What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-07 · 287 added, 291 removed, 108 unchanged (84% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Looking Information

15 unchanged sentences

contained in this report.

operate in the fragrance business, and manufacture, market and distribute a wide array of fragrances and fragrance related products.

operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrances and fragrance related

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.

produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European

based fragrance product sales represented approximately 67% and 70% of net sales for the nine months ended September 30, 2023

and 2022, respectively.

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

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

Dupont, Rochas and Van Cleef & Arpels , whose products are distributed

in over 120 countries around the world.

In addition, our exclusive and worldwide license for the production and distribution of

Lacoste brand perfumes and cosmetics becomes effective in January 2024.

our United States operations, we also market fragrance and fragrance related products.

United States operations represented 33%

and 30% of net sales for the nine months ended September 30, 2023 and 2022, respectively.

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.

produce and distribute fragrance products through our European based operations primarily under license agreements with brand

owners, and European based fragrance product sales represented approximately 70% and 74% of net sales for the three months ended

March 31, 2024 and 2023, respectively.

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.

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 fragrance and fragrance related products.

United States based operations represented

30% and 26% of net sales for the three months ended March 31, 2024 and 2023, 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, Roberto Cavalli and Ungaro brands.

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

3 unchanged sentences

Jimmy Choo, GUESS, Donna Karan/DKNY and Ferragamo brand names.

This diversified portfolio of top brands represented

74% of total sales for the first 9 months of 2023 up from 69% in 2022.

PARFUMS, INC.

INTER PARFUMS, INC.

AND SUBSIDIARIES

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

Three Months Ended

Donna Karan/DKNY

4 unchanged sentences

grow our business in two distinct ways.

First, we grow by adding new brands to our portfolio, through new licenses, other arrangements

or out-right acquisitions of brands.

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

3 unchanged sentences

influence our sales and operating performance each year.

Our introduction of new products may have some cannibalizing effect

The introduction of new products may have some cannibalizing effect

on sales of existing products, which we take into account in our business planning.

2 unchanged sentences

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

These components are received and stored directly at our third-party

fillers or received at one of our distribution centers.

For those components received at one of our distribution centers, based

upon production needs, the components are subsequently 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.

7 unchanged sentences

dollar has a negative impact on our

However, earnings are positively affected by a strong dollar, because almost 50% of net sales of our European operations

are denominated in U.S.

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

However, earnings are positively affected by a strong dollar, because greater than 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.

PARFUMS, INC.

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

INTER PARFUMS, INC.

AND SUBSIDIARIES

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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

Important Events

see our discussion of Recent Important Events, which is incorporated by reference to Note 2 to the Consolidated Financial Statements

contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

contained in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

of Critical Accounting Policies

1 unchanged sentence

of Operations

and Nine Months Ended September 30, 2023 as Compared to the Three and Nine Months Ended September 30, 2022

Months Ended March 31, 2024 as Compared to the Three Months Ended March 31, 2023

Three months ended March 31,

(in millions)

based product sales

States based product sales

sales for the three months ended September 30, 2023, increased 31% from the three months ended September 30, 2022.

At comparable

foreign currency exchange rates, net sales increased 27% from the third quarter of 2022 of which 7% is related to new brands.

The average dollar/euro exchange rate for the current third quarter was 1.09 compared to 1.01 in the third quarter of 2022, while

for the nine months ended September 2023 the average dollar/euro exchange rate was 1.08 compared to 1.06 in the nine months ended

September 2022.

Net sales for the nine months ended September 30, 2023, increased 27% as compared to the nine months ended September

At comparable foreign currency exchange rates, net sales increased 26% from the nine months ended September 2022 of which

7% is related to new brands.

the trend from the first half of 2023, the current third quarter was exceptionally strong for both European and United States

based operations, as net sales increased 18% and 64%, respectively, as compared to the corresponding period of the prior year.

As previously disclosed, the third quarter growth rate is favorably impacted by a lower base in 2022 where more gift sets were

shipped in the fourth quarter due to supply chain disruptions.

We currently expect this phasing to adversely impact our fourth

quarter growth rates.

PARFUMS, INC.

European based product sales

United States based product sales

sales for the three months ended March 31, 2024 increased 4% from the three months ended March 31, 2023.

At comparable foreign

currency exchange rates, net sales increased 3% from the first quarter of 2023.

The average dollar/euro exchange rate for the

current first quarter was 1.09 compared to 1.07 in the first quarter of 2023.

current first quarter saw modest sales growth, as compared to the corresponding period of the prior year, largely due to the exceptional

performance of both European and United States based operations in 2023.

European based operations, Coach grew sales by 5% while Montblanc and Jimmy Choo saw decreases in sales of 5% and 23%, respectively,

as compared to the corresponding period of the prior year.

This was largely driven by the substantial increases in sales of Montblanc

and Jimmy Choo in the first quarter of 2023 of 28% and 63%, respectively, as compared to the first quarter of 2022.

first quarter of 2024, we began selling the Lacoste brand, which added $20 million in sales.

by our United States based operations had a strong start growing 18% off a high 2023 base when first quarter sales had expanded

This increase was driven by the addition and extension of Roberto Cavalli to our portfolio and double-digit growth for GUESS

and Donna Karan/DKNY, following successful brand extensions and continued brand expansion.

INTER PARFUMS, INC.

AND SUBSIDIARIES

European based operations, our largest brands, Coach, Montblanc, and Jimmy Choo sales rose 32%, 20% and 6%, respectively, as compared

to the corresponding period of the prior year.

Continuing the growth trend of the first half of 2023, third quarter sales by our

United States operations grew substantially, up 64%, largely from the continued success of GUESS fragrances which performed exceedingly

well during the quarter across all geographies and was up 59% from the third quarter of 2022.

This was driven by the continued

growth in sales of the Seductive line within GUESS.

Of note, the significant growth in the quarter builds upon the 45%

sales increase we reported for the third quarter of 2022.

We also had strong sales of Ferragamo fragrances, which we have enriched

with sister scents for the Signorina and Storie di Seta collections.

During the quarter, we initiated Phase 1 of

the Abercrombie & Fitch Fierce distribution roll-out.

We began with introductory distribution of this iconic fragrance

in select markets and expect the majority of the Phase 1 distribution to roll-out during the fourth quarter.

The increase was

also driven by the addition and extension of Donna Karan and DKNY to our portfolio.

They have climbed to become our second largest

United States based brand in just one year under our expertise.

favorable trends in the first half of the year continued into the third quarter and we look forward to executing our plans for

the remainder of the year.

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

We have a large number

of brand extensions across many of our brands launching in the fourth quarter of the year, including Guess Bella Vita Paradiso .

In sum, 2023 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds, most notably

the somewhat limited travel retail business in Asia and supply chain disruptions that have largely abated.

Sales to Customers by Region

months ended September 30,

the first quarter of 2024, we debuted Montblanc Legend Blue, which contributed to the continued brand strength as our largest

Additionally, during the first quarter of 2024, we debuted the Donna Karan Cashmere Collection , which helped the

brand to see double digit growth.

Many of our mid-sized brands, including Van Cleef & Arpels, Kate Spade and MCM, also achieved

double digit sales gains.

Additionally, we introduced brand extensions within established lines for Abercrombie & Fitch and

our first quarter grew more moderately than the first quarter of 2023, we are confident in our future as we look forward to executing

our plans for the remainder of 2024.

Our brands are in high demand in a robust environment for the fragrance industry, and we

have many exciting developments planned for the Company.

We have a large number of brand extensions across many of our brands

launching throughout the year, including a new flanker for the I Want Choo line planned for the second quarter of 2024,

plus the first launch of an Interparfums developed blockbuster fragrance for Lacoste, later in the year.

Additionally, there is

a new flanker for Roberto Cavalli Signature and a new DKNY blockbuster fragrance planned for the second half of 2024.

sum, 2024 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds.

Net Sales to Customers by Region

Three months ended March 31,

(In millions)

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Western Europe

Eastern Europe

Central and South America

the first three quarters of 2023, sales in our largest market, North America, rose 30%, followed by Western Europe and Asia where

comparable three quarter year sales in both regions increased 24% and 15%, respectively.

Our sales in Eastern Europe, Central

and South America and the Middle East were also robust, up 65%, 28% and 25%, respectively.

Additionally, our travel retail business

is continuing to show signs of renewed life.

PARFUMS, INC.

Middle East and Africa

Eastern Europe

quarter sales in Western Europe rose 10%, followed by Asia/Pacific and Central and South America where comparable quarter sales in both

regions increased 13% and 31%, respectively.

Our sales in North America decreased slightly by 3% as the first quarter of 2023

saw large increases due to the new product launches previously discussed.

While our sales in North America saw minimal decreases,

the region is still strong and is our largest region across the Company.

Additionally, our travel retail business is continuing

to show signs of renewed life.

Eastern Europe was adversely impacted by sourcing constraints in certain countries which resulted

in sales shifting from the first quarter into the second quarter of 2024.

INTER PARFUMS, INC.

AND SUBSIDIARIES

Profit margin

margin as a % of net sales

States operations

margin as a % of net sales

Company’s gross margin percentage was 63.9% and 63.3% for the three and nine months ended September 30, 2023 as compared

to 64.9% and 63.7% for the three and nine months ended September 30, 2022, respectively.

This decrease in gross margin percentage

was largely 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.

European based operations, gross profit margin as a percentage of net sales was 68.6% and 66.6% for the three and nine months

ended September 30, 2023, respectively, as compared to 69.5% and 67.8% for the corresponding periods of the prior year.

As previously

disclosed, a key driver in the decrease in gross profit margin for European based operations in 2023 was due to an increase in

inventory reserves in the second quarter of 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.

United States operations, gross profit margin was 55.6% and 56.7% for the three and nine months ended September 30, 2023, respectively,

as compared to 53.8% and 54.0% for the corresponding periods of the prior year.

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 the first three quarters of 2023 allowed us to better absorb fixed expenses such as depreciation and point

of sale expenses, as compared to the corresponding period of the prior year.

PARFUMS, INC.

Gross Profit margin

Three months ended March 31,

(in millions)

European based operations

Cost of sales

Gross margin as a % of net sales

United States based operations

Cost of sales

Gross margin as a % of net sales

The Company’s gross profit margin

as a percentage of net sales was 62.5% for the three months ended March 31, 2024 as compared to 65.1% for the three months ended

March 31, 2023.

The decrease was driven by unfavorable segment, geographic and channel mix, as well as increased trade spending

to support our business in the absence of significant innovation.

We also incurred slight cost inflation on the raw materials

we purchased in 2023.

We expect many of these adverse impacts to be non-recurring and should normalize over the balance of the

For European based operations, gross profit

margin as a percentage of net sales was 64.0% and 67.8% in the first quarters of 2024 and 2023, respectively.

European based operations

were impacted by geographic and channel mix, as well as increased trade spending to support the business in the absence of significant

new innovation in the first quarter of 2024.

Additionally, cost inflation impacts on raw materials purchased in Europe were more

significant as energy costs rose in the region.

We expect many of these adverse impacts to be non-recurring and should normalize

over the balance of the year.

United States based operations, gross profit margin as a percentage of net sales was 58.7% and 57.6% in the first quarters of

2024 and 2023, respectively.

Similar to 2023, gross margins continued to expand behind strong cost containment efforts as well

as a more favorable brand and channel mix, as a higher portion of our sales are being sold directly to retailers as opposed to

third-party distributors.

Additionally, the significant increase in sales in the first quarter of 2024 allowed us to continue

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

we do not bill customers for shipping and handling costs, and such costs, which aggregated $2.5 million and $3.9 million for the

three months ended March 31, 2024 and 2023, respectively, are included in selling, general and administrative expenses in the

consolidated statements of income.

As such, our Company’s gross profit may not be comparable to other companies, which may

include these expenses as a component of cost of goods sold.

The improvement in shipping and handling costs in the first quarter

of 2024 as compared to corresponding period in 2023 was a direct benefit of lower transportation costs seen globally.

INTER PARFUMS, INC.

AND SUBSIDIARIES

we do not bill customers for shipping and handling costs, and such costs, which aggregated $3.9 million and $11.4 million for

the three and nine months ended September 30, 2023, respectively, as compared to $5.5 million and $11.0 million for the corresponding

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

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

a component of cost of goods sold.

months ended,

general and administrative expenses

general and administrative expenses as a percent of net sales

States Operations

general and administrative expenses

general and administrative expenses as a percent of net sales

Company has seen selling, general and administrative expenses decrease as a percentage of net sales to 40.2% and 39.8% for the

three and nine months ended September 30, 2023 as compared to 41.9% and 41.7% for the three and nine months ended September 30,

2022, respectively.

This decrease of selling, general and administrative expenses as a percentage of net sales was largely driven

by sales growth for the three and nine month periods allowing to better absorb certain fixed operating costs, and favorable segment

European operations, selling, general and administrative expenses increased 18% and 15% for the three and nine months ended September

30, 2023, as compared to the corresponding period of the prior year, and represented 42.3% and 40.1% of net sales for the three

and nine months ended September 30, 2023, respectively, as compared to 42.1% and 42.3% for the three and nine months ended September

Selling, general and administrative expenses

Three months ended

(In millions)

European based operations

Selling, general and administrative expenses

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

United States based operations

Selling, general and administrative expenses

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

Company’s selling, general and administrative expenses as a percentage of net sales was 41.5% for the three months ended

March 31, 2024 as compared to 36.1% for the three months ended March 31, 2023.

The increase was largely driven by increased spending

on promotional and advertising activities in the first quarter of 2024 as compared to the prior year period.

Additionally, starting

in 2024, the Company began to amortize the cost of the Lacoste license which represented $1.6 million during the first quarter.

These costs will be incurred quarterly over the remaining life of the license.

European based operations, selling, general and administrative expenses increased 16.9% for the three months ended March 31, 2024,

as compared to the corresponding period of the prior year, and represented 39.1% and 33.6% of net sales in the 2024 and 2023 periods,

respectively.

For United States operations, selling, general and administrative expenses increased 44% and 40% for the

three and nine months ended September 30, 2023, as compared to the corresponding period of the prior year, and represented 36.5%

and 39.3% of net sales for the three and nine months ended September 30, 2023, respectively, as compared to 41.4% and 40.2% for

the three and nine months ended September 30, 2022, respectively.

As discussed in more detail below, the decreased selling, general

and administrative expenses as a percentage of net sales are primarily the result of high sales growth offset in part by increases

in promotion and advertising expenditures as well as the annualization impact of the structural investments of $9.0 million in

our United States operations that we made throughout 2022 in order to support the new licenses for the first three quarters of

and advertising included in selling, general and administrative expenses aggregated $62.8

million and $152.6 million for the three and nine months ended September 30, 2023, respectively, as compared to $44.8 million

and $124.9 million for the corresponding periods of the prior year.

Promotion and advertising represented 17.1% and 15.4% of net

sales for the three and nine months ended September 30, 2023, respectively, as compared to 16.0% and 16.1% for the corresponding

periods of the prior year.

Promotion and advertising are integral parts of our industry, and we continue to invest heavily

to support new product launches and to build brand awareness.

We believe that our promotion and advertising efforts have had a

beneficial effect on sales.

All of our brands have benefited 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.

PARFUMS, INC.

As discussed above, this increase is driven by increased promotion and advertising spending as well as the impact

of the amortization of the Lacoste license.

For United States based operations, selling, general and administrative expenses increased

24.5% for the three months ended March 31, 2024, as compared to the corresponding period of the prior year, and represented 46.0%

and 43.5% of net sales in the 2024 and 2023 periods, respectively.

As discussed in more detail below, these fluctuations are primarily

from variations in promotion and advertising expenditures.

and advertising included in selling, general and administrative expenses aggregated $48.3 million and $35.2 million in the first

quarters of 2024 and 2023, respectively, and represented 14.9% and 11.3% of net sales in the 2024 and 2023 periods, 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 a beneficial effect on sales.

Historically,

the Company incurred the majority of our promotional and advertising expenditures in the second half of the year.

2024, the Company implemented a strategy to increase spending in the first half of the year to better support and drive business

growth throughout the year.

Additionally, as the first quarter of 2024 saw a lighter innovation program than prior years, the

Company focused on increasing promotional and advertising spending to support the continued success of our existing brands and

to support the initial launch of our new brands, Lacoste and Roberto Cavalli.

We also continue to develop and implement omnichannel

concepts and compelling content to deliver an integrated consumer experience.

Long term, we continue to anticipate that on a full

year basis, promotion and advertising expenditures will aggregate approximately 21% of net sales.

expense included in selling, general and administrative expenses aggregated $27.2 million for the three months ended March 31,

2024, as compared to $24.1 million for the corresponding periods of the prior year.

Royalty expense represented 8.4% and 7.7%

of net sales for the three months ended March 31, 2024 and 2023, respectively.

This increase was primarily driven by unfavorable

INTER PARFUMS, INC.

AND SUBSIDIARIES

expense included in selling, general and administrative expenses aggregated $29.1 million

and $77.2 million for the three and nine months ended September 30, 2023, respectively, as compared to $23.1 million and $61.4

million for the corresponding periods of the prior year.

Royalty expense represented 7.9% and 7.8% of net sales for the three

and nine months ended September 30, 2023, as compared to 8.3% and 7.9% of net sales for the corresponding periods of the prior

year, due to changes in brand mix.

from Operations

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

operating margins aggregated 23.7% and 23.5% for the three and nine months ended September 30, 2023, respectively, as compared

to 23.0% and 22.1% for the corresponding periods of the prior year.

operating margins aggregated 21.0% and 29.0% for the three months ended March 31, 2024 and 2023, respectively.

Income and Expense

Traditionally,

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

The increase in interest expense

related to prior year acquisitions is the main driver of the increase in other income and expense during 2023.

As previously disclosed,

in April 2021 we completed the acquisition of the headquarters of Interparfums SA.

The acquisition was financed by a 10-year €120

million (approximately $127.1 million) bank loan which bears interest at one-month Euribor plus 0.75%.

Also in 2021, approximately

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

The swap effectively

exchanges the variable interest rate to a fixed rate of approximately 1.1%.

enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties

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

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

Almost 50% of net sales of our European

operations are denominated in U.S.

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

In December 2022, to finance the acquisition

of the Lacoste trademark, the Company entered into a $54.1 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

The acquisition was financed by a 10-year approximately $129.7 million (€120 million) bank loan which bears interest

at one-month Euribor plus 0.75%.

Approximately $86.5 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 $145.0 million and $157.5 million as

of March 31, 2024 and December 31, 2023, 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.

Greater than 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 the three

months ended March 31, 2024 and 2023.

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

As of September 30,

2023, short-term investments include approximately $8.8 million of marketable equity securities of other companies in the luxury

goods sector.

As of March 31, 2024,

short-term investments include approximately $10.4 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.

Company purchased additional marketable securities in the second and third quarter of 2023, which generated unrealized losses

of $0.5 million in the three months ended September 30, 2023.

Interest and investment income for the three months ended September

30, 2022, includes a gain of $2.3 million, resulting from the interest rate swap.

For the nine months ended September 30, 2022,

the Company recognized a gain of $6.4 million related to the interest rate swap which was largely offset by losses of $5.3 million

on marketable equity securities during the same period.

PARFUMS, INC.

AND SUBSIDIARIES

consolidated effective tax rate was 23.5% and 22.6% for the nine months ended September 30, 2023 and 2022, respectively.

purchased additional marketable securities throughout 2023 and in the first quarter of 2024, which generated unrealized gain of

$0.9 million during the first quarter of 2024.

consolidated effective tax rate was 23.9% and 23.4% for the three months ended March 31, 2024 and 2023, respectively.

The effective

tax rate for European operations was 25% for each of the nine months ended September 30, 2023 and 2022.

Our effective tax rate

operations was 19% for the nine months ended September 30, 2023, as compared to 11% for the corresponding period

of the prior year.

Our effective tax rate differs from the 21% statutory rate due to benefits received from the exercise of stock

options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state

and local taxes.

Additionally, in the third quarter of 2022 our U.S.

operations recognized a one-time tax benefit of $2.5 million

associated with the 2021 Salvatore Ferragamo acquisition.

At the time of the acquisition, we had not recognized deferred tax benefits

as there were uncertainties concerning its potential recoverability;

however, as of September 30, 2022, the recoverability was

deemed likely.

Other than as discussed above, we did not experience any significant changes in tax rates, and none were expected

in jurisdictions where we operate.

September 30,

income European operations

income United States operations

Net income attributable to the noncontrolling interest

income attributable to Inter Parfums, Inc.

was $53.2 million and $142.2 million for the three and nine months ended September

30, 2023, respectively, as compared to $41.4 million and $104.3 million for the corresponding period of the prior year.

attributable to European operations was $46.0 million and $133.5 million for the three and nine months ended September 30, 2023,

respectively, as compared to $42.4 million and $106.7 million for the corresponding period of the prior year.

Net income attributable

to United States operations was $20.2 million and $46.1 million for the three and nine months ended September 30, 2023, respectively,

as compared to $10.9 million and $27.4 million for the corresponding period of the prior year.

The significant fluctuations in

net income for both European operations and United States operations are directly related to the previous discussions relating

to changes in sales, gross margin, and selling, general and administrative expenses.

tax rate for European based operations was 25% for both the three months ended March 31, 2024 and 2023.

The effective tax rate

for United States based operations was 17.7% for the three months ended March 31, 2024, as compared to 12.7% for the corresponding

period of the prior year.

Our effective tax rate differs from the 21% statutory rate due to benefits received from the exercise

of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset

by state and local taxes.

Other than as discussed above, we did not experience any significant changes in tax rates, and none

were expected in jurisdictions where we operate.

INTER PARFUMS, INC.

AND SUBSIDIARIES

Three Months Ended

(In thousands)

Net income attributable to European based operations

Net income attributable to United States based operations

Net income attributable to the noncontrolling interest

Net income attributable to Inter Parfums, Inc.

income attributable to Inter Parfums, Inc.

was $41.0 million for the three months ended March 31, 2024 as compared to $54.1 million

for the corresponding period of the prior year.

income attributable to European based operations was $44.9 million and $60.6 million for the three months ended March 31, 2024

and 2023, respectively, while net income attributable to United States based operations was $9.5 million and $10.3 million for

the three months ended March 31, 2024 and 2023, respectively.

The significant fluctuations in net income for both European based operations

and United States based operations are directly related to the previous discussions pertaining to changes in sales, gross margin,

and selling, general and administrative expenses.

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 NYSE Euronext.

Net income attributable to the noncontrolling interest is directly

related to the profitability of our European operations and aggregated 28% of European operations net income for all periods presented.

Net margins attributable to Inter Parfums, Inc.

for the nine months ended September 30, 2023 and 2022 aggregated 14.4% and 13.4%,

respectively.

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 27.3% and 27.8% of European based operations net income for

the three months ended March 31, 2024 and 2023, respectively.

Net profit margins attributable to Inter Parfums, Inc.

31, 2024 and 2023 aggregated 12.7% and 17.3%, respectively.

and Capital Resources

conservative financial tradition has enabled us to amass significant cash balances.

As of September 30, 2023, we had $183.5 million

in cash, cash equivalents and short-term investments, most of which is held in euro by our European operations and is readily

As of March 31, 2024, we had $97 million in

cash, 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.

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such cash and cash equivalents and short-term investments.

As of September 30, 2023 short-term investments include approximately

$10.2 million of marketable equity securities.

of September 30, 2023, working capital aggregated $514 million and we had a working capital ratio of 2.4 to 1.

Approximately 78%

of the Company’s total assets are held by European operations, and approximately $245 million of trademarks, licenses and

other intangible assets are also held by European operations.

Company is party to a number of license and other agreements for the use of trademarks and rights in connection with the manufacture

of March 31, 2024, working capital aggregated $530 million and we had a working capital ratio of 2.8 to 1.

Approximately 79% of

the Company’s total assets are held by European based operations, and approximately $248 million of trademarks, licenses

and other intangible assets are also held by European based operations.

INTER PARFUMS, INC.

AND SUBSIDIARIES

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.

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proprietary basis or as a licensee.

In July 2023, we entered into a long-term global licensing agreement for the creation, development

and distribution of fragrances and fragrance-related products under the Roberto Cavalli brand.

This license took effect in July

2023, and we target to start shipping products in January 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.

This new license takes effect January 2024.

provided by operating activities aggregated $24.3 million for the nine months ended September 30, 2023, as compared to cash

used in operating activities of $8.2 million for the corresponding period of the prior year.

For the nine months ended

September 30, 2023, working capital items used $169.1 million in cash from operating activities, as compared to $159.2

million in the 2022 period.

Although from a cash flow perspective accounts receivable is up 48.6% from year end 2022, the

balance is reasonable based on 2023 record sales levels and reflects a combination of high volumes of shipments towards the

end of the third quarter as well as some payment schedules extended going into the holiday season.

Strong collection activity

resulted in day’s sales outstanding decreasing to 72 days, down from 80 days in the corresponding period of the prior

From a cash flow perspective, inventory levels as of September 30, 2023, increased 26% from year end 2022 in support of

our overall sales growth.

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.

INTER PARFUMS, INC.

AND SUBSIDIARIES

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 we 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.

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 and products started to ship in January

used in operating activities aggregated $52.0 million and $7.4 million for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024, working capital items used $111.7 million in cash from operating activities, as compared

to $84.8 million in the 2023 period.

Although from a cash flow perspective, accounts receivable is up 20% from year end 2023,

the balance is reasonable based on first quarter 2024 record sales levels and seasonality of the business.

Although day’s

sales outstanding was 73 days, up from 71 days in the corresponding period of the prior year, we are still seeing strong collection

activity and do not anticipate any issues with collections of accounts receivable.

From a cash flow perspective, inventory levels

as of March 31, 2024 increased 9% from year end 2023 in support of our overall sales growth.

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.

flows provided by investing activities in 2024 reflect purchases and sales of short-term investments.

These investments include

certificates of deposit with maturities greater than three months.

Approximately $2 million of such certificates of deposit contain

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

These investments consist

of certificates of deposit with maturities greater than three months, marketable equity securities and other contracts.

31, 2024, approximately $2.0 million of certificates of deposit contain penalties where we would forfeit a portion of the interest

earned in the event of early withdrawal.

business is not capital intensive as we do not own any manufacturing facilities.

3 unchanged sentences

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

short-term financing requirements are expected to be met by available cash on hand at September 30, 2023, and short-term credit

INTER PARFUMS, INC.

AND SUBSIDIARIES

flows used in financing activities in the first quarter of 2024 reflect issuances and repayments of debt and payment of dividends

to stockholders.

short-term financing requirements are expected to be met by available cash on hand at March 31, 2024, and by short-term credit

lines provided by domestic and foreign banks.

3 unchanged sentences

There was $8.3 million of short-term borrowings outstanding pursuant to these facilities

as of September 30, 2023 and no short-term borrowings outstanding as of September 30, 2022.

February 2022, our Board authorized a 100% increase in the annual dividend to $2.00 per share.

In February 2023, the Board of

Directors further increased the annual dividend to $2.50 per share.

The next quarterly cash dividend of $0.625 per share is payable

on December 31, 2023, to shareholders of record on December 15, 2023.

as of March 31, 2024 and $18.0 million outstanding as of March 31, 2023.

February 2023, the Board of Directors authorized an annual dividend of $2.50 per share.

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 June

28, 2024, to shareholders of record on June 14, 2024.

believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facilities,

1 unchanged sentence

rates in the U.S.

and foreign countries in which we operate did not have a significant impact on operating results for the nine

months ended September 30, 2023.

and foreign countries in which we operate did impact operating results for the three months ended March 31,

2024, as they resulted in slightly higher costs of inventory and were not fully offset by price increases we passed onto our respective

customers or operating efficiencies.

INTER PARFUMS, INC.

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis