What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-28 · 512 added, 606 removed, 31 unchanged (97% of the section changed)

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

We operate in the fragrance business, and

manufacture, market and distribute a wide array of fragrances and fragrance related products.

We manage our business in two segments,

European based operations and United States based operations.

Certain prestige fragrance products are produced and marketed by

our European operations through our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as

28% of Interparfums SA shares trade on the NYSE Euronext.

We produce and distribute our European based

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

approximately 68%, 75% and 78% of net sales for 2022, 2021 and 2020, respectively.

We have built a portfolio of prestige brands,

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

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

Through our United States operations, we

also market fragrance and fragrance related products.

United States operations represented 32%, 25% and 22% of net sales in 2022,

2021 and 2020, respectively.

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

of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and

Ungaro brands.

Substantially all of our prestige fragrance

brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses.

With respect to the Company’s largest brands, we license the Montblanc, Jimmy Choo, Coach and GUESS brand names.

As a percentage of net sales, product sales

for the Company’s largest brands were as follows:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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.

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.

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.

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

Year Ended December 31,

Quarterly sales fluctuations are influenced

by the timing of new product launches as well as the third and fourth quarter holiday season.

In certain markets where we sell

directly to retailers, seasonality is more evident.

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

We grow our business and expand our shares

in two distinct ways.

First, by adding new brands to our portfolio, either through new licenses or other arrangements or out-right

acquisitions of brands.

Second, we grow through the introduction of new products and by supporting new and established products

through advertising, merchandising and sampling, as well as by phasing out underperforming products, so we can devote greater resources

to those products with greater potential.

The economics of developing, producing, launching and supporting products influence our

sales and operating performance each year.

The introduction of new products may have some cannibalizing effect on sales of existing

products, which we take into account in our business planning.

Our business is not capital intensive, and

it is important to note that we do not own manufacturing facilities.

We act as a general contractor and source our needed components

from our suppliers.

These components are either received and stored directly at our third-party fillers or received at one of our

distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which

manufacture the finished product for us and then deliver them to one of our distribution centers.

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.

Donna Karan/DKNY

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.

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.

business is not capital intensive, and it is important to note that we do not own manufacturing facilities.

We act as a general

contractor and source our needed components from our suppliers.

These components are received at one of our distribution centers

and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished

product for us and then deliver them to one of our distribution centers.

with any global business, many aspects of our operations are subject to influences outside our control.

We believe we have a strong

brand portfolio with global reach and potential.

As part of our strategy, we plan to continue to make investments behind fast-growing

markets and channels to grow market share.

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

A strong U.S.

dollar has a negative impact on our net sales.

However, earnings are positively

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

dollars, while almost

all costs of our European operations are incurred in euro.

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

Conversely, a weak U.S.

dollar has a favorable impact on our net sales

while gross margins are negatively affected.

We address certain financial exposures through a controlled program of risk management

that includes the use of derivative financial instruments, and primarily enter into foreign currency forward exchange contracts

to reduce the effects of fluctuating foreign currency exchange rates.

Impact of COVID-19 Pandemic

A novel strain of coronavirus (“COVID-19”)

surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic.

In response, various national,

state, and local governments issued decrees prohibiting certain businesses from operating and certain classes of workers from reporting

Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill

and caused a significant unfavorable impact on our results of operations in 2020.

Business significantly improved in the second

half of 2020 and continued to improve throughout 2021 and 2022, as retail stores reopened, and consumers increased online purchasing.

While we expect this trend to continue, the introduction of variants of COVID-19 in various parts of the world has caused the temporary

re-implementation of governmental restrictions to prevent further spread of the virus.

In addition, international air travel remains

curtailed in several jurisdictions due to both governmental restrictions and consumer health concerns.

While COVID-19 had significantly

restricted international travel, the travel retail business has picked up.

We remain confident that travel retail will once again

be a source of growth over the long-term.

Lastly, the improved economy has put significant strains on our supply chain causing

disruptions affecting the procurement of components, the ability to transport goods, and related cost increases.

These disruptions

have come at a time when demand for our product lines has never been stronger or more sustained.

We have been addressing this issue

since the beginning of 2021, by ordering well in advance of need and in larger quantities.

Since 2021, we have strived to carry

more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where

they are sold.

We do not expect the supply chain bottlenecks to begin lifting until the second half of 2023.

Therefore, despite

recent business improvement, the impact of the COVID-19 pandemic might continue to have adverse effects on our results of our operations,

financial position and cash flows through at least the first half of 2023.

Recent Important Events

In December 2022, we

closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted for the production and distribution

of Lacoste brand perfumes and cosmetics.

Our rights under this license are subject to certain minimum advertising expenditures

and royalty payments as are customary in our industry.

The license becomes effective in January 2024 and will last for 15 years.

In April 2022, we announced

that the Dunhill fragrance license will expire on September 30, 2023 and will not be renewed.

The Company will continue to produce

and sell Dunhill fragrances until the license expires and will maintain the right to sell-off remaining Dunhill fragrance inventory

for a limited time as is customary in the fragrance industry.

Salvatore Ferragamo

In October 2021, we

closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the

production and distribution of Ferragamo brand perfumes.

Our rights under this license are subject to certain minimum advertising

expenditures and royalty payments as are customary in our industry.

The license became effective in October 2021 and will last

for 10 years with a 5-year optional term, subject to certain conditions.

With respect to the

management and coordination of activities related to the license agreement, the Company operates through a wholly-owned Italian

subsidiary based in Florence, that was acquired from Salvatore Ferragamo on October 1, 2021.

The acquisition together with the

license agreement was accounted for as an asset acquisition.

Emanuel Ungaro

In October 2021, we

also entered into a 10-year exclusive global licensing agreement a with a 5-year optional term subject to certain conditions, with

Emanuel Ungaro Italia S.r.l, for the creation, development and distribution of fragrances and fragrance-related products, under

the Emanuel Ungaro brand.

Our rights under this license are subject to certain minimum advertising expenditures and royalty payments

as are customary in our industry.

Donna Karan and DKNY

In September 2021,

we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related

products under the Donna Karan and DKNY brands.

Our rights under this license are subject to certain minimum advertising expenditures

and royalty payments as are customary in our industry.

With this agreement, we are gaining several well-established and valuable

fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious , as well as a significant loyal

consumer base around the world.

In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc.

stock valued at $5.0 million to the licensor.

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

new fragrances under these brands in 2024.

Rochas Fashion

Effective January

1, 2021, we entered into a new license agreement modifying our Rochas fashion business model.

The new agreement calls for a reduction

in royalties to be received.

As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas

fashion trademark.

In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark

after an independent expert concluded that the valuation of the trademark was $11.3 million.

The new license also contains an

option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value.

and Building Acquisition - Future Headquarters in Paris

April 2021, Interparfums SA, our 73% owned French subsidiary, completed the acquisition of its future headquarters at 10 rue de

Solférino in the 7th arrondissement of Paris from the property developer.

This is an office complex combining three buildings

connected by two inner courtyards, and consists of approximately 40,000 total sq.

purchase price includes the complete renovation of the site.

As of December 31, 2022, $148.1 million of the purchase price, including

approximately $4.4 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying

balance sheet as of December 31, 2022.

The purchase price has been allocated approximately $61.1 million to land and $87.0 million

to the building.

The building, which was delivered on February 28, 2022, includes the building structure, development of

the property, façade waterproofing, general and technical installations and interior fittings that will be depreciated

over a range of 7 to 50 years.

The Company has elected to depreciate the building cost based on the useful lives of its components.

Approximately $3.4 million of cash held in escrow is also included in property, equipment and leasehold improvements on the accompanying

balance sheet as of December 31, 2022.

The acquisition was

financed by a 10-year €120 million (approximately $128.0 million) bank loan which bears interest at one-month Euribor plus

Approximately €80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate

of 2% per annum.

Discussion of Critical Accounting Policies

We make estimates and assumptions in the

preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America.

Actual results could differ significantly from those estimates under different assumptions and conditions.

We believe the following

discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial

condition and results of operations.

These accounting policies generally require our management’s most difficult and subjective

judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

of the Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee

of the Board of Directors.

Long-Lived Assets

We evaluate indefinite-lived intangible

assets for impairment at least annually during the fourth quarter, or more frequently when events occur or circumstances change,

such as an unexpected decline in sales, that would more likely than not indicate that the carrying value of an indefinite-lived

intangible asset may not be recoverable.

When testing indefinite-lived intangible assets for impairment, the evaluation requires

a comparison of the estimated fair value of the asset to the carrying value of the asset.

The fair values used in our evaluations

are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 9.80%.

The cash flow

projections are based upon a number of assumptions, including, future sales levels and future cost of goods and operating expense

levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are

more subjective in nature.

If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment

charge is recorded.

We believe that the assumptions we have

made in projecting future cash flows for the evaluations described above are reasonable.

However, if future actual results do not

meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results

of operations.

At December 31, 2022 indefinite-lived intangible

assets aggregated $105.0 million.

The following table presents the impact a change in the following significant assumptions would

have had on the calculated fair value in 2022 assuming all other assumptions remained constant:

dollar has a favorable impact on our net sales while gross margins are negatively affected.

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.

of COVID-19 Pandemic

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.

Important Events

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.

of Critical Accounting Policies

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.

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.

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.

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

$ in millions

(decrease) to fair value

Increase (decrease)

to fair value

Weighted average cost of capital

2 unchanged sentences

Future sales levels

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.

projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is

If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment

charge would be recorded to reduce the intangible asset to its fair value.

The cash flow projections are based upon a number of

assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions,

changes to our business model or changes in consumer acceptance of our products which are more subjective in nature.

In those cases

where we determine that the useful life of long-lived assets should be shortened, we would amortize the net book value in excess

of the salvage value (after testing for impairment as described above), over the revised remaining useful life of such asset thereby

increasing amortization expense.

We believe that the assumptions we have made in projecting future cash flows for the evaluations

described above are reasonable.

In determining the useful life of our Lanvin

brand names and trademarks, we applied the provisions of ASC topic 350-30-35-3.

The only factor that prevented us from determining

that the Lanvin brand names and trademarks were indefinite life intangible assets was Item c.

“Any legal, regulatory, or

contractual provisions that may limit the useful life.” The existence of a repurchase option originally in 2025 and amended

to 2027, may limit the useful life of the Lanvin brand names and trademarks to the Company.

However, this limitation would only

take effect if the repurchase option were to be exercised and the repurchase price was paid.

If the repurchase option is not exercised,

then the Lanvin brand names and trademarks are expected to continue to contribute directly to the future cash flows of our Company

and their useful life would be considered to be indefinite.

With respect to the application of ASC topic

350-30-35-8, the Lanvin brand names and trademarks would only have a finite life to our Company if the repurchase option were exercised,

and in applying ASC topic 350-30-35-8, we assumed that the repurchase option is exercised.

When exercised, Lanvin has an obligation

to pay the exercise price and the Company would be required to convey the Lanvin brand names and trademarks back to Lanvin.

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, 2022, we have not made any material changes in our assumptions underlying these critical accounting policies or to the related

significant estimates.

The results of our business underlying these assumptions have not differed significantly from our expectations.

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.

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.

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.

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.

we believe the estimates we have made are proper and the related results of operations for the period are presented fairly in

9 unchanged sentences

be an increase or decrease of approximately $0.6 million, $0.3 million and $0.01, respectively.

Results of Operations

of Operations

ended December 31,

(in millions)

European based product sales

United States based product sales

Total net sales

Net sales rebounded significantly in 2021,

as compared to 2020 for both European and United States based operations and continued to increase in 2022.

At comparable foreign

currency exchange rates, net sales increased 30% in 2022, as compared to 2021.

Net sales in 2020 reflected the negative impacts

of the COVID-19 pandemic on the beauty industry.

Retail store closings, event cancellations and a shutdown of international air

travel brought our sales to a virtual standstill in early 2020.

In the second half of 2020, business began rebounding thanks to

retail stores reopening and a robust e-commerce business conducted by our retail customers.

For European based operations, our largest

brands, Montblanc, Jimmy Choo and Coach grew 2022 sales by 15%, 23% and 18%, respectively, as compared to 2021.

There were also

significant gains made by our mid-sized brands, including Van Cleef & Arpels and Karl Lagerfeld.

The year-over-year gains,

in both euro and dollars, are all the more impressive considering our new product pipeline was dominated by flankers and extensions.

However, we did bring to market several entirely new lines, including our first ever Moncler duo, Kate Spade Sparkle, Singulier

by Boucheron and Open Road and Wild Rose by Coach.

In 2021, GUESS became our fourth brand

with sales exceeding $100 million.

Strong momentum on GUESS continued in 2022 with brand sales increasing another 24% as compared

There were also significant gains made by our mid-sized brands, especially Abercrombie & Fitch, Hollister and Oscar

Additionally, 2022 saw the first full year of sales of Ferragamo products and in the second half of 2022, we also

welcomed first time sales of our newest brands, Donna Karan/DKNY.

Together, these new brands contributed to 38% growth of our

US operations.

We are confident in our future as 2023

has many exciting developments for the Company.

We have transitioned to a new modern enterprise resource planning system (ERP)

for our US operations which will enable us to operate more efficiently and offer more scale to absorb our newer brands We have

a solid line-up of new product launches in the pipeline for many of our brands.

This includes the roll out of the Moncler Collection

in the first quarter and a Duo flanker in the third quarter, a launch of GUESS Uomo Acqua in the second quarter,

as well as Bella Vita Paradiso in the fourth quarter.

Extensions of the Montblanc Legend , Jimmy Choo Man

and Jimmy Choo’s I Want Choo , debut in the first, second and third quarters, respectively.

Also, in the third quarter,

we will unveil new men’s lines for Coach and Boucheron.

Brand extensions and flankers are in the works for MCM, Abercrombie

& Fitch, Hollister, Anna Sui, and Oscar de la Renta.

In sum, 2023 has all the earmarks of another superb year as the growth

catalysts currently far outweigh the headwinds, most notably inflation and supply chain disruptions.

Lastly, we have recently

announced the license agreement with Lacoste which will offer us another sizable building block of growth in 2024.

As in the past, we hope to benefit from

our strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee.

we have no certainty that any new license or acquisition agreements will be consummated.

Customers by Region

Years ended December 31,

(in millions)

North America

based product sales

States based product sales

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.

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 .

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

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

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.

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.

Sales to Customers by Region

ended December 31,

Western Europe

Eastern Europe

Central and South America

Our largest market, North America achieved

sales growth of 22% in 2022 compared to 2021, while Western Europe and Asia grew sales by 28% and 19% in 2022, respectively, compared

Latin America and the Middle East also achieved top line growth of 24% and 44% in 2022, respectively compared to 2021.

Eastern Europe saw only moderate top line growth of 6% as compared to 2021 largely related to the war in Ukraine.

Gross Margins

Years ended December 31,

(in millions)

European operations:

Cost of sales

Gross margin, as a percent of net sales

United States operations:

Cost of sales

Gross margin, as a percent of net sales

For European based operations, gross profit

margin as a percentage of net sales was 68.2%, 66.6% and 64.0% in 2022, 2021 and 2020, respectively.

Distribution in the United

States for European based operations is handled by a 100% owned subsidiary of Interparfums SA based in the United States.

sales are made at a wholesale price rather than at an ex-factory price, resulting in higher gross margins.

Net sales of our U.S.

based distribution subsidiary increased 16% in 2022, as compared to 2021, leading to favorable mix and giving rise to the increase

in gross margin in 2022 over both 2021 and 2020.

We carefully monitor movements in foreign currency exchange rates as over 50%

of our European based operations net sales is denominated in U.S.

Central and South

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.

Profit Margin

ended December 31,

based operations:

Gross margin, as a

percent of net sales

States based operations:

Gross margin, as a

percent of net sales

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.

the Company’s pricing actions have broadly compensated for cost inflation impacts.

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.

margin standpoint, a strong U.S.

dollar has a positive effect on our gross margin while a weak U.S.

From a margin standpoint, a strong U.S.

has a positive effect on our gross margin while a weak U.S.

dollar has a negative effect.

The average dollar/euro exchange rate was 1.05 in 2022, 1.18 in 2021, and 1.15 in 2020.

Pricing action also enabled us to offset

inflationary pressures.

For United States operations, gross profit

margin was 54.7%, 53.1% and 51.8% in 2022, 2021 and 2020, respectively.

With a decline in sales in 2020, certain expenses such

as depreciation of tools and molds together with the distribution of point-of-sale materials exaggerated the decline in gross margin

for the year as a percentage of sales.

The scale benefits coming from our significant growth in 2021 and 2022, combined with pricing

actions and favorable channel/brand mix, have enabled us to more than offset the impacts of inflation and thus expand gross margin

by 130 bps in 2021 and another 160 bps in 2022.

Costs relating to purchase with purchase

and gift with purchase promotions are reflected in cost of sales, and aggregated $43.1 million, $36.9 million and $26.4 million

in 2022, 2021 and 2020, respectively, and represented 4.0%, 4.2% and 4.9% of net sales, respectively.

Generally, we do not bill customers for

shipping and handling costs and such costs, which aggregated $15.8 million, $10.0 million and $5.0 million in 2022, 2021 and 2020,

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

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

of goods sold.

Selling, General & Administrative

Years ended December 31,

(in millions)

European Operations

Selling, general & administrative expenses

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

United States Operations

Selling, general & administrative expenses

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

For European operations, selling, general

and administrative expenses increased 9% and 55% in 2022 and 2021, respectively, as compared to the corresponding prior year period,

and represented 48.2%, 49.4% and 49.8% of sales in 2022, 2021 and 2020, respectively as we were able to leverage our scale.

discussed in more detail below, these fluctuations, which are in line with the fluctuations in sales for European operations, are

primarily from variations in promotion and advertising expenditures.

For United States operations, selling, general and administrative

expenses increased 70% and 58% in 2022 and 2021, respectively, as compared to the corresponding prior year period and represented

39.1%, 36.5% and 43.1% of sales in 2022, 2021 and 2020, respectively.

As discussed in more detail below, the increased selling,

general and administrative expenses as a percentage of net sales are primarily the result of increases in promotion and advertising

expenditures.

Additionally, the US based operations increased expenses related to salaries and benefits as we build the organization

and infrastructure to support our new brands and future growth.

Promotion and advertising included in selling,

general and administrative expenses aggregated $212.4 million, $171.1 million and $91.7 million in 2022, 2021 and 2020, respectively.

Promotion and advertising as a percentage of sales represented 19.5%, 19.5% and 17.0% of net sales in 2022, 2021 and 2020, respectively.

Promotion and advertising programs were cut significantly in 2020 in response to market conditions.

Promotion and advertising are

integral parts of our industry, and we continue to invest heavily in promotional spending to support new product launches and to

build brand awareness.

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

causing then to continue to grow strongly on a global basis.

All of our brands have benefitted from newly launched and enhanced

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

We also continue to

develop and implement omnichannel concepts, the way brick-and-mortar stores and a business’ online operations work in tandem,

and compelling content to deliver an integrated consumer experience.

We anticipated that on a full year basis, future promotion

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

Royalty expense included in selling, general

and administrative expenses aggregated $87.0 million, $68.9 million and $41.1 million in 2022, 2021 and 2020, respectively.

expense as a percentage of sales represented 8.0%, 7.8% and 7.6% of net sales in 2022, 2021 and 2020, respectively.

The increases

in 2022 and 2021, as a percentage of sales, are directly related to new licenses and increased royalty-based product sales.

a result of the COVID-19 pandemic, we reached agreements with most of our licensors to waive or significantly reduce minimum guaranteed

royalties for 2020.

Service fees, which are fees paid within

our European operations to third parties relating to the activities of our distribution subsidiaries, aggregated $7.9 million,

$9.4 million and $6.8 million in 2022, 2021 and 2020, respectively.

The 2022 and 2021 amounts are in line with and directly related

to fluctuations in sales within our U.S.

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.

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

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.

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.

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.

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.

General & Administrative Expenses

ended December 31,

based operations

general & administrative expenses

general & administrative expenses as a percent of net sales

States based operations

general & administrative expenses

general & administrative expenses as a percent of net sales

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.

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

The increase related to these structural and personnel investments began throughout 2022 and had full year impact in 2023

of $7.8 million.

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.

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.

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 17.9%, 16.8%

and 13.1% for the years ended December 31, 2022, 2021 and 2020, respectively.

Other Income and Expenses

In December 2022, to

finance the acquisition of the Lacoste trademark, the Company entered into a $53.3 million (€50 million) four-year loan agreement.

The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%.

This variable rate debt was swapped for variable

interest rate debt with a maximum rate of 2% per annum.

Additionally, in April 2021, we completed the acquisition of the future

headquarters of Interparfums SA.

The acquisition was financed by a 10-year €120 million (approximately $128 million) bank

loan which bears interest at one-month Euribor plus 0.75%.

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

was swapped for fixed interest rate debt.

Long-term debt including current maturities aggregated $186.8 million, $148.8 million

and $24.7 million as of December 31, 2022, 2021 and 2020, respectively.

We enter into foreign currency forward exchange

contracts to manage exposure related to receivables from unaffiliated third parties denominated in a foreign currency and occasionally

to manage risks related to future sales expected to be denominated in a foreign currency.

Due to the sizable swings in currency

rates during 2022, we went from recognizing a gain of $2.3 million in 2021 to a loss of $1.9 million in 2022.

This accounts for

most of our fluctuation within Other income and expenses.

Interest and investment income represents

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

In 2022, short-term investments include approximately

$19.9 million of marketable equity securities of other companies in the luxury goods sector.

Interest and investment income includes

approximately $3.1 million of unrealized gains on marketable equity securities.

Given our strong balance sheet and cash position,

the increase in interest rates had a favorable impact on interest and investment income.

Our effective income tax rate was 22.2%,

27.1% and 27.9% in 2022, 2021 and 2020, respectively.

Income tax expense represents U.S.

foreign, state and local income taxes.

The effective rate differs from the federal statutory rate primarily due to the effect of

state and local income taxes, the tax impact of share-based compensation and the taxation of foreign income including tax settlements.

Our effective tax rate will change from year-to-year based on recurring and non-recurring factors including the geographical mix

of earnings, enacted tax legislation, state and local income taxes, the tax impact of share-based compensation, the interaction

of various global tax strategies and the impact from certain acquisitions.

Our effective income tax rate for European

operations was 25.2%, 30.6% and 29.7% in 2022, 2021 and 2020, respectively, as the French Prime Minister reduced the French corporate

income tax rate from approximately 33% to 25% over a three-year period.

Our effective income tax rate for U.S.

was 13.8%, 15.6% and 16.7% in 2022, 2021 and 2020, respectively.

Our effective tax rate differs from the

21% statutory rate due to state, local and foreign taxes, offset by benefits received from the exercise of stock options as well

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

Additionally, in the third quarter of 2022,

operations recognized a one-time tax benefit of $2.5 million associated with the 2021 Salvatore Ferragamo acquisition.

At the time of the acquisition, we had not recognized deferred tax benefits as there were uncertainties concerning its potential

recoverability;

however, as of September 30, 2022, the recoverability was deemed likely.

The Company has determined that it has no

tax liability related global intangible low-taxed income (“GILTI”) as of December 31, 2022, 2021 and 2020.

also estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $1.5 million,

$0.6 million and $0.3 million as of December 31, 2022, 2021 and 2020, respectively.

Share-based compensation resulted in a discrete

tax benefit of $0.8 million, $1.3 million and $0.4 million in 2022, 2021 and 2020, respectively.

Year ended December 31,

(In thousands)

Net income attributable to European operations

Net income attributable to United States operations

from Operations

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.

Income and Expenses

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.

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

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

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.

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

In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million.

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.

consolidated effective tax rate was 24.8%, 22.2% and 27.1% in 2023, 2022 and 2021, respectively.

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.

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

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.

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.

ended December 31,

attributable to European based operations

income attributable to United States based operations

Net income attributable to the noncontrolling interest

Net income attributable to Inter Parfums, Inc.

Net income attributable to European operations

was $107.3 million, $80.7 million and $42.0 million in 2022, 2021 and 2020, respectively, while net income attributable to United

States operations was $43.7 million, $29.4 million and $8.0 million in 2022, 2021 and 2020, respectively.

The fluctuations in net

income for both European operations and United States operations are directly related to the previous discussions concerning changes

in sales, gross profit margins, selling, general and administrative expenses, most of which were caused by the effects of the COVID-19

pandemic beginning in 2020 and the recovery in 2021 and 2022.

The noncontrolling interest arises primarily

from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares

trade on the Euronext.

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

operations and aggregated 27.9%, 28.0% and 28.1% of European operations net income in 2022, 2021 and 2020, respectively.

attributable to Inter Parfums, Inc.

aggregated 11.1%, 9.9% and 7.1% in 2022, 2022 and 2020, respectively.

Liquidity and Capital Resources

Our conservative financial tradition has

enabled us to amass significant cash balances.

As of December 31, 2022, we had $256 million in cash, cash equivalents and short-term

investments, most of which are held in euro by our European operations and are readily convertible into U.S.

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

As of December 31, 2022, short-term investments include approximately $19.9 million of marketable equity securities.

As of December 31, 2022, working capital

aggregated $443 million, and we had a working capital ratio of 2.3 to 1.

Approximately 80% of the Company’s total assets

are held by European operations including approximately $249 million of trademarks, licenses and other intangible assets.

The Company is party to a number of license

and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring

at various dates through 2039.

In connection with certain of these license agreements, the Company is subject to minimum annual

advertising commitments, minimum annual royalties and other commitments.

Financial Statements and Supplementary

Data – Note 12 – Commitments in this annual report on Form 10-K.

Future advertising commitments are estimated based

on planned future sales for the license terms that were in effect at December 31, 2022, without consideration for potential renewal

periods and do not reflect the fact that our distributors share our advertising obligations.

The Company hopes to continue to benefit

from its strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee.

income attributable to Inter Parfums, Inc.

was $152.7 million, $120.9 million and $87.4 million in 2023, 2022 and 2021, respectively.

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

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.

and Capital Resources

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.

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.

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.

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.

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.

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.

December 2022, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances

and fragrance-related products under the Lacoste brand.

This new license takes effect January 2024.

In September 2021, we entered into a long-term

global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the

Donna Karan and DKNY brands.

Our rights under this license are subject to certain minimum advertising expenditures and royalty

payments as are customary in our industry.

With this agreement, we are gaining several well-established and valuable fragrance

franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious , as well as a significant loyal consumer

base around the world.

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

these brands in 2024.

In October 2021, we closed on a transaction

agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution

of Ferragamo brand perfumes.

The license became effective in October 2021 and will last for 10 years with a 5-year optional term,

subject to certain conditions.

With respect to the management and coordination of activities related to the license agreement,

the Company is operating through a wholly-owned Italian subsidiary based in Florence, that was acquired from Salvatore Ferragamo

on October 1, 2021.

The acquisition together with the license agreement was accounted for as an asset acquisition.

The total cost

of the assets acquired net of liabilities assumed aggregated approximately $35.8 million.

In connection with this acquisition,

we agreed to pay $17.0 million in equal annual installments of $1.7 million including interest imputed at 2.0%.

Opportunities for external growth are regularly

examined, with the priority of maintaining the quality and homogeneous nature of our portfolio.

However, we cannot assure you that

any new license or acquisition agreements will be consummated.

Cash provided by operating activities

aggregated $115.2 million, $119.6 million, and $65.0 million in 2022, 2021 and 2020, respectively.

In 2022, working capital items

used $65.6 million in cash from operating activities, as compared to $13.7 million in 2021 and $7.3 million in 2020.

from a cash flow perspective, accounts receivable is up approximately 37% from year-end 2021, the balance is reasonable based

upon fourth quarter 2022 record sales levels and reflects strong collection activity as day’s sales outstanding increased

slightly to 64 days in 2022, as compared to 61 days in 2022 and decreased significantly as compared to 86 days in 2020.

cash flow perspective, inventory levels are up 49% from year-end 2021.

Inventory days on hand increased to 231 days in 2022, as

compared to 208 days in 2021, and 277 days in 2020 as we chose to protect service level in light of the COVID driven supply chain

Cash flows used in investing activities

reflect the purchase and sales of short-term investments.

These investments consist of certificates of deposit with maturities

greater than three months marketable equity securities and other contracts.

At December 31, 2022, approximately $39 million of

certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.

Our business is not capital intensive as

we do not own any manufacturing facilities.

On a full year basis, we generally spend less than $5.0 million on capital expenditures

including tools and molds needed to support our new product development calendar.

Capital expenditures also include amounts for

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

In December 2022, to finance Interparfums

SA’s acquisition of the Lacoste trademark, the Company entered into a $53.3 million (€50 million) four-year loan agreement.

The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%.

This variable rate debt was swapped for variable

interest rate debt with a maximum rate of 2% per annum.

In April 2021, Interparfums SA completed

the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer.

This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total

The $142 million purchase price is in line

with market value and includes the complete renovation of the site.

As of December 31, 2021, $136.1 million of the purchase price,

including approximately $3.1 million of acquisition costs, is included in building, equipment and leasehold improvements on the

accompanying balance sheet as of December 31, 2021.

Approximately $8.8 million of cash held in escrow is included in other assets

on the accompanying balance sheet as of December 31, 2021.

In 2022 this cash was released from escrow and there is no longer any

balance of cash outside of cash and cash equivalents on the accompanying balance sheet as of December 31, 2022.

In addition, the

Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit

was reimbursed by the French Tax Authorities and the loan was repaid.

The acquisition was

financed by a 10-year €120 million (approximately $136 million) bank loan which bears interest at one-month Euribor plus 0.75%.

Approximately €80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate of 2%

In June 2020, the Company and Divabox, owner

of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to

which we acquired 25% of Divabox capital for $14 million through a capital increase.

In connection with the acquisition, the Company

entered into a $13.4 million term loan, which was repaid in full in February 2021.

Our short-term financing requirements are

expected to be met by available cash on hand at December 31, 2022, cash generated by operations and short-term credit lines provided

by domestic and foreign banks.

The principal credit facilities for 2022 consist of a $20.0 million unsecured revolving line of

credit provided by a domestic commercial bank and approximately $20 million in credit lines provided by a consortium of international

financial institutions.

There were no balances due from short-term borrowings as of December 31, 2022 and 2021.

In April 2020, as a result of the uncertainties

raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the quarterly cash dividend.

2021, our Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly and in February 2022,

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

In February 2023 the Board of Directors further

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.

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.

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%.

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.

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.

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.

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.

flows used in financing activities in 2023 reflect issuances and repayment of debt, purchases of treasury shares, and payment

of dividends to stockholders.

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

This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum.

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.

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

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%.

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.

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.

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.

The next quarterly cash dividend of $0.625 per share is payable on March 31,

2023, to shareholders of record on March 15, 2023.

Dividends paid, including dividends paid once per year to noncontrolling stockholders

of Interparfums SA, aggregated $79.8 million, $41.5 million and $21.1 million for the years ended December 31, 2022, 2021 and 2020,

respectively.

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.

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.

countries in which we operate did not have a significant impact on operating results for the year ended December 31, 2022 as they

were either offset by price increases we passed onto our respective customers or operating efficiencies.

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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis