CO2 equivalent and the Base Carbone®, a public database of emission factors made available by the French Agency for Ecological Transition (ADEME). in tons of CO 2 equivalent 2022 Emissions Weighted Average Scope 1 23 0.02% Scope 2 702 0.61% Scope 3 113,996 99.37% Total 114,721 in tons of CO 2 equivalent 2022 Scope 3 Upstream Products and services purchased 111,150 Fixed assets 531 Emissions from fuels and energy not included in Scope 1 or 2 63 Upstream freight transport and distribution 2,252 Waste generated Negligible Business travel In services purchased Commuting to work Negligible Upstream leasing assets — Other indirect upstream emissions — Scope 3 Downstream Downstream freight transport and distribution In services purchased Transformation of products sold — Use of products sold — End of life of products sold Non determined for 2022 Downstream leasing assets — Franchises — Investments — Other indirect downstream emissions — Total scope 3 113,996 Interparfums carbon intensity is in the low end of its industry sector. Calculating this first carbon footprint across the board has given us a starting point and highlighted our need to ask our suppliers more about their climate strategy and encourage them to make their own calculations to refine ours. We will then be able to forecast our carbon trajectory more precisely. Commitment to Create a More Diverse, Fair and Inclusive Culture, and Impact Our Community Interparfums is a company serving many customers in different countries. To serve our customers well, we must attract and retain the best talent who bring with them different backgrounds, experiences and viewpoints. Fostering an inclusive culture is key to enabling our talents to work together effectively. In United States based operations, as of December 31, 2022, women accounted for 67% of the workforce and black, indigenous, and people of color accounted for 58% of the workforce. Our workforce as of December 31, 2022 included 241 full time employees. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment, and all our US employees are trained once a year on Preventing Harassment at Work through on-line training. 15 At Interparfums, we strongly believe in fostering a diverse and inclusive workplace where everyone feels safe, valued, respected, and empowered to reveal their authentic selves. This approach to diversity includes diversity of gender, ethnicity, ability, background, gender identity, and sexual orientation and is recognized at the leadership level and throughout our whole organization. Offer a Healthy and Environmental Conscious Workplace Since September 2022 our New York office has been partnering with Fraîche, which provides smart fridges that are stocked every day with high-quality and on-trend items curated from their local partner restaurants and brands. Our New York based employees can have access to meals, drinks, and snacks and the Company gives each employee a daily credit to be used. We are very glad to be part of the Fraîche journey. To ensure that all our employees play an active role in our environmental approach, we have carried out several initiatives aimed to reflect on how Interparfums impacts climate change, global warming, pollution, and other environmental challenges, and how we can promote sustainability. To commemorate Earth Day, we encouraged all employees to participate in activities that promote sustainability, distributed info on the UN Sustainable Goals, tips on how to be more sustainable in the office and shared a QR code linked to a survey where employees were invited to share suggestions on how we can make Interparfums a more sustainable workplace. In Interparfums’ offices we also launched our recycling initiative. For example, in New York, we have now color-coded bins as follows: ● green bins for paper/cardboard placed next to the copy-machines and in the kitchens. ● blue bins for metal, plastic, glass, and cartons placed in the kitchens. ● black bins for regular trash/non-recycling items. Moreover, we shared good practices on “how to be more sustainable in the office” tips on printing, electricity management, and cyberlearning. This is a first but necessary step in promoting sustainability in our day-to-day work. Caring Employer Committed to Everyone’s Success With a management style that is very family oriented and close to employees, everyone is free to share their ideas while respecting the Company’s. Management attaches the utmost importance to ensuring that everyone understands and supports Interparfums’ strategy. Regular briefings on business developments and monetary results keep employees up to date with management and market expectations. The flexibility of the organization, which is essentially made up of small teams, means that it can constantly adapt to any changes or developments in the external environment. The Company cultivates a positive and inclusive culture through various initiatives including the following that were implemented during 2023 in our United States based operational locations: ● Launched Global Employee Anniversary Recognition Program ● Distributed IP branded swag & product launches ● Engagement & Pulse Surveys ● Distributed company internal logo and Teams backgrounds ● CPR Training Certification (New York and New Jersey) 16 ● Holiday Parties (US and Italy) ● Greater diversity, equality and recognition ● 14th and 15th floor renovations for New York office Social- Positive Contribution Through Impactful Philanthropy To start the new year off strong, we’re proud to announce that Interparfums partnered with I Support the Girls https://isupportthegirls.org/programs/our-impact/ to distribute 1,100 Interparfums products to various American and international shelters for the holiday season. Our products were distributed to 13 different shelters that donate hygiene and cosmetic products to domestic abuse survivors and low-income schools. Commitment To Sustainable Fragrances Throughout Their Life Cycle Compliance Policy - As a global distributor of fragrances under licenses, Interparfums, fragrance oils and ingredients must comply with relevant global legislation, including, but not limited to, the countries and jurisdictions where the products are sold. We do not support animal testing on any bulk, raw materials, or finished product. We encourage our suppliers and any testing laboratories to find alternative test methods to ensure the safety and stability of our products. We also encourage development, use, and regulatory acceptance of alternatives to animal testing to ensure health and safety of consumers. Fragrance oil compounds must not be tested on animals (any mixtures of blended raw materials supplied to Interparfums). Fragrance ingredients must also not be tested on animals by the fragrance manufacturer for cosmetic safety assessment purposes. The fragrance suppliers share with Interparfums an analysis report with physiochemical data (color, pH, density, organoleptic profile, etc.). We rely on these reports shared by our partners. Measurements are taken after receipt to check the ingredients before formulation. Compliance with the specifications is verified for each batch, and at each renewal. If compliance is not obtained, then the product is not launched. In other words, 100% of the products launched are compliant. As there is no claim regarding our products, there is no further investigation made on them (unlike cosmetic products for instance). Vegan-Friendly Fragrances Policy - We support a shift toward a vegan consciousness. As vegan products are becoming a standard request on the part of many of Interparfums’ licensors and clients, all fragrance oils developed for Interparfums are vegan in accordance with the definition provided below: Vegan products do not contain any animal products, animal by-products, or animal derivatives. Animal products are anything obtained from living or killed animals. Animal by-products are anything obtained from living animals, including, but not limited to, beeswax, honey, shellac (including Ambretollide), and lanolin. Animal derivatives are anything derived from animals, animal products, or animal products, such as casein derived from milk. Responsible Ingredients - As consumer interest continues to grow toward sustainable products and sustainably sourced ingredients, we understand our responsibility to ensure that we can speak about sustainably sourced ingredients within our products. Of course, all claims are compliant with the new French claims guide preparing the future European Commission regulation on explicit environmental claims (Green Claims Directive), as our products are also sold in Europe. All fragrances developed for Interparfums should provide an environmentally added value ingredient storyline, such as use of responsibly sourced lavender. Of course, the exact storyline or ingredient requested may vary depending on the brand or project. While we understand some of these may be safe-as-used and well proven as solvents, all fragrance oils developed for Interparfums are formulated without phthalates and without gluten. This restriction also applies to ingredients that contain gluten such as wheat, barley, oats and rye, as well as raw materials that may be derived from gluten containing ingredients (e.g., Tocopherol derived from wheat germ oil). 17 To complete our approach, we have formalized a list of ingredients prohibited in our fragrances, which is shared by our development teams. In addition, we strictly adhere to the requirements of our licensors. It is important to specify that most of our alcohol is of plant origin, mainly corn. MCM Ultra - We have MCM Ultra fragrance, a bold new scent that fuses expert craftsmanship with cutting-edge technologies. Inspired by the brand’s signature backpack in eye-catching Berlin Gold, MCM Ultra features a rich scent profile in a show-stopping packaging that meets the opulence of this exquisite fragrance. MCM Ultra is 100% vegan, made with 74% biodegradable ingredients, and contains 79% responsibly sourced ingredients from Firmenich Naturals Together™ program that make a positive social impact to local communities all over the world. Created in collaboration with our amazing partners at MCM, the ULTRA campaign foreshadows MCM Worldwide AW22’s campaign, “The Movement”. The campaign takes place in a seemingly infinite room made of entirely gold-tinted mirrors, reminiscent of a Berlin discotheque. The MCM tribe moves through the warm, ultra-luxurious light to reveal the ULTRA bottle emerging from liquid gold, capturing the feeling of upscale, sensual glitz and glamour that encapsulates ULTRA. Contractors Interparfums does not tolerate child labor or any form of involuntary labor and demands that its business Contractors (including its contractors, consultants, fillers, vendors and suppliers) conduct themselves with the utmost fairness, honesty and responsibility in all aspects of their business. As a general principle, our business Contractors are required to comply fully with all legal requirements applicable to the conduct of their business. We also demand that they comply with rigorous standards with respect to the manner in which they treat their employees and accept Interparfums’ Supplier Code of Conduct, which reflects our principles and values. Governance Inter Parfums, Inc. adheres to corporate governance codes including but not limited to anti-hedging, bribery, fraud, and prohibition against insider trading. The Company’s management is responsible for the development and implementation of its ESG strategies and programs. Ultimate oversite by the Company’s Board of Directors is included in its committee charters and practices. Inter Parfums, Inc. is a publicly traded company (Nasdaq GS: IPAR), and files reports with the Securities and Exchange Commission (“SEC”). Our largest subsidiary, 72% owned Interparfums SA, is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext and is subject to the reporting requirements of the Euronext. Interparfums SA also maintains a governance policy that relates to its status as a French publicly held company, in addition to complying with this governance policy, where applicable. Interparfums SA CSR/ESG Introduction Interparfums SA has identified its Corporate Social Responsibility (“CSR”) challenges based on the expectations of its stakeholders and the market. The first step was to identify them. A materiality analysis was then carried out to list the CSR challenges and highlight the priorities to be addressed in the coming years to ensure the model’s sustainability. Stakeholders and priorities consist of the following: Interparfums SA Stakeholders Priorities Licensors Synergy, mutual involvement, sharing common values Suppliers and subcontractors Responsible sourcing policy, product traceability and security, long-term relationships based upon trust, industrial synergies Employees Sense of belonging, maintaining skills, equal opportunities, social dialogue, working conditions Civil Society Ecological footprint, local economy, relationships with schools, patronage Distributors Satisfaction, relationships built on trust, long-term relationships Consumers Health & safety, packaging recycling, name recognition Shareholders, financial community, Autorité des marchés financiers (financial market regulation) (“AMF”) Regular relations based upon trust and transparency 18 Interparfums SA is committed to a global approach to social, environmental and corporate responsibility and transparency. Year after year, it develops a CSR policy implemented by its operational and functional divisions and involving all staff. It identifies its main challenges based on several key areas: its responsibilities to consumers, the environment, operational stakeholders and society, and employees. To support this approach, a CSR Executive Committee was set up at the beginning of 2021 at the initiative of management. Comprising the Operations & Supply Chain, Human Resources, Finance, Legal and Communications departments, it has formalized the Company’s CSR strategy, with goals to: ● Consolidate its status as a responsible employer with, in particular, the formalization of a "Responsible Employer Charter" and reinforcement of the employee training plan ● Reduce its ecological footprint and involve suppliers in the process, thanks to the introduction of optimized eco-design specifications, including the reduction of packaging and the introduction of recycled and recyclable materials on each product developed ● Measure its carbon footprint according to the GHG protocol methodology (Scopes 1, 2 and 3) to initiate a low- carbon trajectory compatible with the Paris Agreements ● Strengthen its sustainable development approach by formalizing a business ethics charter that can be enforced against operational stakeholders 19 ESG Targets In line with the Interparfums SA’s Corporate Social Responsibility strategy, the following table presents Interparfums SA’s main objectives and compares them to market benchmarks such as the Sustainable Development Goals (“SDGs”). In January 2024, as part of its continuing improvement in ESG performance, Interparfums SA announced that it had increased its rating with Sustainalytics, a leading ESG rating firm, and now ranks 26 th out of 104 companies. SGD 2025 Targeted Performance 2023 Status Attracting, supporting and developing all talent Deploy responsible employer charter Completed 2023 Train 70% of employees per year 55% of employees trained CSR training for employees Deployment of the Word for Good platform Raising employee awareness about disabilities Annual intervention of a committed association/personality Proposing environmentally and socially responsible packaging Work with suppliers with an EcoVadis score of 70/100 Average score of suppliers evaluated with EcoVadis 68.1/100 Propose 85% recyclable packaging 82% of our packaging is recyclable Initiating a low carbon trajectory Reduce emissions from scopes 1, 2 and 3 Emissions increase by 13.6% from 2022 to 2023 Engage in contribution projects (carbon sequestration) Initiation of a first project Strengthen relationships with our partners Distribute eco-design charter to all industrial suppliers 100% completed in 2022 Committing 100% of industrial suppliers to a low carbon trajectory New Objective Ethical conduct and compliance Deploy the business ethic charter to all stakeholders 51% of industrial suppliers have received and signed the Business Ethics Charter Raising employee awareness Action initiated at end of 2023 with Climate collage Ensure the Health and Safety of Consumers Interparfums SA is responsible for marketing the cosmetic products it sells and for assessing their safety. It also relies on information provided by perfumers, who assess the safety of the raw materials used to make fragrances. Interparfums SA carries out skin and eye safety tests on the products it markets. In accordance with EC regulation 1223/2009, none of these tests are carried out on animals. Dermal safety tests are carried out on healthy adult volunteers and ocular safety tests on cultured cells. Interparfums SA has taken account of the REACH regulation (EC Directive No. 1907/2006 of 18 December 2006) on the registration, evaluation and authorization of chemicals with all its suppliers, and has taken the initiative of contacting its various subcontractors and suppliers to ensure that they effectively comply with the necessary registrations, notifications and requests for authorization from those upstream in their supply chain. Interparfums SA has proactively communicated with all its suppliers to commit to supplying items that do not contain any substance listed in Appendix XIV (substances of very high concern). To date, no supplier has declared the presence of substances subject to authorization in items supplied to Interparfums SA. 20 High Priority for High Levels of Natural Ingredients Interparfums SA uses only plant-based alcohol in all its fragrance lines, essentially beet alcohol, 99.5% of which is natural. The remainder is made up, depending on the line, of a variable proportion of natural ingredients. All the perfumers we work with have concentrates with a proportion of ingredients certified to ISO 9235 or ISO 16128. The proportion of natural fragrances is therefore over 80%. For its other products (aftershave balm, hand cream, shower gel and body lotion), Interparfums SA uses between 79% and 88% natural ingredients. Rochas Girl Franchise The launch of Rochas’ first low environmental impact line in 2021 was the first eco-design initiative to be led by Interparfums SA teams. This proposal allowed us to test with Rochas Girl the possibilities available to us in this area, taking our thinking as far as possible. The aim was to offer consumers a fragrance that met their expectations in terms of environmental engagement. This project combined the codes of luxury perfumery with a new awareness by modernizing the Rochas portfolio, in an inclusive and eco-responsible approach. Rochas Girl is made from 90% natural ingredients, with neroli extract with relaxing properties, and is vegan. Its glass bottle contains 40% post-consumer recycled glass (“PCR”), which is the maximum level currently proposed by glassmakers, and its cap is made from recycled plastic. Its cardboard case is FSC-certified, printed with water-based ink and without unnecessary decoration. It is made in France. Its formula contains no colorants, stabilizers, controversial additives or UV filters. It contains a reduced number of allergens. In the same vein, a refill is now available for even less impact on the environment. The multi-channel advertising was consistent with the product, with an advertisement filmed in the Paris region, with pictures of unretouched models conveying an authentic image. FSC certified cardboards point-of-sale advertising was also used. With Rochas Girl , Rochas also wanted to join the "1% for the planet" initiative, redistributing 1% of turnover generated to various charities. The new version of Rochas Girl , Rochas Girl Life, launched in spring 2023, offers a direct refill and its bottle is made from 40% PCR glass. Environmental Responsibilities Interparfums SA does not directly manage industrial sites but is involved in developing an environmental policy in collaboration with its subcontracting partners and suppliers throughout its value chain, particularly in the following areas: ● choice of ingredients; ● choice of techniques and materials; ● recycling and waste disposal measures; and ● reducing CO 2 emissions. Interparfums SA has no manufacturing activity and entrusts the manufacturing process to partners, each offering the best expertise and commitment in their respective fields: fragrance, glassmaking and packaging. Interparfums SA asks them about their CSR strategies, in addition to the EcoVadis assessment, and works with them to incorporate the environmental issues identified at each stage, in particular the choice of materials used in components, waste treatment and reducing the carbon footprint. An optimized eco-design charter was formalized in 2022 and shared both internally and externally to ensure that the possible options in this area are clear to all stakeholders. The aim of this charter is to highlight the best practices of Interparfums SA for optimizing the eco-design of the products it develops. The objectives for each product category are clearly stated: glass, decoration, covers, wedges and cases. 21 Promotional products are not forgotten either with boxes, tubes and point-of-sale advertising. This is a global approach that will enable Interparfums SA to prepare for the regulatory obligations of the French AGEC law (anti-waste law for a circular economy). Manage the Environmental Impact of Our Operations Interparfums SA uses an HQE (High Environmental Quality) certified warehouse located in Normandy France, for its logistics and storage needs. This certification covers improved insulation, lighting using presence detectors, Ecolabel finishing materials, centralized technical management for energy control, rainwater recovery and efficient waste sorting. Interparfums SA constantly monitors energy and water consumption indicators to identify opportunities for improving energy efficiency in lighting, heating and ventilation throughout the logistics site, such as modulating ventilation flow rates and programming weekend heating/ventilation slowdowns. To this end, the warehouse lighting is switched off automatically when employees are on a break outside and the temperature in the warehouse is kept at 11°C. This energy management also includes measures to manage the recharging schedules of the electric forklift trucks during off-peak hours at night, with a low consumption of 280 kW maximum instead of 600 kW during the day. Monthly electricity consumption reports are drawn up and in the event of significant peaks in consumption, the Company analyses the causes of this over-consumption in order to remedy the situation where necessary. Finally, to help preserve the environment, Interparfums SA has installed dedicated parking spaces for bicycles and electric terminals for cars on the logistics site. 2021 2022 2023 Total Energy consumption in kWh 1,845,715 1,753,729 1,696,084 Waste Interparfums SA closely monitors its waste production at warehouse level. In 2023, 27 tons of waste were recycled through various channels (plastic, pallets, paper and cardboard). In addition, 3 tons of non-hazardous waste were incinerated with heat recovery. There was no dangerous waste elimination in 2023. Logistics Actions undertaken in collaboration with the warehouse and goods dispatch manager as part of the improvement and optimization of inter-plant transport and the logistics platform have contributed to a reduction in the number of trucking turnarounds. As regards transport to distributors, Interparfums SA uses road transport for shipments in France and Europe and sea transport for America, Asia and the Middle East. Interparfums SA makes very limited use of air transport, reserving it for unavoidable emergencies. Some promotional products manufactured in Asia are sent directly to American distributors without being imported and stored in France. Measure the Carbon Footprint Of Our Activities The carbon footprint has been calculated for scopes 1 and 2 since 2020. Scope 1 covers direct greenhouse gas emissions (gas and fuel consumption by Interparfums SA vehicles), while Scope 2 covers indirect emissions associated with energy (electricity consumption). The sites studied were the warehouse and offices of the Paris head office. On rue de Solférino, the premises are connected to the City of Paris heating network and to a district cooling network that uses the cool temperature of the River Seine to cool the water in the distribution network. The emission factors for these two networks are very favorable in terms of carbon footprint. Gas consumption is now reduced to that of the warehouse. In addition, the solar panels on the roof have produced 4.9 MWh of renewable energy. in tons of CO 2 equivalent 2021 2022 2023 Scope 1 226 205 194 Scope 2 29 30 27 Total 255 235 221 22 The variations between 2023 and 2022 are linked to the periods of lockdown relating to the pandemic in 2020. In 2022, Interparfums SA moved its head office to BREEAM and HQE-certified premises, which are expected to reduce energy consumption by around 30%. In addition, the use of renewable energies and the Paris heating network help improve these results. Since 2021, a full scope 1, 2 and 3 carbon footprint has been calculated using the GHG protocol method and either emission factors available in databases, monetary ratios, or data shared by suppliers. Therefore, 2021 is the reference year chosen by Interparfums SA for its carbon trajectory. We are convinced that it is by involving our suppliers in our approach that we will be able to make progress on a low-carbon trajectory. For the moment, only 53% of suppliers within the EcoVadis scope are tracking their carbon footprint. However, 86% of purchases of goods and services for production are made from suppliers located in Europe, who will be subject to the CSRD regulations (with a deadline depending on their size) and will therefore initiate the process of measuring their carbon footprint. If they wish, we will support them in terms of methodology so that they can make progress on these crucial issues. in tons of CO 2 equivalent 2021 2022 2023 Scope 3 Upstream Products and services purchased 166,934 144,320 177,188 Fixed assets 2,668 3,839 3,965 Emissions from fuels and energy not included in Scope 1 or 2 55 48 45 Upstream freight transport and distribution 729 1,050 2,026 Waste generated 17 23 24 Business travel 494 265 585 Commuting to work Negligible Negligible Negligible Upstream leasing assets — — — Other indirect upstream emissions — — — Scope 3 Downstream Downstream freight transport and distribution 129 279 11,078 End of life of products sold 3,659 2,878 3,534 Downstream leasing assets — — — Total scope 3 174,685 152,702 198,445 The variations observed between the two years can be explained by changes in suppliers, some of whom are more advanced in terms of carbon strategy and disclose their new scope 3, which we integrated in our measurements. More assets were tied up over the period and more business trips were made. 2021 2022 2023 Variation 2022/2023 Carbon footprint (scopes 1, 2 and 3) - in teqCO 2 174,940 152,937 198,666 13.6% 23 Interparfums carbon intensity is at the low end of its sector. The significant change between 2021 and 2022 is also linked to the increase in sales. 2021 2022 2023 Variation 2022/2023 Carbon intensity - in kg of CO 2 per k€ of turnover 312 216 249 15.2% Once the carbon footprint measurement had been completed, it was found only some of production purchases were made from suppliers with targets for reducing their carbon footprint by 2030 (often in line with the European fit for 55 ). We will be continuing our dialogue with them to increase the number of partners involved and thus avoid carbon emissions. Interparfums SA wants to ensure that its climate trajectory is in line with the most recognized standards. A first step is to align its reporting with the principles of the TCFD ( Task Force on Climate- Related Financial Disclosures). Commitment to Carbon Sequestration Programs At the end of 2022, Interparfums teamed up with TerraTerre , a young French Company with a mission to connect farmers committed to the ecological transition and companies wishing to contribute to the global goal of climate neutrality by 2050. Improve the Environmental Impact of Products Action to prevent environmental risks and pollution begins with the choice of techniques and materials, which must be optimized. To reduce the impact of its activities, some of the bottles produced by Interparfums SA are colored by applying a water-soluble solution, making it possible to obtain a partly biodegradable color with no harmful impact on the natural environment. For the rest of its product ranges, Interparfums SA is pursuing its objective of gradually phasing out the use of "solvent-based" lacquers, with a view to using "water-based" lacquers for all its product ranges. In addition, Interparfums SA is committed to reducing the volume of packaging and selecting appropriate materials at every stage of product development, to ensure that they can be recycled or disposed of under optimum conditions. Recyclable glass bottles are manufactured using a system that recovers, crushes and remelts the waste. Interparfums SA has revised boxes and secondary packaging (perfume cases and boxes) to optimize pallet filling, reduce cardboard purchases and cut transport volumes by reducing empty space. Tester boxes are entirely recyclable. Interparfums SA is now imposing a minimum number of pallets per truckload. Promotional Products Integrated Into the CSR Initiative Packaging for our boxes and cases has long been made from FSC-certified cardboard and paper. The transport crates have also been FSC-certified since 2022. The design of the boxes also takes environmental concerns into account, with a choice of two formats, each with 3 recipient heights to match the volume of perfume. In addition, because of new specifications from certain distributors, the boxes will be subject to further developments. The new configuration will enable us to reduce our use of PS (polystyrene) plastic by more than 200 tons and our use of 100% recycled APET plastic by 40 tons. Thanks to an innovative proposal from a supplier, in 2022 the new capsules helped reduce the amount of virgin PP plastic used by 3.6 tons. The replacement of virgin plastic in the boxes has begun, with the essential steps of testing compatibility with the formulas. In 2022, 60% of tube have been made from PE PCR, saving 16 tons of virgin PE plastic. PVC has definitively been banned for perfumery items. 24 Further, more than 50% of tubes are recyclable, and more than 2 million of them contain no or no more carbon black (making them difficult, if not impossible, to recycle). Another action aimed at reducing the consumption of unnecessary packaging is to discourage its use and replace it, particularly polybags. We progressively suppress the carbon black in the plastic tubes to make them recyclable in an easier way. Gifts with Purchase (GWPs) are a major driver of consumer decisions. The CSR initiative extends to their selection. Our five suppliers are already assessed by EcoVadis, and their average score is 77.6 (4 are Platinum and 1 Gold according to the 2022 ranking), which is well above the average score for their sector (which is either 39 or 47, depending on the company). We are therefore exercising our duty of care in this area and, in addition, will be sharing our ethics charter with them in 2023. The search for eco-labelled products is also a priority. In 2024, except for fragile items, promotional products will be wrapped in Kraft paper rather than plastic. Help Consumers Recycle Their Packaging Cardboard packaging for perfumes sold by Interparfums SA can be recycled if the correct procedure is followed. The optimized eco- design charter recommends using traditional glass ( i.e., soda-lime glass), which is recyclable, and avoiding technical glass ( i.e., boro-silicate glass), which is not. Since January 2022, European regulations have made it compulsory to display the Triman logo with instructions on how to recycle waste. This has been done for all products sold by Interparfums SA. We are taking part in the Selective Perfumery working group run by the Institut du Commerce, which aims to mobilize brands and distributors around the issue of collecting and recycling plastic in-store advertising in France. This collective approach also brings together in-store advertising manufacturers already committed to eco-design and potential dismantling. All these actions reflect Interparfums SA’s determination to integrate circular economy initiatives into its business model. Responsibilities to Operational Stakeholders and Society As it carries out and develops its activities, Interparfums SA has identified the following challenges: ● Maintain a high level of relationship with its licensors through synergy, mutual involvement and the sharing of common values; ● Develop long-term partnerships with its suppliers and subcontractors through close collaboration in information exchange, in particular about their CSR approach, their carbon footprint and their trajectory; and ● Develop long-term, trust-based relationships with its distributor customers. Build Trusting Relationships with Licensors and Distributors Since signing its first license agreement in 1988, Interparfums has developed a significant portfolio of luxury brands under license. Contact with luxury houses is systematically initiated by managers who develop and maintain a close relationship with the licensors. Through the close collaboration between the marketing departments and the brands, which has increased over the years, products are developed according to the desires and collections of each brand, to offer a unique fragrance that represents shared values. Interparfums SA has developed long-standing relationships with its distributors in each of the countries or regions in which it operates. More than 60 employees use their expertise in France and over 100 countries to distribute its fragrances. As each continent and region of the world has its own tastes, identity and olfactory culture, as well as its own sensitivities and attachment to a brand, there is no single destination, and it is crucial to develop close commercial relationships with our distributors, to provide optimum service to the consumer. 25 Every two or three years, Interparfums SA organizes a seminar lasting several days, bringing together all its distributors from around the world. This seminar, scheduled for 2024, will be an opportunity to present all the brands and products on offer, to meet all the distributors and involve them closely in our development, and for the distributors to meet the employees with whom they work closely on a daily basis. Forge Lasting Industrial Partnerships Most of the subcontractors' factories and the warehouse for storing finished products are in Haute Normandie (France). The activity generated by Interparfums SA thus contributes to the development of the local economy. All of the perfumers we work with answer the CDP Climate Change questionnaire. Their grades are above B, which is a reassuring performance for our relationship with them. This means that they are dealing with climate change and biodiversity at the right level. Ratings of this level reflect a mature analysis of climate risks and opportunities. The Forests questionnaire is also important for Interparfums SA, which pays close attention to the management of natural areas and considers it essential not to introduce raw materials responsible for deforestation in any country. Of our suppliers assessed by EcoVadis, 45% are ISO 14001 certified, and 28% are ISO 45001/ OHSAS 18001 certified. Run a Quality Management System with Confidence Interparfums SA has introduced specifications for purchasing, logistics, and best manufacturing practice standards for its subcontractors. In addition, Interparfums SA has drawn up a business ethics charter that will be binding for its partners, to ensure that they comply with the rules of ethics, morality and law that we are committed to respecting. Its roll-out can thus be measured and improvement plans can be requested from partners. Since 2013, all our suppliers have been implementing the ISO 22716 international standard on Best Manufacturing Practices, which sets out guidelines for the production, checks, packaging, storage and dispatch of cosmetic products. It is the practical development of the quality assurance concept, through the description of the plant's activities. Against this regulatory backdrop, regular audit campaigns of all packaging plants carried out by the Quality department in accordance with the ISO 22716 standard have been introduced. The purpose of these audits is to ensure that packagers maintain a good level of traceability. All plant activities have been reviewed, including the processes for receiving raw materials and packaging items, manufacturing, packaging and quality control. These reports have demonstrated that our subcontractors comply with ISO 22716 Best Manufacturing Practices and in particular the traceability required for all fragrance production. Assess the CSR Performance of Suppliers As part of its CSR strategy, Interparfums SA has teamed up with EcoVadis to assess the CSR performance of its supply chain and suppliers. EcoVadis operates a global platform for assessing and sharing CSR performance, and their assessment method is based on international CSR standards. In 2023, 110 suppliers were assessed or in the process of being assessed, representing 92% of Interparfums SA’s purchasing activity. As part of a continuous improvement approach, Interparfums SA’ s objective is to monitor and encourage the CSR performance of its suppliers in 4 major areas: Environment, Social and Human Rights, Business Ethics and Responsible Purchasing. Results of EcoVadis Evaluations Number of Supplies Assessed 91 Average Score (overall score) 68.1/100 Environment Score 71.5/100 Social and Human Rights Score 67.8/100 Business Ethics Score 61.4/100 Responsible Purchasing Score 66.2/100 26 Social- Positive Contribution Through Impactful Philanthropy Plastic pollution is a major issue. The oceans are its first victims and taking concrete action to protect them is a cause that Interparfums SA defends. With this in mind, we have decided to support The Sea Cleaners, a charity founded by yachtsman Yvan Bourgnon. The charity's mission is to help clean up the oceans by deploying boats to collect and recycle plastic waste. Awareness-raising campaigns are also run for the general public to bring about lasting changes in behavior. Since 2018, through the Givaudan Foundation , Interparfums SA has helped seven schools manage their libraries. In 2022, the school library installation program continued in Sulawesi with the opening of 2 new libraries in Mamuju (West Sulawesi). A total of more than 5,000 books were delivered to 1,163 children and 95 schoolteachers. Interparfums SA renewed this partnership for 2023. Caring Employer Committed to Everyone's Success With a management style that is very family oriented and close to employees, everyone is free to share their ideas while respecting Interparfums SA’s values. Management attaches the utmost importance to ensuring that everyone understands and supports Interparfums SA’s strategy. Regular briefings on business developments keep employees up to date with management and market expectations. The flexibility of the organization, which is essentially made up of small teams, means that it can constantly adapt to any changes or developments in the external environment. Sharing the "Interparfums SA spirit" also means that all employees adhere to and are aware of the Company's ethical values, as well as ensuring that employees feel fulfilled at work and respect good working conditions. This ethical commitment has been formalized in a charter called the "Code of Conduct," to which each employee adheres, and which particularly focuses on health, safety, discipline, risk prevention, harassment, respect for individual freedoms, sensitive transactions, fraud and business confidentiality. Diversity of profiles, cultures, ages and genders is a source of strength for our teams, the Company's greatest asset. Since 2019, Interparfums SA has organized an annual disability awareness campaign. In 2022, employees had the opportunity to take part in a conference organized in partnership with the Café Joyeux Company, which employs people with disabilities, mainly with Down's syndrome or autism. Thanks to these discussions and testimonials, employees were able to talk about any obstacles they might face and share their visions and experiences. Thanks to these awareness-raising campaigns and local support from the Human Resources teams, three employees have been recognized as disabled workers via the RQTH (Recognition as a Worker with a Disability). The quality of the work carried out by the teams is enhanced throughout the careers of our employees through training courses in order to maintain a high level of competence in all business categories. To this end, Interparfums SA offers all its employees development plans enabling them to broaden their technical, managerial and personal skills. Our employees, who work mainly in the offices at our Paris headquarters, enjoy excellent working conditions. In 2022, the premises were transferred to a single site on rue de Solférino, in a building renovated to the latest standards in terms of user comfort. Smart systems mean everyone can manage their own lighting and ventilation. The site is easily accessible by public transport, and its car park has bicycle spaces and two vehicle charging points. 27 In addition, as part of the drive to prevent psychosocial risks, a counseling and psychological support service is available to employees via a dedicated toll-free number, in partnership with the Institut d'Accompagnement Permanent Psychologique et de Ressources (“IAPR”). The CSR Executive Committee has therefore decided to set up a dedicated internal interactive platform: Work for Good . Work for Good is a socially responsible platform which, with just a few clicks of the mouse, aims to raise awareness among employees and encourage them to think about their consumption habits, both at work and at home and also think about how our professions need to change. The platform also provides year-round information on Interparfums’ strategy. A number of modules will also be dedicated to understanding climate change. And for those who want it, turnkey training courses on environmental and social issues along with simple solutions that are easy to integrate into everyday life. Governance Interparfums SA adheres to the Middlenext corporate governance code and in this context is developing its governance in line with the ESG issues identified in its materiality matrix above. Since its listing on the Paris stock exchange, Interparfums SA has made every effort to be as transparent as possible by regularly explaining its strategy, outlook and concerns, and by answering all its shareholders' questions to the best of its ability. In 2022, we set up an Individual Shareholders’ Consultative Committee to strengthen our communication and respond more effectively to the legitimate expectations of our shareholders. In 2023, the members of the Board of Directors attended information-sharing sessions designed to help them anticipate future regulations, particularly in terms of climate change, business ethics and the fight against corruption and forced labor. At the 2023 Annual General Meeting, new Directors were appointed to achieve double parity, with the Board of Directors now made up of 50% independent directors and 50% women. Interparfums SA does not engage in any lobbying activities. Interparfums SA is a member of Middlenext to ensure that management is informed and trained in new regulations. Ethics The business ethics charter formalized in 2022 was sent in the second half-year to supply chain suppliers via the Provigis platform. This will enable us to guarantee suppliers' regulatory compliance and monitor the electronic signature system that will be put in place for the ethics charter. Other suppliers and partners will also be involved. In addition to distributing the ethics charter, we have decided to provide anti-corruption training for all our employees. Employees who are most exposed to risk will benefit from a special, tailor-made training day led by an expert. 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. 28 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 based 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 also 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. 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 based operations maintain product liability coverage in an amount of €14.7 million (approximately $16.2 million). Based upon 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, but are not limited to, perfumes, colognes, fragrance mists, body sprays 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, Interparfums products are in compliance with these regulations. 29 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 ● Boucheron ● Coach ● Donna Karan and DKNY ● Dunhill (license expired September 30, 2023, sell off period until September 30, 2024) ● Emanuel Ungaro ● Ferragamo ● French Connection ● Graff ● GUESS ● Hollister ● Jimmy Choo ● Kate Spade ● Karl Lagerfeld ● Lacoste ● MCM ● Moncler ● Montblanc ● Oscar de la Renta ● Roberto Cavalli ● Van Cleef & Arpels In addition, we are the registered owner of several trademarks for fragrance and beauty products, including: ● Rochas ● Lanvin ● Intimate ● Tristar 30 Equity Investments 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. Human Capital General As of December 31, 2023, we had 607 full-time employees worldwide. Of these, 334 are full-time employees of our European based operations and its subsidiaries, with 90 employees engaged in sales activities and 244 in administrative, production and marketing activities. Our United States based operations has 273 full-time employees, and of these, 85 are engaged in sales activities and 188 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. At Interparfums, we strongly believe in fostering a diverse and inclusive workplace free from discrimination of any kind, including sexual or other discriminatory harassment, an environment where everyone feels safe, valued, respected, and empowered to reveal their authentic selves. This approach to diversity includes diversity of gender, ethnicity, ability, background, gender identity, and sexual orientation and is recognized at the leadership level and throughout our whole organization. Goals for our employees Company-wide are: - // cultivating a culture that promotes our values of entrepreneurship, commitment, creativity and passion; - // developing a respectful and inclusive work environment; - // developing team spirit and cross-functional collaboration; - // ensuring equal opportunity employment; - // empowering employees to develop their skills and grow their career; - // maintaining a high level of expertise; - // maintaining a proper balance between professional and private life; - // promoting dialogue between employees and management; - // offering quality of working conditions; - // preserving the health and safety of all. United States Based Operations Our employees are one of our most valuable assets, and fostering long-term relationships is 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 a long-standing workforce benefits our company. All of our executive officers have been with us for a long time (other than our CFO and our head of HR who joined our Company in 2022), and we also have several senior members of staff with years of experience at Interparfums. These experienced 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, Interparfums organizes two seminars over several days for all its global employees. This seminar provides an opportunity to present all the company’s brands, products and marketing strategies. In Italy, an onboarding process is deployed including a welcome day with training on the company’s history and values, meeting with all teams and dinner with the new employee’s team. We also have an onboarding program in the US, which includes a two-day newcomers’ seminar, twice a year where new hires learn more about our Company, our vision, our brands, our teams, our ways of working and have team building activities. 31 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 remained in place until June 2023, are in compliance with the Centers for Disease Control guidelines and state requirements. In Italy, the application of COVID-19 anti-contagion measures and protocol are followed and as required by the law, we provide occupational health and safety training. Compensation and Benefits We aim to provide an increasingly attractive employment package at our United States operations, this includes a comprehensive benefits package (including Medical, Dental, Vision, basic and voluntary Life Insurance, AD&D Short-term and Long-Term Disability and 401K program (plus company match after 1 year of service, 50% of employee contribution, capped at 3%) parental leave and commuter benefits). We also allow Friday remote working arrangements for our employees, have shorter hours on Fridays during the summer months, and have made available food choices for purchase in our lunchroom in New York from the “Fraîche” fridge. For the Italian operations, some of the benefits are required by law, such as health insurance for employees and family coverage, supplementary voluntary severance scheme, parental leave, study leave and paid time off. A welfare plan is provided for employees in Italy, consisting of €500 per year, that each employee can use through a dedicated platform that comprises a broad range of benefits and services (Transport and mobility, education, health, culture and leisure time, supplementary pension and fringe benefit). Ten paid hours per year are allocated for medical appointments. Luncheon vouchers worth €8 per day worked are given to cover lunch expenses. Depending on the position in question, specific categories of employees are entitled to a company mobile phone and unlimited internet access. In Italy, we also implemented remote working two days per week and flexible working hours (different start and end times for employee’s workday). Performance Evaluation System Performance management was introduced in 2022. It is designed mainly to drive individual performance and organizational effectiveness by aligning individual and company objectives and to set clear, fair and transparent expectations for success. Enabling and empowering all employees to develop their skills and be in line with professional advancement possibilities is an integral part of this process. Finally, the aim is to promote ongoing opportunities for employees and managers to exchange feedback on performance, milestones, development, and build stronger work relationships. The process begins in January with goal setting and development planning. Two check-ins are scheduled over the course of the year. In November-December, an end-of-year review is carried out for performance assessment. The latter represents a key step in the career management of all our employees as it covers four main objectives: ● // provides an accurate evaluation on employee’s progress and performance against annual goals; ● // evaluates strengths and opportunity areas; ● // enables self-reflection; ● // rates overall performance. 32 Employee Engagement During Q3 of 2022, we conducted a Companywide Engagement Survey as we want to hear everyone’s voice and understand their expectations. We want to build a culture where all our employees feel included, engaged, and motivated – a workplace where they can bring their best to make things happen and achieve our collective goals. Based on the survey’s feedback, we implemented various People & Talent programs with a focus on onboarding, talent management, performance, learning, internal communications, and company culture. Some examples include more enhanced benefits, our Performance Management Program, LinkedIn Learning, our toolkit for new hires, Employee Anniversary Rewards and community events. To nurture employee engagement, we hold quarterly presentations with all employees presenting Company results, function updates, celebrate successes and open the floor to Q&As. In Italy, community and team building events are organized to actively promote and strengthen the sense of belonging (Interparfums Italia’s birthday, Christmas and Easter dinners). The offices have been refurbished with a dining room for socializing and relaxing over complimentary coffee, tea and cookies. At Easter and Christmas, associations benefited from philanthropic funding by purchasing chocolate eggs (for AIL - Italian Association against Leukemia, Lymphoma and Myeloma) and Christmas cards and gift baskets (for ANT - Home Medical Care for Cancer Patients). European Based 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 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. 33 Women account for 74% of Interparfums SA’s workforce and 60% of management positions are occupied by women in 2023. Since 2019, Interparfums SA has organized an annual disability awareness raising campaign. In 2021, employees were given an opportunity to participate in a 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 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 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, Interparfums SA maintains a statutory employee profit-sharing agreement, which represents 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 from 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. 34 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 license 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; 35 ● diversion of management’s attention from our core business; ● adverse effects on existing business relationships with suppliers and customers; ● 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. 36 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. 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. 37 ● COVID-19 or New Pandemic and Economic Downturn Although we weathered the COVID-19 pandemic and its effects to date, if this pandemic reemerges or another pandemic emerges, any pandemic 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, previously had certain negative impacts on our business. Any reemergence of COVID-19, or a new pandemic, could 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 such 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 or emergence of a new pandemic on our operations. ● Considerable uncertainty remains regarding the potential re-emergence of COVID-19 variants, or emergence of new a new pandemic, including potential reinstatement of measures by various authorities and others in response to any such re-emergence or new pandemic emergence. As we continue to monitor potential COVID-19 variant or new pandemic developments, including the impacts on our consumers, customers and suppliers, we will 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 or new pandemic. ● 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 or new pandemic emergence may result in claims or litigation against us. The extent and potential short and long-term impact of a re-emergence of COVID-19 variants 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. 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. 38 ● 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. 39 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 based 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. The wars between Russia and Ukraine, and Israel and Hamas could adversely impact our business and financial results. The wars between Russia and Ukraine, and Israel and Hamas have negatively impacted our operations to a limited degree to date. However, future impacts to our Company are difficult to predict due to the high level of uncertainty as to how these wars will evolve. Fuel supplies and supply chains increases, as well as retailers or consumers, could all be negatively impacted by these wars. Such negative impacts could have a material adverse effect on our net sales, earnings and cash flows. ● 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. 40 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. 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, Interparfums 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 is 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 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. 41 Our business is subject to inflationary pressures. Despite significant inflationary pressures that started during 2022 and continued into 2023 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 2024, a further increase in sales prices, if necessary, 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. ● 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. 42 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. Our information systems and websites may be susceptible to outages, hacking and other cybersecurity 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, attacks and similar events. Despite the implementation of network security measures, our systems may be vulnerable to computer viruses, hacking, attacks 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. 43 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. 44 Item 1B. Unresolved Staff Comments. None. Item 1C. Cybersecurity Cybersecurity for our Company is conducted by our United States based operations and European based operations. For our United States based operations, our Information Technology department (“ITUS”) in New York, New York is in charge of our cybersecurity for offices in the United States, Italy, and other remote locations. For our European based operations, our Information Technology department (“ITEU”) in Paris, France is in charge of our cybersecurity for offices in France, and other remote locations. Each of ITUS and ITEU report to their respective segment Chief Executive Officers, Messrs. Madar for ITUS and Benacin for ITEU, who are also directors of our Company. Any material issues of cybersecurity would then be reported to our board of directors. As of the date of this report, we have not had any material cybersecurity incidents. Both departments have established strict security rules for infrastructure, application and limitations on access rights. New employees are instructed on aspects of cybersecurity, and reminders for safe internet access are periodically sent. Access to our networks for former employees and contractors is immediately revoked upon severance of association, and any hardware such as laptops, company phones, access keys are returned. Each department has also installed equipment and tools to protect and update against the risks of intrusions, cyberattacks, and system obsolescence. Various applications and methods to manage our cybersecurity include, but not limited to, use of EDI (electronic digital interface) for receiving orders, fire walls, virtual private network, antivirus software, encryption, and requiring two factor authentication for remote access after business hours. Redundancy is important as data is routinely backed up daily. In addition, Interparfums SA has adopted an IT Charter that defines the rights and obligations of employees and users of their information system, to ensure that the information technology resources are used in a secure environment complying with the procedures of internal control, and regularly performs penetration testing. Beginning in January 2024, Interparfums SA commenced enrolling all employees of Interparfums SA in cybersecurity training. United States based operations provides specific user IDs, and employees are instructed to set up passwords that are not easy to guess, keep passwords confidential, and immediately change such employee’s password if such employee believes it has been compromised. All desktop and laptop computers must be password protected and must be changed every 90 days. In addition, employees must not knowingly input erroneous, fraudulent, fictitious or otherwise inappropriate data into any application/system and report any suspicious activity to ITUS. Company employees are prohibited from downloading any files or software for personal use, and not create any independent data connections from Company offices that attempt to sidestep the Company’s network security policy or mechanisms. Neither United States based operations nor European based operations sells directly to retail consumers, which diminishes to some degree, but does not preclude, the likelihood of third party access to our data. 45 Item 2. Properties United States Based Operations We maintain our corporate headquarters and United States based 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 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, and office space in Paris, France. We also maintain a distribution center in Liscate, Italy. In 2023 we obtained small, leased space for our new sales subsidiaries in Dubai and Switzerland, in addition to maintaining a leased sales office in Hong Kong. European Based Operations Since March 2022, our European based 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 based 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 converted them into additional offices. A small office is located in Singapore for Asia-Pacific distribution by European based operations. In addition, European based operations maintain an approximately 37,000 square meters (approximately 398,265 square feet) distribution center located in Criquebeuf sur Seine, France, with a 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 one with a service provider that expires in 2024. Fees for such services 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. 46 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 2023 High Closing Price Low Closing Price Fourth Quarter 147.71 121.48 Third Quarter 150.70 129.06 Second Quarter 157.59 125.60 First Quarter 143.87 96.65 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 As of February 9, 2024, the number of record holders, which include brokers and broker nominees, etc., of our common stock was 25. We believe there are approximately 47,503 beneficial owners of our common stock. 47 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, the average performance the Company’s peer group for the year ended December 31, 2022 (the “2022 Peer Group”), and the average performance of the Company’s peer group for the year ended December 31, 2023 (the “2023 Peer Group”). The 2022 Peer Group consists of CCA Industries, Inc., Colgate-Palmolive Co., Estée Lauder Companies, Inc., Kimberly Clark Corp., Natural Health Trends Corp., Procter & Gamble Co., Revlon, Inc., Stephan Co., Summer Infant, Inc. and United Guardian, Inc. The 2023 Peer Group also includes Estée Lauder Companies, Inc. and Procter & Gamble Co. and replaces all other companies with e.l.f. Beauty, Inc., Coty Inc., L’Oréal SA, LVMH Moët Hennessy Louis Vuitton, Natura &Co Holding SS, Olaplex Holdings, Inc., and Shiseido Co Ltd. The Company changed its peer group in order to reflect the current competitive landscape in our industry more accurately. 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. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Inter Parfums, Inc., the NASDAQ Composite Index, 2022 Peer Group and 2023 Peer Group *$100 invested on 12/31/18 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. 12/18 12/19 12/20 12/21 12/22 12/23 Inter Parfums, Inc. 100.00 112.73 94.40 168.99 156.49 237.77 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 2022 Peer Group 100.00 137.57 160.49 193.85 173.59 161.94 2023 Peer Group 100.00 142.28 167.60 202.03 171.31 168.21 Dividends In February 2021, our Board of Directors authorized an annual dividend of $1.00 per share, payable quarterly. In February 2022, our Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share and in February 2023 the Board of Directors increased the annual dividend to $2.50 per share. Just recently, in February 2024, the Board of Directors further increased the annual dividend to $3.00 per share. The next quarterly cash dividend of $0.75 per share is payable on March 29, 2024, to shareholders of record on March 15, 2024. Item 6. [RESERVED] 48 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 prestige 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 based 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. We produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 65%, 68% and 75% of net sales for 2023, 2022 and 2021, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T. Dupont and Van Cleef & Arpels , whose products are distributed in over 120 countries around the world. In addition, our exclusive and worldwide license for the production and distribution of Lacoste brand perfumes and cosmetics became effective in January 2024. Through our United States based operations, we also market fragrances and fragrance related products. United States based operations represented 35%, 32% and 25% of net sales in 2023, 2022 and 2021, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Emanual Ungaro, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta, and Roberto Cavalli 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 Jimmy Choo, Montblanc, Coach, GUESS, Donna Karan/DKNY and Ferragamo brand names. This diversified portfolio of top brands represented 73%, 71% and 66% of total sales in 2023, 2022, and 2021, respectively. As a percentage of net sales, product sales for the Company’s largest brands were as follows: Year Ended December 31, 2023 2022 2021 Jimmy Choo 17 % 18 % 18 % Montblanc 17 % 18 % 19 % Coach 15 % 15 % 16 % GUESS 12 % 12 % 12 % Donna Karan/DKNY 7 % 3 % — Ferragamo 5 % 5 % 1 % 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, the United States, and Italy. We grow our business in two distinct ways. First, we grow by adding new brands to our portfolio, through new licenses, or other arrangements or outright 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 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. 49 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 based operations are denominated in U.S. dollars, while almost all costs of our European based 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 Please see our discussion of the Impact of the COVID-19 Pandemic, which is incorporated by reference to Note 2 to the Consolidated Financial Statements contained in this 2023 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023. Recent Important Events Please see our discussion of Recent Important Events, which is incorporated by reference to Note 3 to the Consolidated Financial Statements contained in this 2023 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023. 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 10.39%. 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. 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. 50 At December 31, 2023 indefinite-lived intangible assets aggregated $108.8 million. The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2023 assuming all other assumptions remained constant: $ in millions Change Increase (decrease) to fair value Weighted average cost of capital +10 % $ 4.4 Weighted average cost of capital -10 % $ 31.8 Future sales levels +10 % $ 33.3 Future sales levels -10 % $ 7.5 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 lived 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. Quantitative Analysis During the three-year period ended December 31, 2023, 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. 51 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 2023, had these estimates been changed simultaneously by 5% in either direction, our reported gross profit would have increased or decreased by approximately $0.7 million and selling, general and administrative expenses would have changed by approximately $0.1 million. The collective impact of these changes on 2023 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 $0.6 million, $0.3 million and $0.01, respectively. Results of Operations Net Sales Years ended December 31, (in millions) 2023 % Change 2022 % Change 2021 European based product sales $ 861.9 16 % $ 744.0 12 % $ 663.2 United States based product sales 455.8 33 % 342.7 58 % 216.4 Total net sales $ 1,317.7 21 % $ 1,086.7 24 % $ 879.6 Net sales in 2023 increased 21% compared to 2022. At comparable foreign currency exchange rates, net sales increased 20% in 2023, as compared to 2022, of which 5% is related to new brands. The average dollar/euro exchange rate for 2023 was 1.08 compared to 1.05 in 2022. For European based operations, our largest brands, Jimmy Choo, Montblanc, and Coach grew 2023 sales by 19%, 15% and 25%, respectively, as compared to 2022. There were also significant gains made by our mid-sized brands, including Van Cleef & Arpels, Rochas, 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. The increase was also driven by the continued success of our established lines including Jimmy Choo I Want Choo , Montblanc Legend , Coach Woman , and Coach Man . Sales by our United States based operations grew substantially in 2023, up 33%, as compared to 2022, largely from the continued success of GUESS fragrances, which performed exceedingly well during the quarters across all geographies, and was up 23% in 2023 as compared to 2022. This was driven by the continued growth in sales of the Seductive line within GUESS. The increase was also driven by the addition and extension of Donna Karan and DKNY to our portfolio. These two sister fragrance groups have climbed to become our second largest United States based brand in just one year under our expertise. We also had strong sales of Ferragamo fragrances, which we have enriched with sister scents for the Signorina and Storie di Seta collections. There were also gains made by our mid-sized brands, Oscar de la Renta Abercrombie & Fitch, and Hollister. In the second half of the year, we successfully completed Phase 1 of the Abercrombie & Fitch Fierce distribution roll-out. We are confident in our future as 2024 has many exciting developments for the Company. We transitioned to a new modern enterprise resource planning system (“ERP”) for our United States based operations, which has enabled us to operate more efficiently and offer more scale to absorb our newer brands. Distribution of Roberto Cavalli and Lacoste products, our newly acquired licenses, have begun in the first quarter. A new blockbuster fragrance line for Lacoste, and a new flanker for Roberto Cavalli Signature are planned to launch in the second half of 2024. We also have a solid line-up of new product launches in the pipeline for many of our existing brands. This includes the Phase 2 distribution roll-out of Abercrombie & Fitch Fierce in the first quarter , a roll out of the Donna Karan Cashmere Collection in the first quarter, a new DKNY blockbuster in the third quarter, a launch of a new GUESS fragrance in the second quarter, as well as an Uomo flanker in the third quarter. Extensions of Jimmy Choo I Want Choo , Montblanc Legend , and Coach Dreams, are set to debut throughout the year. Brand extensions and flankers are also in the works for Ferragamo, MCM, Abercrombie & Fitch, Hollister, Anna Sui, Emanuel Ungaro, and Oscar de la Renta. In sum, 2024 has all the earmarks of another strong year as the growth catalysts, such as the rebound of the travel retail business in Asia, currently far outweigh the headwinds, most notably supply chain disruptions that have largely abated. 52 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, 2023 2022 2021 (in millions) North America $ 511.7 $ 421.0 $ 346.9 Western Europe 301.2 259.2 202.0 Asia 191.8 163.6 135.2 Middle East 107.3 87.8 61.0 Eastern Europe 103.2 74.2 69.7 Central and South America 92.7 69.9 56.4 Other 9.8 11.0 8.4 $ 1,317.7 $ 1,086.7 $ 879.6 Our largest market, North America, achieved sales growth of 22% in 2023 compared to 2022, followed by Western Europe and Asia where sales grew by 16% and 17% in 2023, respectively, compared to 2022. Middle East, Eastern Europe, and Central and South America also achieved top line growth of 22%, 39% and 33% in 2023, respectively, compared to 2022. Additionally, our travel retail business is continuing to show signs of renewed life. Gross Profit Margin Years ended December 31, 2023 2022 2021 (in millions) European based operations: Net sales $ 861.9 $ 744.0 $ 663.2 Cost of sales 282.6 236.9 221.2 Gross margin $ 579.3 $ 507.1 $ 442.0 Gross margin, as a percent of net sales 67.2 % 68.2 % 66.6 % United States based operations: Net sales $ 455.8 $ 342.7 $ 216.4 Cost of sales 196.0 155.4 101.5 Gross margin $ 259.8 $ 187.3 $ 114.9 Gross margin, as a percent of net sales 57.0 % 54.7 % 53.1 % The Company’s gross margin percentage was 63.7% in 2023 as compared to 63.9% in 2022. The slight decrease in gross margin percentage was driven by unfavorable segment mix as well as certain one-time expenses related to inventory as discussed further below. Overall, the Company’s pricing actions have broadly compensated for cost inflation impacts. For European based operations, gross profit margin as a percentage of net sales was 67.2%, 68.2% and 66.6% in 2023, 2022 and 2021, respectively. 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 1.08 in 2023, 1.05 in 2022, and 1.18 in 2021. The weaker dollar in 2023 resulted in a decline in our gross margin. This decline was partially offset as 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 United States based distribution subsidiary increased 14% in 2023, as compared to 2022, leading to favorable mix and helping to further offset the gross margin decline. The decline was also driven by an increase in inventory reserves made during 2023 related to certain underperforming brands. As the Company experienced long lead times in obtaining and building inventory during the COVID-19 Pandemic, high levels of inventory investments were required to protect service levels. Excluding these one-time adjustments, gross margin as a percentage of sales for European based operations would be in line with the prior period, driven by increases in pricing and product mix, offset by cost inflation. 53 For United States based operations, gross profit margin was 57.0%, 54.7% and 53.1% in 2023, 2022 and 2021, respectively. The significant margin expansion stems from a number of factors. Firstly, for the most part, the price increases we took in early 2023 weren’t fully offset by a higher cost of goods given our cost containment efforts. Secondly, we are seeing favorable brand and channel mix, as a larger portion of our higher priced fragrances are being sold directly to retailers as opposed to third-party distributors. Lastly, the significant increase in sales in 2023 allowed us to better absorb fixed expenses such as depreciation and point of sale expenses, as compared to the prior year. Costs relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $52.3 million, $43.1 million and $36.9 million in 2023, 2022 and 2021, respectively, and represented 4.0%, 4.0% and 4.2% of net sales, respectively. Generally, we do not bill customers for shipping and handling costs and such costs, which aggregated $14.2 million, $15.8 million and $10.0 million in 2023, 2022 and 2021, 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 sales. Selling, General & Administrative Expenses Years ended December 31, 2023 2022 2021 (in millions) European based operations Selling, general & administrative expenses $ 406.6 $ 358.3 $ 327.5 Selling, general & administrative expenses as a percent of net sales 47.2 % 48.2 % 49.4 % United States based operations Selling, general & administrative expenses $ 181.1 $ 134.0 $ 79.0 Selling, general & administrative expenses as a percent of net sales 39.7 % 39.1 % 36.5 % The Company’s selling, general and administrative expenses as a percentage of nets sales were 44.6%, 45.3% and 46.2% in 2023, 2022 and 2021, respectively. This decrease was largely driven by sales growth during 2023 and 2022 allowing for better absorption of fixed operating costs, and favorable segment mix. For European based operations, selling, general and administrative expenses increased 13% and 9% in 2023 and 2022, respectively, as compared to the corresponding prior year period, and represented 47.2%, 48.2% and 49.4% of net sales in 2023, 2022 and 2021, respectively. 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 based operations, selling, general and administrative expenses increased 35% and 70% in 2023 and 2022, respectively, as compared to the corresponding prior year period and represented 39.7%, 39.1% and 36.5% of net sales in 2023, 2022 and 2021, respectively. As discussed in more detail below, these fluctuations, which are in line with the fluctuations in sales for United States based operations, are primarily from variations in promotion and advertising expenditures. Additionally, the United States based operations increased expenses related to salaries and benefits as we build the organization and infrastructure to support our new brands and future growth. The increase related to these structural and personnel investments began throughout 2022 and had full year impact in 2023 of $7.8 million. 54 Promotion and advertising included in selling, general and administrative expenses aggregated $259.9 million, $212.4 million and $171.1 million in 2023, 2022 and 2021, respectively. Promotion and advertising represented 19.7%, 19.5% and 19.5% of net sales in 2023, 2022 and 2021, respectively. Promotion and advertising are integral parts of our industry, and we continue to invest heavily to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have had a beneficial effect on sales. All of our brands have benefitted from newly launched and enhanced e-commerce sites in existing markets in collaboration with our retail customers on their e-commerce sites. We also continue to develop and implement omnichannel concepts and compelling content to deliver an integrated consumer experience. Long term, we anticipate that on a full year basis, promotion and advertising expenditures should 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 $103.8 million, $87.0 million and $68.9 million in 2023, 2022 and 2021, respectively. Royalty expense represented 7.9%, 8.0% and 7.8% of net sales in 2023, 2022 and 2021, respectively, due to changes in brand mix. Service fees, which are fees paid within our European based operations to third parties relating to the activities of our distribution subsidiaries, aggregated $11.0 million, $7.9 million and $9.4 million in 2023, 2022 and 2021, respectively. The 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 19.1%, 17.9% and 16.8% for the years ended December 31, 2023, 2022 and 2021, respectively. Other Income and Expenses Interest expense is primarily related to the financing of brand and licensing acquisitions. The increase in interest expense in 2023 is related to prior year acquisitions. In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a $55.3 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 headquarters of Interparfums SA. The acquisition was financed by a 10-year approximately $132.6 million (€120 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately $88.4 million (€80 million) of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate of 2% per annum. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%. Long-term debt including current maturities aggregated $157.5 million, $180.0 million and $148.8 million as of December 31, 2023, 2022 and 2021, 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. Over 50% of net sales of our European based operations are denominated in U.S. dollars. 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 consolidated income statements. Such gains and losses were immaterial in each 2023, 2022, and 2021. Interest and investment income represents interest earned on cash and cash equivalents and short-term investments. As of December 31, 2023, short-term investments include approximately $9.4 million of marketable equity securities of other companies in the luxury goods sector. In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million. The Company purchased additional marketable securities in the second and third quarter of 2023, which generated unrealized losses of $0.3 million during 2023. Overall the increases in interest rates led to higher net interest expenses. These increases in interest expense combined with losses on foreign currency were partially offset by the gains on marketable securities. 55 Income Taxes Our consolidated effective tax rate was 24.8%, 22.2% and 27.1% in 2023, 2022 and 2021, respectively. The effective tax rate for European based operations was 27.3%, 25.2% and 30.6% in 2023, 2022 and 2021, respectively. The French Government voted the reduction of the French corporate income tax rate from approximately 33% to 25% over a three-year period resulting in the decrease in rate from 2021 to 2022. Our effective tax rate in 2023 differs from the 25% statutory rate due to a one-time tax assessment of € 2.8 million ($3.1 million) included in tax expense as the result of a tax audit conducted for the 2020 and 2021 tax years. The effective tax rate for United States based operations was 19.3%, 13.8% and 15.6% in 2023, 2022 and 2021, respectively. Our effective tax rate differs from the 21% statutory rate due to benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes. Additionally, in the third quarter of 2022, our United States based 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, recoverability was deemed likely. Other than as discussed above, we did not experience any significant changes in tax rates, and none were expected in the jurisdictions where we operate. The Company has determined that it has no tax liability related to global intangible low-taxed income (“GILTI”) as of December 31, 2023, 2022 and 2021. The Company also estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $2.4 million, $1.5 million and $0.6 million as of December 31, 2023, 2022 and 2021, respectively. Share-based compensation resulted in a discrete tax benefit of $1.2 million, $0.8 million and $1.3 million in 2023, 2022 and 2021, respectively. Net Income Year ended December 31, 2023 2022 2021 (In thousands) Net income attributable to European based operations $ 123,994 $ 107,292 $ 80,670 Net income attributable to United States based operations 63,782 43,745 29,357 Net income 187,776 151,037 110,027 Less: Net income attributable to the noncontrolling interest 35,122 30,099 22,616 Net income attributable to Inter Parfums, Inc. $ 152,654 $ 120,938 $ 87,411 Net income attributable to Inter Parfums, Inc. was $152.7 million, $120.9 million and $87.4 million in 2023, 2022 and 2021, respectively. Net income attributable to European based operations was $124.0 million, $107.3 million and $80.7 million in 2023, 2022 and 2021, respectively, while net income attributable to United States based operations was $63.8 million, $43.7 million and $29.4 million in 2023, 2022 and 2021, respectively. The significant fluctuations in net income for both European and United States based operations are directly related to the previous discussions relating to changes in sales, gross profit margins, selling, general and administrative expenses. The noncontrolling interest arises 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 based operations and aggregated 28.1%, 27.9% and 28.0% of European based operations net income in 2023, 2022 and 2021, respectively. Net profit margins attributable to Inter Parfums, Inc. aggregated 11.6%, 11.1% and 9.9% in 2023, 2022 and 2021, respectively. 56 Liquidity and Capital Resources Our conservative financial tradition has enabled us to amass significant cash balances. As of December 31, 2023, we had $182.8 million in cash and cash equivalents and short-term investments, most of which are held in euro by our European based operations and is 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, 2023, short-term investments include approximately $12.9 million of marketable equity securities. As of December 31, 2023, working capital aggregated $514 million, and we had a working capital ratio of 2.6 to 1. Approximately 78% of the Company’s total assets are held by European based operations, and approximately $255 million of trademarks, licenses and other intangible assets are also held by European based operations. The Company is party to a number of licenses 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 most 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, 2023, 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 July 2023, we entered into a global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Roberto Cavalli brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. This license took effect in July 2023, and began shipping products in February 2024. 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. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. This new license took effect and products have started to ship in 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 gained 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 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%. Cash provided by operating activities aggregated $105.8 million, $73.0 million, and $119.6 million in 2023, 2022 and 2021, respectively. In 2023, working capital items used $102.0 million in cash from operating activities, as compared to $107.7 million in 2022 and $13.7 million in 2021. Although, from a cash flow perspective, accounts receivable is up 19% from year-end 2022, the balance is reasonable based 2023 record sales levels and reflects a strong collection activity as day’s sales outstanding decreased slightly to 60 days in 2023, as compared to 64 days and 61 days in 2022 and 2021, respectively. From a cash flow perspective, inventory levels are up 25% from year-end 2022. Inventory days on hand increased to 249 days in 2023, as compared to 231 days in 2022, and 208 days in 2021 as we have built up inventory related to the newly acquired licenses for Lacoste and Roberto Cavalli which began shipping to customers in 2024. 57 Cash flows provided by investing activities in 2023 reflect the purchases 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, 2023, approximately $2.2 million of certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal. Furthermore, in December 2023, the second installment payment to Lacoste related to the acquisition of the Lacoste trademark in 2022 for $43.3 million (€40 million) was made. Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we typically spend approximately $5.0 million on tools and molds, depending on our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers. Cash flows used in financing activities in 2023 reflect issuances and repayment of debt, purchases of treasury shares, and payment of dividends to stockholders. In December 2022, to finance Interparfums SA’s acquisition of the Lacoste trademark, Interparfums SA entered into an approximately $55.3 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 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, 2023, $154 million of the purchase price, including approximately $3.1 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying consolidated balance sheet. As of December 31, 2023, there was no cash held in escrow included in property, equipment and leasehold improvements on the accompanying consolidated balance sheet. In addition, Interparfums SA 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 $132.6 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%. Our short-term financing requirements are expected to be met by available cash on hand at December 31, 2023, and by short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2023 consist of a $25.0 million unsecured revolving line of credit provided by a domestic commercial bank and approximately $8 million in credit lines provided by a consortium of international financial institutions. Balances due from short-term borrowings totaled $4.4 million and $0 million as of December 31, 2023 and 2022, respectively. In December 2022, our Board of Directors authorized a share repurchase program for our outstanding common stock. During 2023, the Company repurchased 116,860 shares at a cost of $15.4 million. These shares are classified as treasury shares on the accompanying consolidated balance sheet. In February 2024, our Board of Directors authorized the Company to continue repurchasing up to 130,000 shares throughout 2024. In February 2021, our Board of Directors authorized an annual dividend of $1.00 per share, payable quarterly. In February 2022, our Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share and in February 2023 the Board of Directors increased the annual dividend to $2.50 per share. Just recently, in February 2024, the Board of Directors further increased the annual dividend to $3.00 per share. The next quarterly cash dividend of $0.75 per share is payable on March 29, 2024, to shareholders of record on March 15, 2024. Dividends paid, including dividends paid once per year to noncontrolling stockholders of Interparfums SA, aggregated $100.3 million, $79.8 million and $41.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. The cash dividends to be paid in 2024 are not expected to have any significant impact on our financial position. 58 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. 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, 2023 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 We periodically enter into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a currency other than our functional currency. We enter into these exchange contracts for periods consistent with our identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the receivables and cash flows of Interparfums SA, whose functional currency is the euro. All foreign currency contracts are denominated in currencies of major industrial countries and are with large financial institutions, which are rated as strong investment grade. All derivative instruments are required to be reflected as either assets or liabilities in the balance sheet measured at fair value. Generally, increases or decreases in fair value of derivative instruments will be recognized as gains or losses in earnings in the period of change. If the derivative is designated and qualifies as a cash flow hedge, then the changes in fair value of the derivative instrument will be recorded in other comprehensive income. Before entering into a derivative transaction for hedging purposes, we determine that the change in the value of the derivative will effectively offset the change in the fair value of the hedged item from a movement in foreign currency rates. Then, we measure the effectiveness of each hedge throughout the hedged period. Any hedge ineffectiveness is recognized in the income statement. As of December 31, 2023, we had foreign currency contracts in the form of forward exchange contracts of approximately U.S. $61.0 million and GB £2.5 million with 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. 59 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, 2023. 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 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information. None. 60 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 and Executive Vice President of Interparfums SA François Heilbronn Director Robert Bensoussan Director Veronique Gabai-Pinsky Director Gilbert Harrison Director Gerard Kappauf 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 19 meetings (or executed consents in lieu thereof), including meetings of committees of the full board of directors during 2023, 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 nine (9) directors. We have adopted a Code of 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 all employees, applicable, and we agree to provide to any person without charge, upon request, a copy of our Code of Conduct. Any person who requests a copy of our Code of 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 2023, 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 the first 9 months of 2023, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. In September 2023, Mr. Choël retired, and was replaced by Mr. Robert Bensoussan. The charter of the Audit Committee is posted on our Company’s website. 61 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 the first 9 months of 2023, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. Following the election of directors at the 2023 annual meeting, Robert Bensoussan replaced Mr. Choël on the Executive Compensation and Stock Option Committee. The charter of the Executive Compensation and Stock Option Committee is posted on our company’s website. ● Nominating Committee – During the first 9 months of 2023, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. Following the election of directors at the 2023 annual meeting, Robert Bensoussan replaced Mr. Choël on this committee. 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 was revised in early 2024. This policy 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. 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. 62 Nasdaq Board Diversity As required by the Nasdaq Diversity Rule, the board of directors of our company presently has one (1) member who self-identifies as a female and white, and one (1) male member who identifies as Hispanic and white (two or more races or ethnicities), 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 July 18, 2023 As of February 12, 2024 Total Number of Directors 10 9 Gender Identity Female Male Non- Binary Did Not Disclose Gender Female Male Non- Binary Did Not Disclose Gender Directors 1 9 0 0 1 8 0 0 Part II: Demographic Background African American or Black 0 0 0 0 0 0 0 0 Alaskan Native or Native American 0 0 0 0 0 0 0 0 Asian 0 0 0 0 0 0 0 0 Hispanic or Latinx 0 0 0 0 0 0 0 0 Native Hawaiian or Pacific Islander 0 0 0 0 0 0 0 0 White 1 8 0 0 1 6 0 0 Two or More Races or Ethnicities* 0 1 0 0 0 1 0 0 LGBTQ+ 0 0 Did Not Disclose Demographic Background 0 1 *One director self-identified as both “White” and “Hispanic or Latinx”. 63 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 63, 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), the prestigious French business school, 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 65, 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), the prestigious French business school, 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. Michel Atwood Mr. Atwood, age 54, 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. 64 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 62, and a Director since December 1999, is the Executive Vice President of Interparfums SA. Mr. Santi, who is a Certified Accountant and Statutory Auditor in France, was the Chief Financial Officer of Interparfums SA beginning in February 1995 until November 2023. 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 based operations, render him qualified to serve as a member of our board of directors. Francois Heilbronn Mr. Heilbronn, age 63, 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. Robert Bensoussan Mr. Robert Bensoussan, age 66, has been a Director since March 1997 and is also an independent director. Mr. Bensoussan founded Sirius Equity Consultants, a retail and branded luxury goods investment company. To date, Mr. Bensoussan remains an investor in Hapy Sweet Bee Ltd, natural health food product. He is a member of the Advisory Board of Pictet Bank Premium Brands Fund and sits on the board of Yonderland, Europe’s largest premium outdoor retailer. Previously Mr. Bensoussan was a 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. 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 for 9 years. Mr. Bensoussan served on the board of SNS, a prominent aspirational streetwear and entertainment hub in addition to serving on the board of Pronovias, the worldwide leader of wedding dresses. We believe Mr. Bensoussan is qualified to serve as a member of our board of directors due to his business and financial acumen and his experience in the retail and branded luxury goods market. 65 Veronique Gabai-Pinsky Ms. Gabai-Pinsky, age 58, 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. 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 83, 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 Emeritus of the Fashion Division of UJA, Treasurer and a Board member of the Southampton Hospital, a retired 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. 66 Kappauf Gerard Kappauf (“Kappauf”), age 62, a director, was born in Madagascar. After studying Classic Literature at the Sorbonne in Paris, he attended the San Francisco Art Institute on a scholarship and worked as a special effects make-up artist in Los Angeles. Upon traveling to Paris, Kappauf became interested in fashion and worked at a Jean Paul Gaultier fashion show. Thanks to this experience, he began to expand his network by meeting emblematic figures in the industry such as Paco Rabanne. While providing marketing and acquisition consulting services to L’Oréal Group during the tenure of Lindsay Owen Jones as its Chairman, in a bid for independence and emancipation he founded his own magazine in 1992, Citizen K. Through Citizen K, he realized his ambition to launch a major magazine for a wide audience on fashion, luxury, culture, and the art of living, truly different from the magazines already in existence. Citizen K magazine then became Citizen K International in 2012, a benchmark in fashion, luxury, and lifestyle. Kappauf expanded the magazine’s offering with the launch of Citizen K Homme in 2013, and 2014 was the year of change for Citizen K International with a new format and a fresh look. In 2016 Kappauf’s launched Citizen K Arabia. This title, distributed in the Middle East, benefits from editorial development and format adapted to the market. Although 80% of Citizen K International’s editorial content is contained in Citizen K Arabia, this magazine still features 20% of content tailored to The Emirates and the Middle East. In 2021, Kappauf launched The Kurator, the first a-gender magazine in the Middle East, as a luxury supplement to Gulf News, the leading daily newspaper in the region. Founded in January 1992 by Kappauf, he has been the Chief Executive Officer, and Creative and Editorial Director of the K Groupe since inception, which owns Citizen K magazines in Paris, as well as Enkore Studio in Dubai. Enkore Studio specializes in visual brand identity, digital content, storytelling and concept development for the fashion, luxury, beauty, and lifestyle industries. Kappauf now lives in Dubai and is currently working on projects in India. We believe that Kappauf’s perspective on fashion, luxury, culture, and the art of living will bring diversity of viewpoints to our Board of Directors. 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. Insider Trading Policy The use of material non-public information in securities transactions (“Insider Trading”) or the communication of such information to others who use it in securities trading (“Tipping”) violates the federal securities laws. Such violations are likely to result in harsh consequences for the individuals involved including exposure to investigations by the SEC, criminal and civil prosecution, disgorgement of any profits realized or losses avoided through use of the non-public information and penalties equal to three times such profits or losses. Further, Insider Trading violations expose the Company, its management, and other personnel acting in supervisory capacities to potential civil liabilities and penalties for the actions of employees under their control who engage in Insider Trading violations. 67 If a director, officer or employee of our Company is aware of material information relating to the Company, which has not yet been made available to the public for at least two (2) full business days, then such person is prohibited by law as well as by Company policy from trading in the Company’s shares or directly or indirectly disclosing such information to any other persons so that they may trade in the Company’s shares. It is difficult to describe what constitutes “material” information, but one should assume that any information, positive or negative, which might be of significance to an investor in determining whether to purchase, sell or hold our stock, would be material. Information may be significant for this purpose even if it would not alone determine the investor’s decision. Examples include a potential business acquisition, internal financial information which departs in any way from what the market would expect, important product developments, the acquisition or loss of a major contract, or an important financing transaction. We emphasize that this list is not meant to be exhaustive, but merely illustrative. Not only is it illegal to engage in Insider Trading or convey such information to others in breach of a duty, it is also generally illegal to “tip” such information to others who may trade in the securities involved or to recommend the purchase or sale of securities to others while you are in possession of such information. It is the policy of the Company that one should never trade while in possession of material, non-public information or tip or communicate such information to others without first receiving authorization from the Company or our counsel. This policy applies to your personal transactions and those indirectly through a spouse, friend, corporation or other entity. This applies to the securities of the Company and of other corporations. Thus, if in the course of the Company’s business, a person learns of material non-public information concerning another corporation (such as a customer or supplier) you should abstain from trading in that corporation’s securities. Further, this policy applies to securities transactions by individuals who reside in the same household with directors, officers and employees of the Company. Strict compliance with these policies and procedures is expected of all directors, officers and employees and members of their households, and any infringement thereof may result in sanctions, up to and including, termination of office or employment. Insider Trading Procedure In addition, to avoid the appearance of impropriety, no trading in the Company’s securities is permitted to take place without compliance with the following rules. ● The person who intends to trade in the Company’s securities must first contact the Chief Financial Officer of Inter Parfums, Inc., prior to any contemplated purchase or sale. ● There shall be no trading in the Company’s securities by Company personnel within ten (10) full business days before the earlier of (i) the issuance of a press release by the Company concerning its periodic financial information, which occurs approximately five (5) to ten (10) business days before the filing with the SEC of the Company’s periodic reports, which are due no later than March 1, May 10, August 9 and November 9 of each year, or (ii) the actual filing of such periodic reports; and until two (2) full business days AFTER the actual filing of such periodic reports. ● There shall also be no trading in the Company’s securities until not less than two (2) full business days after the release of any other press release or filing with the SEC of a Current Report on Form 8-K by the Company. ● In no event shall there be any trading in the Company’s securities by Company personnel without the prior consent from the Company. 68 Anti-Hedging Policy Under the terms of our Anti-Hedging Policy, no officers, employees or members of our board of directors (and their respective family members or any affiliated entities) may engage in hedging or monetization transactions involving our securities, including buying any financial instrument or entering into any transaction that may offset any potential decrease in the market value of stock options or similar security that is granted as compensation. This policy also prohibits all actions to avoid any downward price of such compensation award. This same prohibition applies as well to any other person or company who is holding such equity security for the benefit of our employees, officers, directors or family members. This policy is not intended to prohibit the exercise of our stock options granted under our stock option plans. Option Grants Policy and Practice Option grants to officers and employees have historically been granted on the last business day of the calendar year, as the board believes that as a general rule, there should not be any material non-public information available at that time of year. However, no options were granted during in years 2021, 2022 and 2023 to any executive officers, other than Michel Atwood, who received an option grant to purchase 5,000 shares on December 30, 2022 as part of his initial compensation package, and 4,000 shares on December 29, 2023, the last day of both calendar years. Options have historically been granted at the fair market value on the date of grant with a 6-year term, and vested 20% each year after the first year on a cumulative basis. Options granted to officers and employees terminate upon the termination of association with the Company, for other than death or permanent disability. Historically, options were granted to independent directors on the first business day of February of each year in accordance with our stock option plan. As the option grant date and number of shares underlying options were determined in our stock option plan, there would be no room for manipulation. As previously reported, in 2022 our board cancelled the automatic option grant on February 1, 2022 in view of determining an alternate form of compensation for the independent directors. However, after discussions with certain financial consultants relating to potential compensation plans in lieu of stock option grants to its independent directors, it was determined that the most favorable way for the independent directors to be compensated was to amend our stock option plan to reinstate the automatic grant of stock options. Accordingly, our board authorized a new automatic grant to our independent directors commencing on the last business day December 30, 2022 to coincide with the historic grant date to officers and employees and continuing on the last business day of each year thereafter, which was approved by our shareholders at the 2023 annual meeting. Clawback Policy for Erroneously Awarded Executive Compensation Our Board of Directors has adopted a policy for the recovery of the award of erroneously awarded incentive compensation for our executive officers (the “Recovery Policy”). If the Company is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, then, in accordance with the provisions of this Recovery Policy, the Company will recover reasonably promptly the amount of all Erroneously Awarded Compensation from its executive officers, as defined below. The term “Erroneously Awarded Compensation” is defined in the Recovery Policy as the amount of incentive-based compensation that exceeds the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts, and computed without regard to any tax liability. For incentive-based compensation based on stock price or total shareholder return, where the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an accounting restatement, the amount must be based on a reasonable estimate of the effect of the accounting restatement on the stock price or total shareholder return upon which the incentive-based compensation was received. 69 The Recovery Policy applies to all incentive-based compensation received by an executive officer during the three (3) completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement, for all incentive-based compensation received by executive officers on or after October 2, 2023. 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 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. Mr. Madar, the Chairman and Chief Executive Officer, took the initiative after discussions with Mr. Atwood, the 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 Executive Vice President of Interparfums SA, and recommended executive compensation levels for executives for European based 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 2023 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. During 2023, the members of such committee initially consisted of Messrs. Francois Heilbronn and Patrick Choël, and Ms. Gabai-Pinsky. Mr. Choël retired in September 2023, and was replaced by Mr. Robert Bensoussan. 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. 70 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 Atwood, the Chief Financial Officer, and Benacin and Santi for European based operations, were most familiar with the individual performance, level of responsibility, skills and experience of each executive officer in their respective operating based operations, 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 based operations. As such, as a general rule the Compensation Committee did not determine the need to benchmark any material item of compensation or overall compensation. 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. Ms. Gabai-Pinsky, 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. Mr. Bensoussan, the final committee member who replaced Mr. Patrick Choel, who retired in September 2023, was previously a member of the boards of lululemon athletica Inc., Feelunique.com, one of Europe’s largest online beauty retailers, and Jimmy Choo Ltd, from 2001 to 2011. 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 Atwood for United States based operations, and Messrs. Benacin and Santi for European based operations, were most familiar with the individual performance, level of responsibility, skills and experience of each executive officer in their respective based operations, 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 based 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 based 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 based operations for several years, principally because European based operations historically have had higher profitability than United States operations, and European based operations are run differently from United States operations by the Chief Executive Officer of European based operations, Mr. Benacin. As the result of this historically higher profitability, European based 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 based 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. 71 For 2023, Mr. Benacin received a base salary of $795,000, as compared to 2022, when he received a base salary of $756,000. In addition, Mr. Benacin’s holding company received $250,000 paid by the Company’s United States based operations, which is included in the calculation of his base salary for each of those years. 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. The Compensation Committee considered the following salient factors in authorizing payment to Mr. Benacin’s holding company; services rendered to United States based 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 based operations. As Mr. Benacin values the services of two named executive officers of Interparfums SA, Mr. Philippe Santi, Executive Vice President, 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 2023, the base salary of each of Messrs. Santi and Garcia-Pelayo was €458,000, a nominal increase of €26,000. In 2022, the base salary of each of Messrs. Santi and Garcia-Pelayo was €432,000, an increase of €24,000 from 2021. Such increases were nominal, as compared to bonus compensation, as discussed later in the section. The Compensation Committee considered the recommendations of Mr. Benacin, results of operations for the year, as well as the services performed for European based operations by Messrs. Santi and Garcia-Pelayo in authorizing these salary levels. A different approach is taken for United States based operations as that based operations 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 based 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 Compensation Committee jointly authorized the aggregate annual increase in the fees paid to Mr. Madar’s holding company, which are attributed to Mr. Madar as base salary, by $600,000 to $1.23 million effective as of January 1, 2020. For 2023 Mr. Madar’s Holding Company received an increase in its management fees to $2 million, after not receiving an increase in 2022 and 2021. Mr. Atwood, who became the Chief Financial Officer in September 2022 after the retirement of the former Chief Financial Officer, 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. For 2023, Mr. Atwood received an increase in base salary to $525,000. The Compensation Committee considered the following material factors in approving the base salary of Mr. Atwood for 2023: his individual performances, level of responsibilities, and skill, as well as the recommendation of the Chief Executive Officer. 72 Bonus Compensation/Annual Incentives In recognition of the 2023 record setting performance in both sales and earnings of Interparfums SA, our French operating subsidiary, Mr. Benacin received a bonus of $216,000, and 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. Discretionary bonus compensation for Mr. Benacin has been approximately 27%, 28%, and 30% of his base salary in 2023, 2022, and 2021, 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 $458,000, $437,000, and $378,000 in 2023, 2022, 2021, respectively, or 92%, 96%, and 78% of their base salary for those years. A different approach is taken for United States based operations as that based operations 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 based operations with a lesser emphasis placed on bonuses. In 2022, the former Chief Financial Officer retired and did not receive a discretionary bonus. Mr. Atwood, who became the Chief Financial Officer in September 2022 after the retirement of the former Chief Financial Officer, 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. For 2023, Mr. Atwood received a discretionary bonus of $125,000. The Compensation Committee considered the same factors in granting these two bonuses as in approving his annual base salary. Jean Madar Holding SAS, the management company beneficially owned by Mr. Madar, the Chief Executive Officer, has not received any cash bonus in the past three years. 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 based 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 $37,603. Calculation of the total annual benefits contribution is made according to the following formula: 50% 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 based operations or European based operations, as other compensation arrangements were being considered as part of a review of the executive compensation strategy. In December 2023, at the recommendation of the Chief Executive Officer, the Compensation Committee authorized the grant of a stock option to purchase 4,000 shares to Mr. Atwood who had received a stock option to purchase 5,000 shares in December 2022, both at the fair market value on the dates 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 2023 or 2022, including Messrs. Jean Madar and Philippe Benacin. 73 Interparfums SA Stock Compensation Plans 2023 - No shares were granted to any employees or corporate officers during 2023. 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 is 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. - As of December 31, 2022 management has updated its expectation related to the performance rate to be 100% for both consolidated sales and consolidated operating income based on the above assumptions, the total expenses related to this plan are valued at $4.1 million. As of December 31, 2023: - 87,609 shares of IPSA Capital Stock, representing $4.1 million were purchased in the open market and allocated to this plan. $1.4 million of expense was recorded (or $1.6 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. 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, the former Chief Financial Officer 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. 74 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 2023, each of Messrs. Benacin and Garcia-Pelayo received an automobile allowance of $11,678. 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 based operations. Commencing in October 2021 we started matching the first 50% of the first 6% of contributions made by each employee on an annual basis, as we have determined that base compensation together with annual bonuses, are sufficient incentives to retain talented employees. Our European based operations maintain a pension plan for its employees as required by French law. For each of 2023, 2022, and 2021, each of Messrs. Benacin, Santi and Garcia-Pelayo received an increase of $17,600, $16,006 and $17,773, respectively, in their value of deferred compensation earnings. Compensation Committee Report We have reviewed and discussed with management the Compensation Discussion and Analysis provisions to be included in this Annual Report on Form 10-K for fiscal year ended December 31, 2023 and the proxy statement for the upcoming annual meeting of shareholders. Based on this review and discussion, we recommend to the board of directors that the Compensation Discussion and Analysis referred to above be included in this Annual Report on Form 10-K as well as the proxy statement for the upcoming annual meeting of shareholders. Francois Heilbronn Veronique Gabai-Pinsky and Robert Bensoussan 75 The following table sets forth a summary of all compensation awarded to, earned by or paid to our “named executive officers,” who are our principal executive officer, our principal financial officer, and each of the three most highly compensated executive officers of our company. This table covers all such compensation during fiscal years ended December 31, 2023, December 31, 2022 and December 31, 2021. For all compensation related matters disclosed in the summary compensation table, and elsewhere where applicable, all amounts paid in euro have been converted to U.S. dollars at the average rate of exchange in each year. SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) 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, (4) 2023 2,000,000 -0- -0- -0- -0- -0- -0- 2,000,000 Chairman and 2022 1,230,000 -0- -0- -0- -0- -0- -0- 1,230,000 Chief Executive Officer 2021 1,230,000 -0- 157,603 -0- -0- -0- -0- 1,387,603 Michel Atwood (5) 2023 525,000 125,000 -0- 140,327 -0- -0- -0- 790,327 Chief Financial Officer 2022 161,218 150,000 -0- 101,814 -0- -0- -0- 413,032 Russell Greenberg, (5) 2022 750,000 -0- -0- -0- -0- -0- -0- 750,000 Former Chief Financial Officer and 2021 720,000 70,000 -0- -0- -0- -0- -0- 790,000 Executive Vice President Philippe Benacin, President Inter 2023 794,975 216,260 -0- -0- -0- 17,600 11,678 1,040,513 Parfums, Inc., Chief Executive 2022 755,440 210,600 139,077 -0- -0- 16,006 11,372 1,132,495 Officer of Interparfums SA 2021 803,504 165,578 -0- -0- -0- 17,733 12,774 999,589 Philippe Santi, Executive Vice 2023 495,668 457,714 -0- -0- 37,603 17,600 -0- 1,008,585 President, Interparfums SA 2022 454,896 436,995 139,077 -0- 32,485 16,006 -0- 1,079,459 2021 482,542 378,464 -0- -0- 34,940 17,733 -0- 913,679 Frédéric Garcia-Pelayo, 2023 495,668 457,714 -0- -0- 37,603 17,600 11,678 1,020,263 Executive Vice President and 2022 454,896 436,995 139,077 -0- 32,485 16,006 11,372 1,090,831 Chief Operating Officer Interparfums SA 2021 482,542 378,464 -0- -0- 34,940 17,733 12,774 926,453 76 1 Amounts reflected under Option Awards represent the grant date fair values in 2023, 2022 and 2021 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, 2023 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 based 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 $37,603. Calculation of total annual benefits contribution is made according to the following formula: 50% 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 2023, 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 Represents fees paid to Jean Madar Holding SAS in accordance with a Supervising and Coordinating Service Agreement, as amended. 5 Mr. Atwood replaced Mr. Greenberg on September 6, 2022, who retired in September 2022. Mr. Atwood’s base salary in 2022 was prorated from $500,000, annually. Name and Principal Position Perquisites and other Personal Benefits ($) Personal Automobile Expense ($) Lodging Expense ($) Total ($) Jean Madar, Chairman Chief Executive Officer -0- -0- -0- -0- Michel Atwood, Chief Financial Officer -0- -0- -0- -0- Philippe Benacin, President of Inter Parfums, Inc. and Chief Executive Officer of Interparfums SA -0- 11,678 -0- 11,678 Philippe Santi, Executive Vice President and Chief Financial Officer, Interparfums SA -0- -0- -0- -0- Frédéric Garcia-Pelayo, Executive Vice President and Chief Operating Officer, Interparfums SA -0- 11,678 -0- 11,678 77 Plan based Awards The following table sets certain information relating to each grant of an award made by our company to the executive officers of our company listed in the Summary Compensation Table during the past fiscal year. Grants of Plan-based Awards Name Grant Date Estimated Future Payouts Under Non-Equity Incentive Plan Awards Estimated Future Payouts Under Equity Incentive Plan Awards All Other Stock Awards: Number of Shares of Stock or All Other Option Awards: Number of Securities Underlying Exercise or Base Price of Option Closing Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) Units (#) Options (#) Awards ($/Sh) Price ($/Sh) Jean Madar NA -0- -0- -0- -0- -0- -0- -0- -0- NA NA Michel Atwood -0- -0- -0- -0- -0- -0- -0- 4,000 $147.41 $144.01 Philippe Benacin -0- -0- -0- -0- -0- -0- -0- -0- NA NA Philippe Santi -0- -0- -0- -0- -0- -0- -0- -0- NA NA Frédéric Garcia-Pelayo -0- -0- -0- -0- -0- -0- -0- -0- NA NA NA means not applicable. 78 Interparfums SA Stock Compensation Plan No awards were granted in 2023 by Interparfums SA under its Stock Compensation Plan. Interparfums SA Profit Sharing Plan 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 based 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 $37,603. Calculation of total annual benefits contribution is made according to the following formula: 50% 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. Name Plan Name Amount Awarded Jean Madar NA $0 Michel Atwood NA $0 Philippe Benacin NA $0 Philippe Santi Interparfums SA Profit Sharing Plan $37,603 Frédéric Garcia-Pelayo Interparfums SA Profit Sharing Plan $37,603 Outstanding Equity Awards at Fiscal Year-End The following table sets forth certain information relating to outstanding equity awards of our Company held by the executive officers listed in the Summary Compensation Table as of December 31, 2023. Option Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable (1) Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Jean Madar 25,000 (2) 0 (2) 0 65.25 12/30/24 20,000 (2) 5,000 (2) 0 73.09 12/30/25 Michel Atwood 1,000 4,000 0 97.84 12/30/28 0 4,000 0 147.71 12/28/29 Philippe Benacin 25,000 (2) 0 (2) 0 65.25 12/30/24 20,000 (2) 5,000 (2) 0 73.09 12/30/25 Philippe Santi 2,000 0 0 65.25 12/30/24 2,000 2,000 0 73.09 12/30/25 Frédéric Garcia-Pelayo 2,000 0 0 65.25 12/30/24 2,000 2,000 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. 79 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($) Jean Madar -0- 0 -0- NA NA 3,630 182,952 -0- -0- Michel Atwood -0- 0 -0- NA NA -0- -0- -0- -0- Philippe Benacin -0- 0 -0- NA NA 3,630 182,952 -0- -0- Philippe Santi -0- 0 -0- NA NA 7,260 365,904 -0- -0- Frédéric Garcia-Pelayo -0- 0 -0- NA NA 7,260 365,904 -0- -0- 1 Estimated number of shares are to be issued only to the extent that the performance conditions have been met. 2 As of December 31, 2023, the closing price of Interparfums SA as reported by the Euronext was 50.40 euros, and the exchange rate was 1.08 U.S. dollars to 1 euro. 80 Option Exercises and Stock Vested The following table sets forth certain information relating to each option exercise affected during the past fiscal year, and each vesting of stock, including restricted stock, restricted stock units and similar instruments of our company during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table. OPTION EXERCISES AND STOCK VESTED Option Awards Stock Awards Name Number of Shares Acquired on Exercise (#) Value Realized on Exercise ($) 1 Number of Shares Acquired on Vesting (#) Value Realized On Vesting ($) Jean Madar 25,000 2,432,417 -0- -0- Michel Atwood -0- -0- -0- -0- Russell Greenberg 25,000 1,425,609 -0- -0- Philippe Benacin 25,000 2,542,813 -0- -0- Philippe Santi 9,200 459,701 -0- -0- Frédéric Garcia-Pelayo 12,000 616,728 -0- -0- [Footnotes from table above] 1 Total value realized on exercise of options in dollars is based upon the difference between the fair market value of the common stock on the date of exercise, and the exercise price of the option. Regarding Interparfums SA, our majority-owned French subsidiary which has its shares traded on the Euronext, no options were exercised during the past fiscal year, and there was no vesting of stock, including restricted stock, restricted stock units and similar instruments during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table. Pension Benefits The following table sets forth certain information relating to payment of benefits in connection with retirement plans during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table. PENSION BENEFITS Name Plan Name Number of Years Credited Service (#) Present Value of Accumulated Benefit* ($) Payments During Last Fiscal Year ($) Jean Madar NA NA -0- -0- Michel Atwood NA NA -0- -0- Philippe Benacin Inter Parfums SA Pension Plan NA 348,839 17,600 Philippe Santi Inter Parfums SA Pension Plan NA 348,839 17,600 Frédéric Garcia-Pelayo Inter Parfums SA Pension Plan NA 348,839 17,600 * Does not include any contributions made by prior employers, or individually by the recipients as such information is confidential under French law. 81 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%. 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 2023, our last completed fiscal year: ● Our median employee’s compensation was $72,274 ● Our Chief Executive Officer’s total 2023 compensation was $4,432,417 ● Accordingly, our 2023 CEO to Median Employee Pay Ratio was 61.33 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, 2023 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, 2023. 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. 82 Employment and Service/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 the material terms of the employment agreement with Philippe Benacin, individually, and the consulting agreement and fees previously granted to, Philippe Benacin Holding SAS, which is incorporated by reference herein. 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 26,000 -0- 52,623 -0- -0- 71,300 149,923 Robert Bensoussan 3 23,000 -0- 52,623 -0- -0- 65,548 141,171 Patrick Choël 4 23,000 -0- -0- -0- -0- 214,775 237,775 Michel Dyens 5 15,000 -0- -0- -0- -0- 266,972 281,972 Veronique Gabai-Pinsky 6 23,000 -0- 52,623 -0- -0- 73,093 148,716 Gilbert Harrison 7 9,000 -0- 52,623 -0- -0- 243,155 304,778 Kappauf 8 3,000 -0- 52,623 -0- -0- -0- 55,623 [Footnotes from table above] 1. Represents gain from exercise of stock options, except for Mr. Harrison, which includes a $60,000 payment made in 2023 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 7,000 shares of our common stock. 3. As of the end of the last fiscal year, Mr. Bensoussan held options to purchase an aggregate of 7,000 shares of our common stock. 4. As of the end of the last fiscal year, Mr. Choël held options to purchase an aggregate of no shares of our common stock. 5. As of the end of the last fiscal year, Mr. Dyens held options to purchase an aggregate of no 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 6,000 shares of our common stock. 7. As of the end of the last fiscal year, Mr. Harrison held options to purchase an aggregate of 7,000 shares of our common stock. 8. As of the end of the last fiscal year, Kappauf held options to purchase an aggregate of 1,500 shares of our common stock. 83 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, 2022, and 2023, 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 was paid one year thereafter in 2023. We maintain a stock option plan for our nonemployee or independent directors. The purpose of this plan 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, options to purchase 1,500 shares are granted on the last business day of each year at the fair market value on the date of grant to all nonemployee directors for as long as each is a nonemployee director on such date. Such options 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. However, if a nonemployee director does not attend certain of the board meetings, then such option grants are reduced according to a schedule. 84 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 27, 2024, we had 32,021,700 shares of common stock outstanding. Name and Address of Beneficial Owner Amount of Beneficial Ownership 1 Approximate Percent of Class Jean Madar Jean Madar Holding SAS 166 rue du Faubourg Saint-Honoré 75008 Paris, France 7,104,841 2 22.2 % Philippe Benacin Interparfums SA 10 rue de Solférino 75007 Paris, France 6,916,064 3 21.6 % Michel Atwood c/o Inter Parfums, Inc. 551 Fifth Avenue New York, NY 10176 1,000 4 Less than 1 % Philippe Santi Interparfums SA 10 rue de Solférino 75008, Paris, France 0 NA Francois Heilbronn 60 Avenue de Breteuil 75007 Paris, France 29,238 5 Less than 1 % Robert Bensoussan c/o Sirius Equity LLP 52 Brook Street W1K 5DS London, UK 11,675 6 Less than 1 % Veronique Gabai-Pinsky 200 East End Avenue New York, NY 10128 2,175 7 Less than 1 % Gilbert Harrison Harrison Group 239 Ox Pasture Road South Hampton, NY 11968 3,175 8 Less than 1 % Gerard Kappauf Jumeirah 1 30th C Street, Villa 76 Dubai, United Arab Emirates -0- Less than 1 % Frederic Garcia-Pelayo Interparfums SA 10 rue de Solférino 75008, Paris, France 12,000 9 Less than 1 % Blackrock, Inc. 55 East 52 nd Street New York, NY 10055 2,806,336 10 8.8 % The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 2,204,470 11 6.9 % All Directors and Officers (As a Group 10 Persons) 14,072,718 12 43.9 % 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 10,500 shares held directly, 7,049,341 shares held indirectly through Jean Madar Holding SAS, a personal holding company, and options to purchase 45,000 shares. 3 Consists of 6,871,064 shares held indirectly through Philippe Benacin Holding SAS, a personal holding company, and options to purchase 45,000 shares. 4 Consists of shares of common stock underlying options for Mr. Atwood. 5 Consists of 27,063 shares held directly and options to purchase 2,175 shares for Mr. Heilbronn. 6 Consists of 9,500 shares held directly and options to purchase 2,175 shares for Mr. Bensoussan. 7 Consists of shares of common stock underlying options for Ms. Gabai-Pinsky. 8 Consists of 1,000 shares held directly and 2,175 shares of common stock underlying options for Mr. Harrison. 9 Consists of shares of common stock underlying options for Mr. Garcia-Pelayo. 10 Information based upon Schedule 13G of Blackrock, Inc. Amendment No. 1 dated January 25, 2024 as filed with the Securities and Exchange Commission. 11 Information based upon Schedule 13G Amendment No. 7 of The Vanguard Group, an investment advisor, dated February 13, 2024 as filed with the Securities and Exchange Commission. 12 Consists of 13,969,018 shares held directly or indirectly, and options to purchase 103,700 shares. 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 308,970 $86.52 537,365 Equity compensation plans not approved by security holders -0- N/A -0- Total 308,970 $86.52 537,365 85 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 2023, 2022, and 2021, and fees for such services were $530,000, $491,300, and $443,625, respectively. In September 2023, Interparfums Luxury Brands, Inc. an indirect majority-owned subsidiary of the Company, loaned the Company the amount of $20 million, which is repayable $5 million per month starting in May 2024 with the last payment including all accrued interest at 5.3% per annum. In December 2023, Interparfums Luxury Brands, Inc. made a second loan to the Company in the amount of $12 million, which is repayable in May 2024 with interest at 5.3% per annum. These loans partially funded our share repurchase plan during 2023 and cash dividend payments. In September 2022, Interparfums Luxury Brands, Inc. loaned the Company $10 million, which was 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. These two loans were repaid in full in 2023. 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 paid two years later in 2023. Management and Consulting Agreements In April 2023, our Board of Directors approved an amendment to the Coordinating and Supervising Service Agreement (“Service Agreement”) that amended the fee arrangement Jean Madar Holding SAS, which replaced a prior agreement that was initially entered into in 2013, as amended. The amendment to the Service Agreement was previously approved by the Executive Compensation and Stock Option Committee, as well as the Audit Committee due to the related party nature of the Service Agreement. The aggregate increase in fees payable to Jean Madar Holding SAS is from $1.23 million to $2.0 million on an annual basis, effective as of January 1, 2023. Further, as requested by Jean Madar Holding SAS, effective April 1, 2023 and continuing thereafter, all fees are to be paid entirely to Jean Madar Holding SAS, and for the balance of calendar year 2023, the amount of such fees are inclusive of the salary paid to Jean Madar individually from January 1, 2023 to March 31, 2023. As Jean Madar, our Chief Executive Officer and Chairman of the Board, is the beneficial owner of Jean Madar Holding SAS, all of such fees paid to Jean Madar Holding SAS have been characterized as base salary for the disclosure purposes for the Summary Compensation and related discussion in Table in Item 11. 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, 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. 86 The following are our directors who are independent directors within the applicable rules of The Nasdaq Stock Market: Francois Heilbronn Robert Bensoussan Veronique Gabai-Pinsky Gilbert Harrison Gerard Kappauf 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 Bensoussan, 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, 2023 and December 31, 2022. Audit Fees Fees billed by Mazars USA LLP and its affiliate, Mazars S.A. for audit services and review of the consolidated financial statements contained in our Quarterly Reports on Form 10-Q were $1.4 million and $1.4 and million for 2023 and 2022, respectively. Audit-Related Fees Mazars USA LLP did not bill us for any audit-related services during 2023 and 2022. Tax Fees Mazars USA LLP did not bill us for any tax services in 2023 and 2022. All Other Fees Mazars S.A. billed us $9,000 and $6,000 for other services during 2023 and 2022, 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. 87 During the first quarter of 2023, 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, 2023. ● 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, 2023. 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, 2023. 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. 88 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, 2023 and 2022 F-5 Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2023 F-6 Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2023 F-7 Consolidated Statements of Changes in Shareholders’ Equity for each of the years in the three-year period ended December 31, 2023 F-8 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2023 F-9 Notes to Consolidated Financial Statements F-10 (a)(2) Financial Statement Schedule: Schedule II – Valuation and Qualifying Accounts F-30 (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. 89 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, 2023, and 2022 F-5 Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2023 F-6 Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2023 F-7 Consolidated Statements of Changes in Shareholders’ Equity for each of the years in the three-year period ended December 31, 2023 F-8 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2023 F-9 Notes to Consolidated Financial Statements F-10 Financial Statement Schedule: Schedule II – Valuation and Qualifying Accounts F-30 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, 2023 and 2022, 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, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, 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, 2023, 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) involve 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 Note 8 to the consolidated financial statements, the Company’s consolidated Trademarks (indefinite lives) balance of $108.8 million at December 31, 2023, which included $11.3 million of the Rochas Fashion indefinite life intangible asset. F- 3 The principal considerations in determining management’s annual impairment test for the Rochas Fashion intangible asset as a critical audit matter was due to the change in events and circumstances surrounding the Rochas Fashon brand trademark and complexity of management’s estimates used in their evaluation of the fair value of the Rochas Fashion trademark. The significant assumptions used to estimate the fair value of the Rochas Fashion intangible asset included the forecasted revenue, operating margin, and discount rate. These significant assumptions are forward-looking and could be affected by future economic and market conditions. Changes in these assumptions could have a significant impact on the fair value of the Rochas Fashion intangible asset, the amount of any impairment charge, or both. We obtained an understanding, evaluated the design and tested the operating effectiveness of Company’s controls over the Rochas Fashion intangible asset impairment review process, including management’s review of the significant assumptions described above and controls over the completeness and accuracy of the data used to develop such estimates. To test the estimated fair value of the Rochas Fashion intangible asset, our audit procedures included, among others, assessing the appropriateness of the valuation model used, evaluating the significant assumptions discussed above, and testing and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We compared the financial projections to the historical accuracy of management’s estimates. We involved our valuation specialists to assist in our evaluation of the Company's model, valuation methodology and the discount rate. Mazars USA LLP /s/ Mazars USA LLP We have served as the Company's auditor since 2004. New York, New York February 27, 2024 F- 4 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2023, and 2022 (In thousands except share and per share data) Assets 2023 2022 Current assets: Cash and cash equivalents $ 88,462 $ 104,713 Short-term investments 94,304 150,833 Accounts receivable, net 247,240 197,584 Inventories 371,859 289,984 Receivables, other 7,012 28,803 Other current assets 29,458 15,650 Income taxes receivable 691 157 Total current assets 839,026 787,724 Property, equipment and leasehold improvements, net 169,222 166,722 Right-of-use assets, net 28,613 27,964 Trademarks, licenses and other intangible assets, net 296,356 290,853 Deferred tax assets 14,545 11,159 Other assets 21,567 24,120 Total assets $ 1,369,329 $ 1,308,542 Liabilities and Equity Current liabilities: Loans payable - banks $ 4,420 $ — Current portion of long-term debt 29,587 28,547 Current portion of lease liabilities 5,951 5,296 Accounts payable - trade 97,409 88,388 Accrued expenses 178,880 213,621 Income taxes payable 8,498 8,715 Total current liabilities 324,745 344,567 Long–term debt, less current portion 127,897 151,494 Lease liabilities, less current portion 24,517 24,335 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, 32,004,660 and 31,967,300 shares on December 31, 2023, and 2022, respectively 32 32 Additional paid-in capital 98,565 90,186 Retained earnings 693,848 620,095 Accumulated other comprehensive loss ( 40,188 ) ( 56,056 ) Treasury stock, at cost, 9,981,665 and 9,864,805 common shares on December 31, 2023, and 2022, respectively ( 52,864 ) ( 37,475 ) Total Inter Parfums, Inc. shareholders’ equity 699,393 616,782 Noncontrolling interest 192,777 171,364 Total equity 892,170 788,146 Total liabilities and equity $ 1,369,329 $ 1,308,542 See accompanying notes to consolidated financial statements. F- 5 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2023, 2022, and 2021 (In thousands except share and per share data) 2023 2022 2021 Net sales $ 1,317,675 $ 1,086,653 $ 879,516 Cost of sales 478,597 392,231 322,614 Gross margin 839,078 694,422 556,902 Selling, general, and administrative expenses 587,696 492,370 406,459 Impairment loss — 7,749 2,393 Income from operations 251,382 194,303 148,050 Other expenses (income): Interest expense 11,253 3,599 2,825 Loss (gain) on foreign currency 1,582 1,921 ( 2,338 ) Interest and investment income ( 10,729 ) ( 5,486 ) ( 3,403 ) Other (income) expense ( 317 ) 50 ( 53 ) Nonoperating Income (Expense) 1,789 84 ( 2,969 ) Income before income taxes 249,593 194,219 151,019 Income taxes 61,817 43,182 40,992 Net income 187,776 151,037 110,027 Less: Net income attributable to the noncontrolling interest 35,122 30,099 22,616 Net income attributable to Inter Parfums, Inc. $ 152,654 $ 120,938 $ 87,411 Net income attributable to Inter Parfums, Inc. common shareholders: Basic $ 4.77 $ 3.80 $ 2.76 Diluted $ 4.75 $ 3.78 $ 2.75 Weighted average number of shares outstanding: Basic 31,994,328 31,859,417 31,676,796 Diluted 32,139,702 31,988,753 31,835,408 Dividends declared per share $ 2.50 $ 2.00 $ 1.00 See accompanying notes to consolidated financial statements. F- 6 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Years ended December 31, 2023, 2022, and 2021 (In thousands except share and per share data) 2023 2022 2021 Net income $ 187,776 $ 151,037 $ 110,027 Other comprehensive income: Net derivative instrument (loss) income, net of tax ( 3,329 ) 2,356 ( 1,367 ) Transfer of OCI into earnings 1,709 992 — Translation adjustments, net of tax 24,042 ( 29,683 ) ( 42,967 ) Other comprehensive income (loss), before tax 22,422 ( 26,335 ) ( 44,334 ) Comprehensive income 210,198 124,702 65,693 Comprehensive income attributable to noncontrolling interests: Net income 35,122 30,099 22,616 Net derivative instrument income (loss), net of tax 25 647 ( 375 ) Translation adjustments, net of tax 6,529 ( 9,358 ) ( 11,524 ) Comprehensive income (loss), net of tax, attributable to noncontrolling interest 41,676 21,388 10,717 Comprehensive income attributable to Inter Parfums Inc. $ 168,522 $ 103,314 $ 54,976 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, 2023, 2022, and 2021 (In thousands except share and per share data) 2023 2022 2021 Common stock, beginning and end of year $ 32 $ 32 $ 32 — — — 32 32 32 Additional paid-in capital, beginning of year 90,186 87,132 75,708 Shares issued upon exercise of stock options 8,025 6,004 5,393 Share-based compensation 1,246 1,355 1,566 Shares issued for license acquisition — — 5,000 Transfer of subsidiary shares purchased ( 892 ) ( 4,305 ) ( 535 ) Additional paid-in capital, end of year 98,565 90,186 87,132 Retained earnings, beginning of year 620,095 560,663 503,567 Net income 152,654 120,938 87,411 Dividends ( 80,047 ) ( 63,743 ) ( 31,690 ) Share-based compensation 1,146 2,237 1,375 Retained earnings, end of year 693,848 620,095 560,663 Accumulated other comprehensive loss, beginning of year ( 56,056 ) ( 38,432 ) ( 5,997 ) Foreign currency translation adjustment, net of tax 17,513 ( 20,325 ) ( 31,443 ) Transfer from other comprehensive income into earnings 1,709 992 — Net derivative instrument (loss) income, net of tax ( 3,354 ) 1,709 ( 992 ) Accumulated other comprehensive loss, end of year ( 40,188 ) ( 56,056 ) ( 38,432 ) Treasury stock, beginning of year ( 37,475 ) ( 37,475 ) ( 37,475 ) Shares repurchased ( 15,389 ) — — Treasury stock, end of year ( 52,864 ) ( 37,475 ) ( 37,475 ) Noncontrolling interest, beginning of year 171,364 166,412 166,615 Net income 35,122 30,099 22,616 Foreign currency translation adjustment, net of tax 6,529 ( 9,358 ) ( 11,524 ) Net derivative instrument income (loss), net of tax 25 647 ( 375 ) Dividends ( 20,301 ) ( 16,056 ) ( 9,836 ) Share-based compensation 180 ( 282 ) ( 293 ) Transfer of subsidiary shares purchased ( 142 ) ( 98 ) ( 791 ) Noncontrolling interest, end of year 192,777 171,364 166,412 788,146 738,332 702,450 187,776 151,037 110,027 Total equity $ 892,170 $ 788,146 $ 738,332 See accompanying notes to consolidated financial statements. F- 8 INTER PARFUMS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2023, 2022, and 2021 (In thousands) 2023 2022 2021 Cash flows from operating activities: Net income $ 187,776 $ 151,037 $ 110,027 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization including impairment loss 17,331 22,539 12,698 Provision for doubtful accounts ( 1,734 ) 2,353 853 Noncash stock compensation 2,525 3,143 2,853 Share of (income) loss of equity investment ( 317 ) 49 ( 53 ) Noncash lease expense 5,448 4,980 7,302 Deferred tax benefit ( 2,987 ) ( 3,604 ) ( 465 ) Change in fair value of derivatives ( 301 ) 227 65 Changes in: Accounts receivable ( 36,843 ) ( 59,640 ) ( 45,395 ) Inventories ( 73,700 ) ( 98,297 ) ( 49,815 ) Other assets 11,868 ( 13,651 ) ( 16,725 ) Operating lease liabilities ( 5,290 ) ( 4,795 ) ( 7,503 ) Accounts payable and accrued expenses 3,064 64,738 103,046 Income taxes, net ( 1,066 ) 3,952 2,698 Net cash provided by operating activities 105,774 73,031 119,586 Cash flows from investing activities: Purchases of short-term investments ( 221,111 ) ( 1,038 ) ( 55,691 ) Proceeds from sale of short-term investments 281,741 896 10,644 Purchase of property, equipment and leasehold improvements ( 6,465 ) ( 33,756 ) ( 141,274 ) Payment for intangible assets acquired ( 46,903 ) ( 56,746 ) ( 1,545 ) Net cash provided by (used in) investing activities 7,262 ( 90,644 ) ( 187,866 ) Cash flows from financing activities: Proceeds from loans payable, bank 4,325 — — Proceeds from issuance of long-term debt — 52,492 157,382 Repayment of long-term debt ( 28,800 ) ( 19,861 ) ( 43,056 ) Proceeds from exercise of options 8,025 6,003 5,393 Purchase of subsidiary shares from noncontrolling interests ( 1,027 ) ( 4,403 ) — Dividends paid ( 80,047 ) ( 63,743 ) ( 31,690 ) Dividends paid to noncontrolling interests ( 20,301 ) ( 16,056 ) ( 9,836 ) Purchase of treasury stock ( 15,389 ) — — Net cash (used in) provided by financing activities ( 133,214 ) ( 45,568 ) 78,193 Effect of exchange rate changes on cash 3,927 ( 493 ) ( 11,207 ) Net decrease in cash and cash equivalents ( 16,251 ) ( 63,674 ) ( 1,294 ) Cash and cash equivalents – beginning of year 104,713 168,387 169,681 Cash and cash equivalents – end of year $ 88,462 $ 104,713 $ 168,387 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 5,823 $ 2,987 $ 2,468 Income taxes 60,990 38,492 40,497 See accompanying notes to consolidated financial statements. F- 9 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (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 prestige 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 Jimmy Choo, Montblanc, 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, 2023 2022 2021 Jimmy Choo 17 % 18 % 18 % Montblanc 17 % 18 % 19 % Coach 15 % 15 % 16 % GUESS 12 % 12 % 12 % Donna Karan/DKNY 7 % 3 % — Ferragamo 5 % 5 % 1 % 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 marketable equity securities, certificates of deposit and other contracts with maturities greater than three months. 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, 2023, 2022 and 2021 (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 $ 2.1 million and $ 4.7 million as of December 31, 2023, and 2022, 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. Depreciation is provided using the straight-line method over the estimated useful lives for furniture and equipment, which range between three and fifteen years. Depreciation on buildings and leasehold improvements is calculated using the straight-line method over the shorter of the lease term or estimated useful asset lives, which range between seven and fifty years. Depreciation provided on equipment used to produce inventory, such as tools and molds, is included in cost of sales. 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 10.39 % and 9.80 % in 2023 and 2022, 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. F- 11 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) Intangible assets subject to amortization principally consist of licenses and are amortized on a straight-line basis over the shorter of the license term or estimated economic life, ranging from three to twenty years. 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 in U.S. dollars, and sales of such products by our foreign subsidiaries are primarily denominated in either euro or U.S. dollars. The substantial majority of our revenue is recognized at a point in time when control of the promised goods is transferred to customers based on agreed upon shipping terms, which usually occurs upon delivery. Revenue is recognized in an amount that reflects the consideration that we expect to receive in exchange for those goods. Net sales are comprised of gross revenues less incentives to customers such as returns, trade discounts and allowances, which give rise to variable consideration. The Company does not bill its customers’ freight and handling charges. All shipping and handling costs, which aggregated $ 14.2 million , $ 15.8 million and $ 10.0 million in 2023, 2022 and 2021, 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. In 2023, Macys, our top retail customer, accounted for approximately 12 % of net sales. No one customer represented 10 % or more of net sales in 2022 and 2021. 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 $ 5.5 million and $ 8.6 million at December 31, 2023 and 2022, respectively, and the amounts recognized for the rights to recover products was $ 2.4 million and $ 3.2 million at December 31, 2023 and 2022, 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. F- 12 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) 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 $ 259.9 million , $ 212.4 million and $ 171.1 million for 2023, 2022 and 2021, respectively. Costs relating to purchase with purchase and gift with purchase promotions that are reflected in cost of sales aggregated $ 52.3 million , $ 43.1 million and $ 36.9 million in 2023, 2022 and 2021, 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. License Agreements The Company’s license agreements generally provide the Company with worldwide rights to manufacture, market and sell prestige fragrances 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 consolidated financial statements. F- 13 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) 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 has authorized share repurchases of the Company’s common stock (Share Repurchase Authorizations). Share repurchases under Share Repurchase Authorizations are 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. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance and allocate resources. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024, on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and shall be applied on a prospective basis with the option to apply retrospectively. We are currently evaluating the impact of adopting this ASU on our disclosures. There are no other recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements. Reclassifications Certain prior year amounts in the accompanying notes to consolidated financial statements have been reclassified to conform with current period presentation. Correction of Immaterial Misstatements in Prior Period Financial Statements During the year ended December 31, 2023, the Company identified an error that caused an overstatement of line items on the previously reported consolidated statement of cash flows. The error does not impact any other consolidated financial statement included herein. Specifically, the error related to the timing of payments to Lacoste in accordance with the acquisition agreement of the Lacoste trademark in 2022 which required a payment in 2022 and an additional payment in 2023 . In the 2022 consolidated statement of cash flow, the payment was reported to have been made in full during 2022. This error had no impact on net income or earnings per share for the year ended December 31, 2022. The impact of the error resulted in a movement of $ 42.1 million between “Change in Accounts payable and accrued expenses” within operating cash flows and “Payment for intangible assets acquired” within investing cash flows. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the errors and determined that the impact was not material to any of our previously issued financial statements. The following table presents a summary of the impact by financial statement line item of the corrections for the year ended December 31, 2022: For the Year Ended December 31, 2022 Consolidated Statement of Cash Flow As previously reported Adjustment As revised (in thousands) Change in Accounts payable and accrued expenses 106,857 ( 42,119 ) 64,738 Net cash provided by operating activities 115,150 ( 42,119 ) 73,031 Payments for intangible assets acquired ( 98,865 ) 42,119 ( 56,746 ) Net cash used in investing activities ( 132,763 ) 42,119 ( 90,644 ) (2) Impact of COVID-19 Pandemic Our business has continued to significantly improve throughout 2021, 2022, and 2023 after the disastrous effects of the COVID-19 Pandemic starting in early 2020, as retail stores reopened, and consumers increased online purchasing. While the COVID-19 Pandemic had significantly restricted international travel, the travel retail business has picked up. 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 are largely abated. F- 14 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) (3) Recent Agreements Abercrombie & Fitch In 2023, we announced our agreement to distribute Abercrombie & Fitch’s number one men’s fragrance, Fierce , in selected markets. The first phase of the agreement, which became effective on September 1, 2023, covers Fierce distribution in certain major markets, including Europe, Mexico and Australia. The second phase, which activated in February 2024, covers distribution in additional markets in Western Europe and Latin America, and may include other flankers of the Fierce family of products. 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 became effective in January 2024 and will last for 15 years. Dunhill The Dunhill fragrance license expired on September 30, 2023 and was not renewed. The Company has now entered the twelve-month sell-off period during which it will maintain the right to sell-off remaining Dunhill fragrance inventory, which is customary in the fragrance industry. All usable components have been converted to finished goods, and any remaining components will be destroyed. 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 have gained 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 As a result of operational challenges faced by the Rochas Fashion business we took a $2.4 million impairment charge on our Rochas fashion trademark in the first quarter of 2021. 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. In 2023, the Rochas teams underwent a strategic shift to take over their own brand operations, exiting contracts with manufacturers and distributors to make this new structure operational beginning in 2024. An independent expert concluded that the valuation based on this new business model would not require additional impairments. F- 15 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) 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 December 31, 2023, $ 154 million (€ 139 million) of the purchase price, including approximately $ 3.1 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying consolidated balance sheet. The purchase price has been allocated approximately $ 63.3 million to land and $ 90.7 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. As of December 31, 2023, there was no cash held in escrow included in property, equipment and leasehold improvements on the accompanying consolidated balance sheet. The acquisition was financed by a 10 -year € 120 million (approximately $ 132.6 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) Inventories Inventories consist of the following: (In thousands) December 31, 2023 December 31, 2022 Raw materials and component parts $ 158,733 $ 146,772 Finished goods 213,126 143,212 $ 371,859 $ 289,984 Overhead included in inventory aggregated $ 5.4 million and $ 3.4 million as of December 31, 2023 and 2022, 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 $ 21.5 million and $ 11.4 million as of December 31, 2023 and 2022, respectively. F- 16 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) (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. Fair Value Measurements at December 31, 2023 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Assets: Short-term investments $ 94,304 $ 12,868 $ 80,614 $ 822 Interest rate swaps 3,909 — 3,909 — Foreign currency forward exchange contracts not accounted for using hedge accounting 359 — 359 — Foreign currency forward exchange contracts accounted for using hedge accounting 1,533 — 1,533 — Total Assets $ 100,105 $ 12,868 $ 86,415 $ 822 Fair Value Measurements at December 31, 2022 Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Assets: Short-term investments $ 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 $ 138,121 $ 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, 2023, 2022 and 2021 (In thousands except share and per share data) 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 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. (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. In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a € 50 million (approximately $ 55.3 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 $ 132.6 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 (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, 2023. Interest expense includes a loss of $ 2.8 million in 2023 and 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 consolidated balance sheet measured at fair value. The valuation of interest rate swaps is included in long-term debt on the accompanying consolidated balance sheets. The valuation of foreign currency forward exchange contracts at December 31, 2023 and December 31, 2022, resulted in an asset and is included in other current assets on the accompanying consolidated balance sheets. F- 18 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) At December 31, 2023, the Company had foreign currency contracts in the form of forward exchange contracts with notional amounts of approximately U.S. $ 61.0 million and GB £ 2.5 million which all have maturities of less than one year. (7) Property, Equipment and Leasehold Improvements Schedule of equipment and leasehold improvements December 31, 2023 2022 Land and Building (construction in progress) $ 157,057 $ 148,137 Equipment 62,384 59,689 Leasehold improvements 2,364 2,293 221,805 210,119 Less accumulated depreciation 52,583 43,397 $ 169,222 $ 166,722 Depreciation expense was $ 9.8 million , $ 7.5 million and $ 4.4 million in 2023, 2022, and 2021, respectively. (8) Trademarks, Licenses and Other Intangible Assets Schedule of trademarks, licenses and other intangible assets 2023 Gross Accumulated Net Book Amount Amortization Value Trademarks (indefinite lives) $ 108,760 $ — $ 108,760 Trademarks (finite lives) 42,752 66 42,686 Licenses (finite lives) 215,307 73,264 142,043 Other intangible assets (finite lives) 19,524 16,657 2,867 Subtotal 277,583 89,987 187,596 Total $ 386,343 $ 89,987 $ 296,356 2022 Gross Accumulated Net Book Amount Amortization 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 F- 19 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) Amortization expense was $ 7.5 million , $ 6.8 million and $ 5.9 million in 2023, 2022 and 2021, respectively. Amortization expense is expected to approximate $ 14.3 million in 2024, $ 13.6 million in 2025, $ 12.0 million in 2026, and $ 11.4 million in 2027 and 2028. The weighted average amortization period for trademarks, licenses and other intangible assets with finite lives are 18 years, 14.3 years and 2.5 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 $ 0 million, $ 6.8 million and $ 2.4 million in 2023, 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 10.39 %, 9.80 %, and 7.47 % as of December 31, 2023, 2022 and 2021, 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. 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 $ 77 million), representing the 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, 2023 2022 Advertising liabilities $ 64,815 $ 42,338 Salary (including bonus and related taxes) 23,546 21,128 Royalties 27,477 26,532 Due vendors (not yet invoiced) 41,859 105,869 Retirement reserves 10,444 8,001 Refund (return) liability 5,507 8,604 Other 5,232 1,149 Total $ 178,880 $ 213,621 (10) Loans Payable – Banks Loans payable – banks consist of the following: The Company and its domestic subsidiaries have available a $ 25 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 5.3 % as of December 31, 2023). The line of credit which has a maturity date of December 13, 2024 , is expected to be renewed on an annual basis. Borrowings outstanding pursuant to lines of credit were zero as of December 31, 2023 and 2022. F- 20 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) The Company’s foreign subsidiaries have available credit lines totaling approximately $ 8 million provided by a consortium of international financial institutions. These credit lines bear interest at EURIBOR plus between 0.6 % and 0.9 % (EURIBOR was 3.96 % at December 31, 2023). Borrowings outstanding pursuant to lines of credit were $ 4.4 million and $ 0 million as of December 31, 2023 and 2022. The weighted average interest rate on short-term borrowings was 4.5 % and 0 % as of December 31, 2023 and 2022. (11) Long-Term Debt Long-term debt consists of the following: December 31, 2023 2022 $ 55.3 million payable in 48 equal monthly installments of $ 1.1 million beginning in December 2022, bearing interest at one-month Euribor plus 0.825 % $ 40,334 $ 52,061 $ 132.6 million payable in 120 equal monthly installments of $ 1.1 million beginning in April 2021, bearing interest at one-month Euribor plus 0.75 % 95,576 104,758 $ 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 9,172 9,890 $ 17 million payable in 10 equal annual installments of $ 1.7 million beginning in October 2021 including interest imputed at 2.0 % per annum 12,402 13,332 157,484 180,041 Less current maturities 29,587 28,547 Total $ 127,897 $ 151,494 In December 2022, to finance Interparfums SA’s acquisition of the Lacoste trademark, the Company entered into a $ 55.3 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 derivative instrument and is therefore recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income. In April 2021, to finance the acquisition of Interparfums SA’s corporate headquarters, the Company entered into a $ 132.6 million (€ 120 million) ten-year credit agreement. Approximately $88.4 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, 2023 are approximately $ 29.6 million in 2024, $ 29.8 million in 2025, $ 28.6 million in 2026, $ 15.9 million in 2027, $ 15.9 million in 2028, and $ 37.7 million thereafter through 2033. F- 21 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (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, 2023, the weighted average remaining lease term was 5.1 years and the weighted average discount rate used to determine the operating lease liability was 3.0 %. Rental expense related to operating leases was $ 5.8 million , $ 5.6 million , and $ 8.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Operating lease payments included in operating cash flows totaled $ 5.3 million , $ 4.8 million , and $ 7.5 million in 2023, 2022, and 2021, respectively. Noncash additions to operating lease assets in totaled $ 4.8 million , $ 0.3 million , and $ 12.2 million in 2023, 2022, and 2021, respectively. Maturities of lease liabilities subsequent to December 31, 2023 are as follows: (In thousands) 2024 $ 6,370 2025 6,031 2026 5,276 2027 5,389 2028 5,372 Thereafter 3,529 31,967 Less imputed interest (based on 3.0% weighted-average discount rate) ( 1,499 ) $ 30,468 F- 22 INTER PARFUMS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2023, 2022 and 2021 (In thousands except share and per share data) License Agreements The Company is party to a number of licenses 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 as follows: (In thousands) 2024 $ 288,005 2025 280,721 2026 251,718 2027 233,945 2028 243,286 Thereafter 1,055,918 $ 2,353,593 Future advertising commitments are estimated based on planned future sales for the license terms that were in effect at December 31, 2023, 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 $ 103.8 million , $ 87.0 million and $ 68.9 million , in 2023, 2022 and 2021, respectively, and represented 7.9 %, 8.0 % and 7.8 % of net sales for the years ended December 31, 2023, 2022 and 2021, 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 $ 1.2 million , $ 1.3 million and $ 1.4 million in 2023, 2022 and 2021, 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 2023: Number of Shares Weighted Average Grant Date Fair Value Nonvested options – beginning of year 168,730 $ 16.31 Nonvested options granted 47,500 $ 35.08 Nonvested options vested or forfeited ( 94,130 ) $ 15.19 Nonvested options – end of year 122,100 $ 24.47 The effect of share-based payment expenses decr