UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended September 30, ~~2017.~~2022.

☐

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from ___________to ________.

Commission File No.0-16469

INTER PARFUMS, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3275609
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

551 Fifth Avenue, New York, New York10176

(Address of Principal Executive Offices) (Zip Code)

~~(212)~~ (212) 983-2640

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.001 par value per share		IPAR		The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See ~~definition~~definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act).

Large accelerated ~~Filer ☐~~filer ☒	Accelerated filer ☒☐
Non-accelerated filer ☐ ~~(Do~~(Do not check if a smaller reporting company)	Smaller reporting company ☐
	Emerging Growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At November ~~7, 2017,~~9, 2022, there were ~~31,186,748~~31,875,625 shares of common stock, par value $.001 per share, outstanding.

INTER PARFUMS, INC. AND SUBSIDIARIES

INDEX

			Page Number
~~Part I.~~	~~Financial Information~~	1
Part I. Financial Information				1
	~~Item 1.~~	~~Financial Statements~~
Item 1. Financial Statements

	Consolidated Balance Sheets as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021	2

		Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and September 30, ~~2016~~2021	3

		Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2022 and September 30, ~~2016~~2021	4

		Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, ~~2017~~2022 and September 30, ~~2016~~2021	5

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2022 and September 30, ~~2016~~2021	6

		Notes to Consolidated Financial Statements	7

		Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1517

		Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3029

		Item 4.	Controls and Procedures	3130

Part II.		Other Information		3130

Item 6. Exhibits		~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	31

Signatures		~~Item 6.~~	~~Exhibits~~	32

~~Signatures~~			32

INTER PARFUMS, INC. AND SUBSIDIARIES

Part I. Financial Information

Item 1.

~~FINANCIAL STATEMENTS~~Financial Statements

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. We have condensed such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued by filing with the SEC. These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, ~~2016~~2021, included in our annual report filed on Form 10-K.

The results of operations for the nine months ended September 30, ~~2017~~2022, are not necessarily indicative of the results to be expected for the entire fiscal year.

Page 1

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)


ASSETS	ASSETS
		September 30, 2017			December 31, 2016				September 30, 2022			December 31, 2021
Current assets:
Cash and cash equivalents		$	108,367		$	161,828			$	41,277		$	159,613
Short-term investments			122,402			94,202				135,443			160,014
Accounts receivable, net			159,434			104,819				220,112			159,281
Inventories			134,280			96,977				283,237			198,914
Receivables, other			1,341			7,433				8,050			10,308
Other current assets			8,885			6,240				19,310			21,375
Income tax receivable			548			626
Income taxes receivable										211			210
Total current assets			535,257			472,125				707,640			709,715
Equipment and leasehold improvements, net			10,321			10,076
Property, equipment and leasehold improvements, net										153,246			149,352
Right-of-use assets, net										27,834			33,728
Trademarks, licenses and other intangible assets, net			200,841			183,868				189,273			214,047
Deferred tax assets			11,071			8,090				10,344			7,936
Other assets			8,183			8,250				22,857			30,586
Total assets		$	765,673		$	682,409			$	1,111,194		$	1,145,364

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt		$	24,016		$	21,498			$	12,593		$	15,911
Current portion of lease liabilities										4,852			6,014
Accounts payable – trade			54,449			49,507				81,415			81,980
Accrued expenses			63,113			62,609				132,834			136,677
Income taxes payable			10,970			3,331				16,820			4,328
Dividends payable			5,301			5,293
Total current liabilities			157,849			142,238				248,514			244,910
Long-term debt, less current portion			41,554			53,064
Deferred tax liability			3,741			3,449

Long–term debt, less current portion										107,942			132,902
Lease liabilities, less current portion										24,590			29,220

Equity:
Inter Parfums, Inc. shareholders’ equity:
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued			—			—
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 31,182,458 and 31,138,318 shares at September 30, 2017 and December 31, 2016, respectively			31			31
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued										—			—
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 31,875,625 and 31,830,420 shares at September 30, 2022 and December 31, 2021, respectively										32			32
Additional paid-in capital			64,645			63,103				85,660			87,132
Retained earnings			424,545			402,714				618,884			560,663
Accumulated other comprehensive loss			(23,061	)		(57,982	)			(92,405	)		(38,432	)
Treasury stock, at cost, 9,864,805 common shares at September 30, 2017 and December 31, 2016, respectively			(37,475	)		(37,475	)
Treasury stock, at cost, 9,864,805 shares at September 30, 2022 and December 31, 2021										(37,475	)		(37,475	)
Total Inter Parfums, Inc. shareholders’ equity			428,685			370,391				574,696			571,920
Noncontrolling interest			133,844			113,267				155,452			166,412
Total equity			562,529			483,658				730,148			738,332
Total liabilities and equity		$	765,673		$	682,409			$	1,111,194		$	1,145,364

See notes to consolidated financial statements.

Page 2

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Net sales	$	280,462		$	262,696		$	775,865		$	668,797

Cost of sales		98,562			95,269			281,525			243,772

Gross margin		181,900			167,427			494,340			425,025

Selling, general and administrative expenses		117,424			99,788			323,249			262,379

Impairment loss		—			—			—			2,393

Income from operations		64,476			67,639			171,091			160,253

Other expenses (income):
Interest expense		682			1,697			2,589			3,344
(Gain) loss on foreign currency		273			(613	)		(2,245	)		(2,169	)
Interest and investment income		(3,343	)		(233	)		(2,341	)		(1,388	)
Other (income) expense		346			(36	)		(98	)		(135	)

Nonoperating Income (Expense)		(2,042	)		815			(2,095	)		(348	)

Income before income taxes		66,518			66,824			173,186			160,601

Income taxes		13,221			16,997			39,078			45,112

Net income		53,297			49,827			134,108			115,489

Less: Net income attributable to the noncontrolling interest		11,874			11,511			29,769			26,854

Net income attributable to Inter Parfums, Inc.	$	41,423		$	38,316		$	104,339		$	88,635

Earnings per share:

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic	$	1.30		$	1.21		$	3.28		$	2.80
Diluted	$	1.30		$	1.20		$	3.26		$	2.79

Weighted average number of shares outstanding:
Basic		31,860			31,659			31,848			31,648
Diluted		31,968			31,807			31,977			31,793

Dividends declared per share	$	0.50		$	0.25		$	1.50		$	0.75

See notes to consolidated financial statements.

Page 3

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Comprehensive income:

Net income	$	53,297		$	49,827		$	134,108		$	115,489

Other comprehensive income:

Net derivative instrument gain (loss), net of tax		1,315			(609	)		(173	)		(703	)

Transfer from OCI into earnings		—			—			992			—

Translation adjustments, net of tax		(32,944	)		(15,396	)		(79,015	)		(33,203	)

Comprehensive income		21,668			33,822			55,912			81,583

Comprehensive income attributable to the noncontrolling interests:

Net income		11,874			11,511			29,769			26,854

Other comprehensive income (loss):

Net derivative instrument gain (loss), net of tax		362			(166	)		(49	)		(192	)

Translation adjustments, net of tax		(10,012	)		(3,974	)		(24,174	)		(10,389	)

Comprehensive income attributable to the noncontrolling interests		2,224			7,371			5,546			16,273

Comprehensive income attributable to Inter Parfums, Inc.	$	19,444		$	26,451		$	50,366		$	65,310

See notes to consolidated financial statements.

Page 4

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(Unaudited)

	Nine months ended September 30,
	2022			2021

Common stock, beginning and end of period	$	32		$	32
		-			-
		32			32
Additional paid-in capital, beginning of period		87,132			75,708
Shares issued upon exercise of stock options		1,816			1,727
Share-based compensation		1,017			1,175
Purchase of subsidiary shares		(4,305	)		—
Shares issued for license acquisition		—			5,000
Transfer of subsidiary shares purchased		—			(540	)
Additional paid-in capital, end of period		85,660			83,070

Retained earnings, beginning of period		560,663			503,567
Net income		104,339			88,635
Dividends		(47,782	)		(23,740	)
Share-based compensation		1,664			892
Retained earnings, end of period		618,884			569,354

Accumulated other comprehensive loss, beginning of period		(38,432	)		(5,997	)
Foreign currency translation adjustment, net of tax		(54,841	)		(22,814	)
Transfer from other comprehensive income into earnings		992			—
Net derivative instrument loss, net of tax		(124	)		(511	)
Accumulated other comprehensive loss, end of period		(92,405	)		(29,322	)
		(37,475)			(37,475)
		-			-
Treasury stock, beginning and end of period		(37,475	)		(37,475	)

Noncontrolling interest, beginning of period		166,412			166,615
Net income		29,769			26,854
Foreign currency translation adjustment, net of tax		(24,174	)		(10,389	)
Net derivative instrument loss, net of tax		(49	)		(192	)
Share-based compensation (adjustment)		(353	)		(69	)
Purchase of subsidiary shares		(152	)		—
Transfer of subsidiary shares purchased		55			1,153
Dividends		(16,056	)		(9,836	)
Noncontrolling interest, end of period		155,452			174,136
		738,332			702,450
		134,108			115,489
Total equity	$	730,148		$	759,795

See notes to consolidated financial statements.

Page 5

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine months ended September 30,
	2022			2021
Cash flows from operating activities:
Net income	$	134,108		$	115,489
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		10,936			7,273
Provision for doubtful accounts		2,004			1,369
Noncash stock compensation		2,353			2,158
Share of income of equity investment		(98	)		(135	)
Impairment loss		—			2,393
Noncash lease expense		4,074			6,953
Deferred tax provision (benefit)		(3,658	)		739
Change in fair value of derivatives		1,348			1,844
Changes in:
Accounts receivable		(89,605	)		(79,112	)
Inventories		(109,377	)		(3,727	)
Other assets		2,615			(13,460	)
Operating lease liabilities		(3,887	)		(6,169	)
Accounts payable and accrued expenses		26,406			41,830
Income taxes, net		14,606			23,816

Net cash provided by (used in) operating activities		(8,175	)		101,261

Cash flows from investing activities:
Purchases of short-term investments		(2,862	)		(41,406	)
Proceeds from sale of short-term investments		5,346			10,753
Purchases of property, equipment and leasehold improvements		(32,615	)		(131,322	)
Payment for intangible assets acquired		(3,757	)		(858	)

Net cash used in investing activities		(33,888	)		(162,833	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			158,992
Repayment of long-term debt		(14,210	)		(38,232	)
Proceeds from exercise of options		1,816			1,727
Purchase of subsidiary shares from noncontrolling interest		(4,402	)		—
Dividends paid		(47,782	)		(23,741	)
Dividends paid to noncontrolling interest		(16,056	)		(9,831	)

Net cash provided by (used in) financing activities		(80,634	)		88,915

Effect of exchange rate changes on cash		(4,413	)		(7,934	)

Net increase (decrease) in cash and cash equivalents		(127,110	)		19,409

Cash and cash equivalents - beginning of period		168,387			169,681

Cash and cash equivalents - end of period	$	41,227		$	189,090

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	2,091		$	1,582
Income taxes		27,718			21,103

See notes to consolidated financial statements.

Page 6

INTER PARFUMS, INC. AND SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(In thousands except per share data)~~

~~(Unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

Net sales $ 169,531 $ 157,622 $ 441,725 $ 386,301

Cost of sales 66,059 62,790 164,240 145,723

Gross margin 103,472 94,832 277,485 240,578

Selling, general and administrative expenses 70,309 62,529 203,676 179,285

Income from operations 33,163 32,303 73,809 61,293

Other expenses (income):
Interest expense 495 515 1,494 2,181
Loss on foreign currency 335 334 1,308 388
Interest income (615 ) (765 ) (2,788 ) (2,722 )

215 84 14 (153 )

Income before income taxes 32,948 32,219 73,795 61,446

Income taxes 10,845 10,740 24,314 22,790

Net income 22,103 21,479 49,481 38,656

Less: Net income attributable to the noncontrolling interest 5,026 5,240 12,287 9,252

Net income attributable to Inter Parfums, Inc. $ 17,077 $ 16,239 $ 37,194 $ 29,404

Earnings per share:

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic $ 0.55 $ 0.52 $ 1.19 $ 0.95
Diluted $ 0.55 $ 0.52 $ 1.19 $ 0.94

Weighted average number of shares outstanding:
Basic 31,175 31,080 31,163 31,058
Diluted 31,307 31,171 31,281 31,138

Dividends declared per share $ 0.17 $ 0.15 $ 0.51 $ 0.45

~~See notes to consolidated financial statements.~~

~~Page 3~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(In thousands except per share data)~~

~~(Unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Comprehensive income:

Net income $ 22,103 $ 21,479 $ 49,481 $ 38,656

Other comprehensive income:

Net derivative instrument gain (loss), net of tax (591 ) — 30 —

Transfer from OCI into earnings — — 22 —

Translation adjustments, net of tax 15,143 2,391 48,715 10,504

Comprehensive income 36,655 23,870 98,248 49,160

Comprehensive income attributable to the noncontrolling interests:

Net income 5,026 5,240 12,287 9,252

Other comprehensive income:

Net derivative instrument gain (loss), net of tax (160 ) — 8 —

Transfer from OCI into earnings — — 5 —

Translation adjustments, net of tax 4,367 698 13,833 3,141

Comprehensive income attributable to the noncontrolling interests 9,233 5,938 26,133 12,393

Comprehensive income attributable to Inter Parfums, Inc. $ 27,422 $ 17,932 $ 72,115 $ 36,767

~~See notes to consolidated financial statements.~~

~~Page 4~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

~~(In thousands)~~

~~(Unaudited)~~

Nine months ended
September 30,
2017 2016

Common stock, beginning and end of period $ 31 $ 31

Additional paid-in capital, beginning of period 63,103 62,030
Shares issued upon exercise of stock options 839 1,235
Purchase of subsidiary shares from noncontrolling interests — (1,670 )
Share based compensation 703 630
Sale of subsidiary shares to noncontrolling interest — (154 )
Additional paid-in capital, end of period 64,645 62,071

Retained earnings, beginning of period 402,714 388,434
Net income 37,194 29,404
Dividends (15,899 ) (13,980 )
Share based compensation 536 —
Retained earnings, end of period 424,545 403,858

Accumulated other comprehensive loss, beginning of period (57,982 ) (48,091 )
Foreign currency translation adjustment, net of tax 34,882 7,363
Transfer from other comprehensive income into earnings 17 —
Net derivative instrument gain, net of tax 22 —
Accumulated other comprehensive loss, end of period (23,061 ) (40,728 )

Treasury stock, beginning and end of period (37,475 ) (36,817 )

Noncontrolling interest, beginning of period 113,267 110,800
Net income 12,287 9,252
Foreign currency translation adjustment, net of tax 13,833 3,141
Transfer from other comprehensive income into earnings 5 —
Net derivative instrument gain, net of tax 8 —
Share based compensation 391 —
Purchase of subsidiary shares from noncontrolling interest — (800 )
Sale of subsidiary shares to noncontrolling interest — 1,603
Dividends (5,947 ) (4,863 )
Noncontrolling interest, end of period 133,844 119,133

Total equity $ 562,529 $ 507,548

~~See notes to consolidated financial statements.~~

~~Page 5~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

~~(Unaudited)~~

Nine months ended
September 30,
2017 2016
Cash flows from operating activities:
Net income $ 49,481 $ 38,656
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 7,377 7,113
Provision for doubtful accounts 283 231
Share based compensation 1,558 706
Deferred tax benefit (2,051 ) (2,556 )
Change in fair value of derivatives (1,869 ) 314
Changes in:
Accounts receivable (43,163 ) (48,735 )
Inventories (27,345 ) (4,979 )
Other assets 542 71
Accounts payable and accrued expenses (8,145 ) (7,784 )
Income taxes, net 7,203 4,391

Net cash used in operating activities (16,129 ) (12,572 )

Cash flows from investing activities:
Purchases of short-term investments (25,988 ) (48,629 )
Proceeds from sale of short-term investments 10,033 15,621
Purchases of equipment and leasehold improvements (2,253 ) (4,260 )
Payment for intangible assets acquired (764 ) (642 )
Proceeds from sale of trademark 5,886 —

Net cash used in investing activities (13,086 ) (37,910 )

Cash flows from financing activities:
Repayments of long-term debt (16,567 ) (16,567 )
Proceeds from exercise of stock options 839 1,235
Proceeds from sale of shares of subsidiary — 1,449
Dividends paid (15,891 ) (13,349 )
Dividends paid to noncontrolling interest (5,947 ) (4,863 )
Purchase of stock of subsidiary — (2,470 )

Net cash used in financing activities (37,566 ) (34,565 )

Effect of exchange rate changes on cash 13,320 4,032

Net decrease in cash and cash equivalents (53,461 ) (81,015 )

Cash and cash equivalents - beginning of period 161,828 176,967

Cash and cash equivalents - end of period $ 108,367 $ 95,952

Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 1,351 $ 1,758
Income taxes 16,823 18,881

~~See notes to consolidated financial statements.~~

~~Page 6~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

Notes to Consolidated Financial Statements

Significant Accounting Policies:

The accounting policies we follow are set forth in the notes to our consolidated financial statements included in our Form 10-K, which was filed with the Securities and Exchange Commission for the year ended December 31, ~~2016. We also discuss such policies in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this Form 10-Q.~~2021.

~~Recent Accounting Pronouncements:~~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 ~~August 2017, the Financial Accounting Standards Board (“FASB”)~~response, various national, state, and local governments issued ~~an Accounting Standards Update (“ASU”)~~decrees prohibiting certain businesses from operating and certain classes of workers from reporting to improve accounting for hedging activities. The objective of the ASU is to improve the financial reporting of hedging relationships in order to better portray the economic results of an entity’s risk management activities in its financial statements and to make certain targeted improvements to simplify the application of hedge accounting guidance. This ASU is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. We are currently evaluating the standard to determine the impact of its adoption on our consolidated financial statements.work.

~~In August 2016, the FASB issued an ASU~~Retail store closings, event cancellations and a shutdown of international air travel brought our sales to ~~eliminate the diversity in practice related to the classification of certain cash receipts~~a virtual standstill and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This ASU is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. We have evaluated the standard and determined that there will be no material impact on our consolidated financial statements.

In February 2016, the FASB issued an ASU which requires lessees to recognize lease assets and lease liabilities arising from operating leases on the balance sheet. This ASU is effective for annual and interim reporting periods beginning after December 15, 2018 usingcaused a ~~modified retrospective approach, with early adoption permitted. We are currently evaluating the standard to determine the impact of its adoption on our consolidated financial statements.~~

In November 2015, the FASB issued an ASU that requires all deferred tax liabilities and assets to be classified as noncurrent on the balance sheet. This ASU is effective for annual and interim reporting periods beginning after December 15, 2016. In January 2017, the Company adopted the standard retrospectively, which resulted in reclassifications among accounts on the consolidated balance sheet, but had no othersignificant unfavorable impact on our results of operations ~~financial condition or cash flows. The effect~~in 2020.

Business significantly improved in the second half of 2020 and continued to improve throughout 2021 and thus far in 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 ~~adoption~~world has caused the temporary re-implementation of governmental restrictions to prevent further spread of the virus. In addition, international air travel remains curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. While COVID-19 has significantly restricted international travel, the travel retail business is beginning to pick up. 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 ~~prior periods was~~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 ~~reclassification~~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 ~~current assets~~multiple suppliers and when possible, manufacture products closer to ~~noncurrent assets~~where they are sold. We do not expect the supply chain bottlenecks to begin lifting until the second half of ~~approximately $8 million.~~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 Agreements:

Salvatore Ferragamo

In ~~May 2014,~~October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the ~~FASB~~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.

Page 7

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on October 1, 2021. All amounts have been translated to U.S. dollars at the October 1, 2021 exchange rate.

(In thousands)

Inventories	$	17,805
Trademarks and licenses		15,880
Other assets		3,033

Assets acquired		36,718

Liabilities assumed		(958	)
Total consideration	$	35,760

Emanuel Ungaro

In October 2021, we also entered into a 10-year exclusive global licensing agreement with a 5-year optional term subject to certain conditions, with Emanuel Ungaro Italia S.r.l, for the creation, development and distribution of fragrances and fragrance related products, under the Emanuel Ungaro brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.

Donna Karan and DKNY

In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor. The exclusive license became effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2024.

Land and Building Acquisition - Future Headquarters in Paris

In April 2021, Interparfums SA, our 73% owned French Subsidiary, completed the acquisition of its headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an ~~ASU which superseded~~office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.

The purchase price includes the ~~most current revenue recognition requirements. This new revenue recognition standard requires entities to recognize revenue~~complete renovation of the site and includes the purchase of several apartments in ~~a way that depicts~~ the ~~transfer of goods or services to customers in an amount that reflects the consideration which the entity expects~~surrounding area to be ~~entitled~~used as additional office space. As of September 30, 2022, $135.5 million of the purchase price, including approximately $4.1 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2022. The purchase price has been allocated approximately $55.9 million to ~~in exchange for those goods or services.~~land and $79.6 million to the building. The ~~new standard also~~building, which was delivered on February 28, 2022, includes ~~enhanced disclosure requirements. This guidance is effective for annual~~the building structure, development of the property, façade waterproofing, general and ~~interim reporting periods beginning after December 15, 2017, with early adoption permitted for annual periods after December 31, 2016. We have evaluated the standard~~technical installations and ~~determined~~interior fittings that ~~there~~ will be ~~no material impact~~depreciated over a range of 7 to 50 years. The Company has elected to depreciate the building cost based on ~~our consolidated financial statements.~~the useful lives of its components. Approximately $3.4 million of cash held in escrow is included in property, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2022.

Page 8

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements:

There are no ~~other~~ recent accounting pronouncements issued but not yet adopted that would have a material effect on our consolidated financial statements.

~~Page 7~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

3.5.

Inventories:

Inventories consist of the following:

(In thousands)	September 30, 2022		December 31, 2021
Raw materials and component parts	$	134,002	$	111,312
Finished goods		149,235		87,602

Inventories	$	283,237	$	198,914

(In thousands) September 30,
2017 December 31, 2016
Raw materials and component parts $ 43,261 $ 36,821
Finished goods 91,019 60,156

$ 134,280 $ 96,977

4.6.

Fair Value Measurement:

The following tables present our financial assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

Fair Value Measurements at September 30, 2017
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
Total (Level 1) (Level 2) (Level 3)
Assets:
Short-term investments $ 122,402 $ — $ 122,402 $ —
Foreign currency forward exchange contracts accounted for using hedge accounting 1,230 1,230

$ 123,632 $ — $ 123,632 $ —
Liabilities:
Interest rate swap $ 628 $ — $ 628 $ —
Foreign currency forward exchange contracts not accounted for using hedge accounting 310 — 310 —
Interest rate swap $ 938 $ — $ 938 $ —

Fair Value Measurements at December 31, 2016
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
Total (Level 1) (Level 2) (Level 3)
Assets:
Short-term investments $ 94,202 $ — $ 94,202 $ —

Liabilities:
Foreign currency forward exchange contracts accounted for using hedge accounting $ 181 $ — $ 181 $ —
Foreign currency forward exchange contracts not accounted for using hedge accounting 418 — 418 —
Interest rate swap 908 — 908 —
$ 1,507 $ — $ 1,507 $ —

Page 8 9

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements


			Fair Value Measurements at September 30, 2022
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments	$	135,444	$	16,248	$	119,196	$	—
Interest rate swaps		6,066		—		6,066		—

Total assets	$	141,510	$	16,248	$	125,262	$	—
Liabilities:
Foreign currency forward exchange contracts accounted for using hedge accounting	$	1,840	$	—	$	1,840	$	—
Foreign currency forward exchange contracts not accounted for using hedge accounting		7,154		—		7,154		—

Total liabilities	$	8,994	$	—	$	8,994	$	—


				Fair Value Measurements at December 31, 2021
				Quoted Prices in		Significant Other			Significant
				Active Markets for		Observable			Unobservable
				Identical Assets		Inputs			Inputs
	Total			(Level 1)		(Level 2)			(Level 3)
Assets:
Short-term investments	$	160,014		$	24,506	$	135,508		$	—
Liabilities:
Foreign currency forward exchange contracts accounted for using hedge accounting	$	1,982		$	—	$	1,982		$	—
Foreign currency forward exchange contracts not accounted for using hedge accounting		63			—		63			—
Interest rate swaps		(234	)		—		(234	)		—

Total liabilities	$	1,811		$	—	$	1,811		$	—

The carrying amount of cash and cash equivalents including money market funds, short-term investments, accounts receivable, other receivables, ~~and~~cash held in escrow, accounts payable and accrued expenses ~~approximates~~approximate fair value due to the short terms to maturity of these instruments.

The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value.

Page 10

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Foreign currency forward exchange contracts are valued based on quotations from financial institutions and the value of interest rate swaps are the discounted net present value of the swaps using third party quotes ~~obtained~~ from financial institutions.

5.7.

Derivative Financial Instruments:

The Company enters into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based on the dollar offset methodology and excludes the portion of the fair value of the foreign currency forward exchange contract attributable to the change in spot-forward difference which is reported in current period earnings. Any hedge ineffectiveness is also recognized as a gain or loss on foreign currency in the income statement. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses accumulated in other comprehensive income are reclassified to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated in other comprehensive income are reclassified to current-period earnings.

In connection with the ~~May 2015 Rochas brand~~April 2021 acquisition ~~$108~~of the office building complex in Paris, €120 million of the purchase price was ~~paid in cash on the closing date and was~~ financed ~~entirely~~ through a ~~5-year~~10-year term loan. ~~As the payment at closing was due in dollars and we had planned to finance it with debt in euro, the~~The Company entered into ~~foreign currency forward~~interest rate swap contracts related to ~~secure~~€80 million of the ~~exchange~~loan, effectively exchanging the variable interest rate ~~for the $108 million purchase price at $1.067 per 1 euro.~~to a variable rate not to exceed 2%. This derivative ~~was designated~~instrument is recorded at fair value and ~~qualified as a cash flow hedge.~~changes in fair value are reflected in the accompanying consolidated statements of income.

Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income ~~(loss)~~ and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying income statements. Such gains and losses were immaterial for both the nine months ended September 30, ~~2017~~2022 and ~~2016. Interest expense includes a gain (loss) of $0.4 million and ($0.2) million for the nine months ended September 30, 2017 and 2016 respectively, relating to the interest rate swap.~~2021.

All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps ~~as of September 30, 2017, resulted in a liability which~~ is included in ~~long-term debt~~other assets on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts ~~not accounted for using hedge accounting~~ at September 30, ~~2017,~~2022, resulted in a net liability and is included in accrued expenses on the accompanying balance sheet.

~~Page 9~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

At September 30, ~~2017,~~2022, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. ~~$22.6~~$90.0 million, GB £2.0 million and ~~GB £11.5~~JPY ¥50.0 million, which ~~both~~all have maturities of less than one year.

~~Accrued Expenses:~~

Page 11

~~Accrued expenses include approximately $20.6 million and $14.1 million in advertising liabilities as of September 30, 2017 and December 31, 2016, respectively.~~INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

7.8.

~~Share Based~~Leases:

The Company leases its offices and warehouses, vehicles, and certain office equipment, substantially all of which are classified as operating leases. The Company currently has no material financing leases. The Company determines if an arrangement is a lease at inception. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term.

In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend or terminate, depending on the lease. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date for the location in which the lease is held in determining the present value of lease payments.

As of September 30, 2022, the weighted average remaining lease term was 6.0 years and the weighted average discount rate used to determine the operating lease liability was 2.6%. Rental expense related to operating leases was $1.2 million and $4.3 million for the three and nine months ended September 30, 2022, respectively, as compared to $1.9 million and $6.8 million for the corresponding periods of the prior year. Operating lease payments included in operating cash flows totaled $3.9 million and $6.2 million for the nine months ended September 30, 2022 and 2021, respectively, and noncash additions to operating lease assets totaled $0.5 million and $14.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Share-Based Payments:

The Company maintains a stock option ~~programs~~program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to ~~five-year~~five-year period. The fair value of shares vested ~~for both~~during the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 aggregated ~~$0.05 million.~~$0.11 million and $0.09 million, respectively. Compensation cost, net of forfeitures, is recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated based on historic trends. It is generally our policy to issue new shares upon exercise of stock options.

The following table sets forth information with respect to nonvested options for the nine ~~month period~~months ended September 30, ~~2017:~~2022:

	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant-Date Fair Value
Nonvested options – beginning of period		401,440		$	7.14		209,510		$	13.45
Nonvested options granted		7,000		$	8.04		—			—
Nonvested options vested or forfeited		(18,145	)	$	7.01		(10,460	)	$	12.14
Nonvested options – end of period		390,295		$	7.16		199,050		$	13.52

~~Share based~~

Page 12

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Share-based payment expense decreased income before income taxes by ~~$0.54~~$0.47 million and ~~$1.56~~$2.35 million for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~$0.28~~$0.71 million and ~~$0.70~~$2.16 million for the corresponding periods of the prior year. ~~Share based~~Share-based payment expense decreased income attributable to Inter Parfums, Inc. by ~~$0.29~~$0.34 million and ~~$0.86~~$1.52 million for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~$0.16~~$0.48 million and ~~$0.42~~$1.42 million for the corresponding periods of the prior year.

The following table summarizes stock option information as of September 30, ~~2017:~~2022:

Shares Weighted Average Exercise Price

Outstanding at January 1, 2017 684,540 $ 26.94
Options granted 7,000 35.72
Options forfeited (12,080 ) 29.70
Options exercised (44,140 ) 19.02

Outstanding at September 30, 2017 635,320 $ 27.54

Options exercisable 245,025 $ 25.13
Options available for future grants 1,086,735

~~Page 10~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2022		524,900		$	57.58
Options forfeited		(1,480	)		67.41
Options exercised		(45,205	)		40.16

Outstanding at September 30, 2022		478,215		$	59.20

Options exercisable		279,165		$	54.40
Options available for future grants		614,015

As of September 30, ~~2017,~~2022, the weighted average remaining contractual life of options outstanding is ~~3.23~~2.12 years ~~(1.99~~(1.76 years for options exercisable),; the aggregate intrinsic value of options outstanding and options exercisable is ~~$8.7~~$7.8 million and ~~$4.0~~$5.9 million, ~~respectively,~~respectively; and unrecognized compensation cost related to stock options outstanding aggregated ~~$2.2~~$1.9 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, ~~2017~~2022 and ~~September 30, 2016~~2021 were as follows:

(In thousands)	September 30, 2017		September 30, 2016		September 30, 2022		September 30, 2021

Cash proceeds from stock options exercised	$	839	$	1,235	$	1,816	$	1,727
Tax benefits		135		—		320		240
Intrinsic value of stock options exercised		804		947		2,105		1,562

The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, ~~2017 and 2016~~2021 were ~~$8.04 and $6.50~~$11.35 per share ~~respectively,~~ on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted.

There were no options granted during the nine months ended September 30, 2022. The assumptions used in the Black-Scholes pricing model for the ~~periods~~period ended September 30, ~~2017 and 2016 are~~2021 is set forth in the following table:

September 30,
2017 September 30,
2016

Weighted average expected stock-price volatility 29 % 33 %
Weighted average expected option life 5 years 5 years
Weighted average risk-free interest rate 1.9 % 1.4 %
Weighted average dividend yield 2.1 % 2.2 %

	September 30, 2021

Weighted average expected stock-price volatility		25	%
Weighted average expected option life		5 years
Weighted average risk-free interest rate		0.4	%
Weighted average dividend yield		1.6	%

Page 13

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Expected volatility is estimated based on historic volatility of the Company’s common stock. The expected term of the option is estimated based on historic data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout as authorized by the Board of Directors would increase as the earnings of the Company and its stock price ~~increases.~~continues to increase.

In ~~September 2016,~~December 2018, Interparfums SA ~~our 73% owned subsidiary in Paris,~~ approved a plan to grant an aggregate of ~~15,100~~26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The corporate performance conditions were met and therefore in June 2022, 211,955shares, adjusted for stock splits, were distributed. The aggregate cost of the grant of approximately $4.8 million was recognized as compensation cost on a straight-line basis over the requisite three-year service period.

In March 2022, Interparfums SA approved an additional plan to grant an aggregate of 88,400 shares to all Interparfums SA employees and corporate officers having more than six months of employment at grant date, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in ~~September 2019 so long~~June 2025 and will follow the same guidelines as the individual is employed by Interparfums SA at the time, and in the case of officers and managers, only to the extent that the performance conditions have been met. Once distributed, the shares will be unrestricted and the employees will be permitted to trade their shares.

~~Page 11~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~December 2018 plan.

The fair value of the grant ~~of €22.46 per share (approximately $26.50 per share) has~~had been determined based on the quoted ~~share~~stock price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant. The estimated number of shares to be distributed of ~~137,381~~66,905 has been determined taking into account employee turnover. The aggregate cost of the grant of ~~€3.1~~approximately $3.2 million ~~(approximately $3.7 million)~~ will be recognized as compensation cost ~~by Interparfums SA~~ on a straight-line basis over the requisite three and a quarter year service period. ~~For the nine months ended September 30, 2017, $0.9 million of compensation cost has been recognized in connection with this plan.~~

ToSimilar to the December 2018 plan, in order to avoid dilution of the Company’s ownership of Interparfums SA, all shares distributed or to be distributed pursuant to ~~this plan~~these plans will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. As of December 31, 2016, 108,348 shares have been acquired in the open market at an aggregate cost of $2.9 million, and such amount has been classified as an equity transaction on the accompanying balance sheet. No additional shares were purchased duringDuring the nine months ended September 30, ~~2017.~~2022, the Company acquired 63,281 shares at an aggregate cost of $3.0 million.

All share purchases and issuances have been classified as equity transactions on the accompanying balance sheet.

Page 14

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.10.

Net Income Attributable to Inter Parfums, Inc. Common Shareholders:

Net income attributable to Inter Parfums, Inc. per common share (“basic EPS”) is computed by dividing net income attributable to Inter Parfums, Inc. by the weighted average number of shares outstanding. Net income attributable to Inter Parfums, Inc. per share assuming dilution (“diluted EPS”), is computed using the weighted average number of shares outstanding, plus the incremental shares outstanding assuming the exercise of dilutive stock options using the treasury stock method.

The reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows:


	Three months ended				Nine months ended				Three months ended				Nine months ended
(In thousands)	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2022		2021		2022		2021
Numerator:
Net income attributable to Inter Parfums, Inc.	$	17,077	$	16,239	$	37,194	$	29,404	$	41,422	$	38,316	$	104,339	$	88,635
Denominator:
Weighted average shares		31,175		31,080		31,163		31,058		31,860		31,659		31,848		31,648
Effect of dilutive securities:
Stock options		132		91		118		80		108		148		128		145
Denominator for diluted earnings per share		31,307		31,171		31,281		31,138		31,968		31,807		31,976		31,793

Earnings per share:
Net income attributable to Inter Parfums, Inc. common shareholders:
Basic	$	0.55	$	0.52	$	1.19	$	0.95	$	1.30	$	1.21	$	3.28	$	2.80
Diluted		0.55		0.52		1.19		0.94		1.30		1.20		3.26		2.79

Not included in the above computations isare the effect of antidilutive potential common shares which consist of outstanding options to purchase ~~0.22 million shares and 0.31~~0.15 million shares of common stock for ~~the~~both three and nine months ended September 30, ~~2017~~2022, as compared to 0.17 and ~~2016, respectively, and 0.15 million and 0.25~~0.23 million shares of common stock for the three and nine months ended September 30, ~~2017 and 2016,~~2021, respectively.

Page 12 15

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

9.11.

Segment and Geographic Areas:

The Company manufactures and distributes one product line, fragrances and fragrance related products. The Company manages its business in two segments, European based operations and United States based operations. The European assets are located, and operations are primarily conducted, in France. Both European operations and United States operations primarily represent the sale of prestige brand name fragrances.

Information on our operations by geographical areas is as follows:

(In thousands)	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,					Nine months ended September 30,
	2017			2016			2017			2016			2022			2021		2022			2021
Net sales:
United States	$	35,690		$	34,251		$	81,977		$	82,197		$	82,183		$	56,382	$	229,129		$	142,089
Europe		134,639			123,405			361,172			304,217			198,318			206,087		546,787			527,004
Eliminations		(798	)		(34	)		(1,424	)		(113	)		(39	)		227		(51	)		(296	)

	$	169,531		$	157,622		$	441,725		$	386,301		$	280,462		$	262,696	$	775,865		$	668,797

Net income attributable to Inter Parfums, Inc.:
United States	$	3,668		$	2,850		$	5,134		$	4,804		$	10,881		$	8,391	$	27,386		$	18,668
Europe		13,409			13,389			32,060			24,600			30,542			29,925		76,953			69,967

	$	17,077		$	16,239		$	37,194		$	29,404		$	41,423		$	38,316	$	104,339		$	88,635

(In thousands) September 30, December 31,
2017 2016
Total Assets:
United States $ 98,747 $ 89,930
Europe 676,519 602,077
Eliminations of investment in subsidiary (9,593 ) (9,598 )

$ 765,673 $ 682,409

~~10.~~

~~Other Matters~~

	September 30,			December 31,
	2022			2021
Total Assets:
United States	$	280,270		$	247,703
Europe		858,342			931,735
Eliminations		(27,418	)		(34,074	)
	$	1,111,194		$	1,145,364

~~License Renewal:~~

In May 2017, the Company, through its majority owned Paris based subsidiary, Interparfums SA, renewed its license agreement for an additional four years with Paul Smith for the creation, development, and distribution of fragrance products through December 2021, without any material changes in terms and conditions. Our initial 12-year license agreement with Paul Smith was signed in 1998, and had previously been extended through December 31, 2017.

Page 13 16

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Buyout of License:~~

In December 2016, the Company reached an agreement with the Balmain brand calling for Balmain to buyout the Balmain license agreement, effective December 31, 2016, in exchange for a payment aggregating $5.9 million. As a result of the buyout, the Company recognized a gain of $4.7 million as of December 31, 2016, and received the buyout payment in May 2017. As of March 31, 2017, the three month inventory sell-off period concluded and Balmain purchased all remaining inventory aggregating $1.4 million.

~~Settlement with French Tax Authorities:~~

As previously reported, the French Tax Authorities examined the 2012 tax return of Interparfums SA, and in August 2015 issued a $6.9 million tax adjustment. The main issues challenged by the French Tax Authorities related to the commission rate and royalty rate paid to Interparfums Singapore Pte. and Interparfums (Suisse) SARL, respectively. Due to the subjective nature of the issues involved, in April 2016, Interparfums SA reached an agreement in principle to settle the entire matter with the French Tax Authorities. The settlement required Interparfums SA to pay a tax assessment of $1.9 million covering the issues for not only the 2012 tax year, but also covering the issues for the tax years ended 2013 through 2015. The settlement, which was finalized by the French Tax Authorities in the first quarter of 2017, was accrued in March 2016.

~~11.~~

~~Subsequent Event~~

In 2012, the French government introduced a 3% tax on dividends or deemed dividends for entities subject to French corporate income tax. On October 6, 2017 the French Constitutional Court released a decision declaring that the 3% tax on dividends or deemed dividends is unconstitutional. As a result of that decision, the Company has filed a claim for refund of approximately $3.3 million (€2.8 million) for these taxes paid since 2015. The French government has not yet determined if, how, or when they will reimburse companies who have filed claims. There is even discussion of additional tax measures to offset this cost. Therefore, due to the unknown factors involved in the potential reimbursement of the claim, the Company did not recognize the refund claim in the accompanying financial statements as of September 30, 2017. The Company will continue to monitor future events as they relate to this matter.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Item 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Information

Statements in this report which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases, you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. You should not rely on forward-looking statements because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and “Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, ~~2016~~2021, and the reports Inter Parfums files from time to time with the Securities and Exchange Commission. Inter Parfums does not intend to and undertakes no duty to update the information contained in this report.

~~Regulation S-K Item 10(e)~~

Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in commission filings,” prescribes the conditions for use of non-GAAP financial information in commission filings. Our reported results for the nine months ended September 30, 2016, include a provision of $1.9 million ($1.4 million net of noncontrolling interests) for income taxes resulting from a nonrecurring tax settlement. Due to the significance of this transaction, as well as its nonrecurring nature, exclusion of such amount in the non-GAAP financial measures provides a more complete disclosure and facilitates a more accurate comparison of current results to historic results. Based upon the foregoing, we believe that our presentation of the non-GAAP financial information beginning on page 27 of this Form 10-Q is an important supplemental measure of operating performance to investors.

Overview

We operate in the fragrance business, and manufacture, market and distribute a wide array of fragrances and fragrance related products. We manage our business in two segments, European based operations and United States based operations. Certain prestige fragrance products are produced and marketed by our European operations through our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 27% 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 ~~82%~~70% and 79% of net sales for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. We have built a portfolio of prestige brands, which includeBoucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, ~~Paul Smith, Repetto, Rochas,~~ S.T. Dupont, Rochas andVan Cleef & Arpels, whose products are distributed in over ~~100~~120 countries around the world.

~~Page 15~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

With respect to our largest brands, we own the Lanvin brand name for its class of trade, and license the Montblanc and Jimmy Choo brand names; for the nine months ended September 30, 2017, sales of product for these brands represented 12%, 22%, and 20% of net sales, respectively.

Through our United States operations, we also market fragrance and fragrance related products. United States operations represented ~~18%~~30% and 21% of net sales for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of theAbercrombie & Fitch, ~~Agent Provocateur,~~ Anna Sui, ~~bebe, Dunhill, French Connection,~~Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Rentaand~~Shanghai Tang~~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, Coach, Jimmy Choo and GUESS brand names.

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INTER PARFUMS, INC. AND SUBSIDIARIES

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

	Nine Months Ended September 30,
	2022			2021

Montblanc		19	%		20	%
Jimmy Choo		18	%		19	%
Coach		15	%		17	%
GUESS		11	%		10	%

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 ~~as well as through our own distribution subsidiaries in Italy, Germany, Spain~~ and the United States.

We grow our business in two distinct ways. First, we grow 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 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. Our introduction of new products may have some cannibalizing effect on sales of existing products, which we take into account in our business planning.

Our business is not capital intensive, and it is important to note that we do not own manufacturing facilities. We act as a general contractor and source our needed components from our suppliers. These components are received at one of our distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers.

As with any global business, many aspects of our operations are subject to influences outside our control. We believe we have a well diversified and strong brand portfolio with global reach and potential. As part of our strategy, we also plan to continue to make investments behind fast-growing markets and channels to grow market share.

For the past several years, the economic and political uncertainty and financial market volatility in Eastern Europe, the Middle East and China had a minor negative impact on our business, however our sales in these regions have been improving and we do not anticipate dramatic changes in business conditions for the foreseeable future. However, if the degree of uncertainty or volatility worsens or is prolonged, then there will likely be a negative effect on ongoing consumer confidence, demand and spending and accordingly, our business. We believe general economic and other uncertainties still exist in select markets in which we do business, and we monitor these uncertainties and other risks that may affect our business.

~~Page 16~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

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, ~~gross margins~~earnings are positively affected by a strong dollar, because almost ~~45%~~50% of net sales of our European operations are denominated in U.S. dollars, while almost all costs of our European operations are incurred in euro. Conversely, a weak U.S. dollar has a favorable impact on our net sales while gross margins are negatively affected. ~~Our Company addresses~~We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial ~~instruments. We~~instruments and primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.

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INTER PARFUMS, INC. AND SUBSIDIARIES

The Russian invasion of Ukraine has negatively impacted our operations in both Russia and Ukraine. Since the invasion, we have been following regulations and sanctions which vary by country. In fiscal 2021, our operations in Ukraine and Russia accounted for approximately 4% of consolidated net sales. Future impacts on our business, including sanctions and counter-sanctions, are difficult to predict due to the high level of uncertainty as to how these developments will evolve.

We are ~~also carefully~~ monitoring ~~currency trends in~~ the ~~United Kingdom~~effects of this conflict, including the risks that may affect our business, and expect that we will adjust our plans accordingly as ~~a result of~~ the ~~volatility created from the United Kingdom’s decision to exit the European Union.~~situation progresses. We ~~have evaluated our current pricing models and currently we~~ do not expect any material credit losses as most of our receivables on sales to Russia and Ukraine are covered by insurance or are being paid in advance.

For the nine months ended September 30, 2022, the activities related to Russia and Ukraine did not have a material impact on our consolidated financial statements.

Impact of COVID-19 Pandemic

A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic. In response, various national, state, and local governments issued decrees prohibiting certain businesses from operating and certain classes of workers from reporting to work.

Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant ~~pricing changes. However, if~~unfavorable impact on our results of operations in 2020.

Business significantly improved in the ~~devaluation~~second half of 2020 and continued to improve throughout 2021 and thus far in 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 ~~British Pound worsens, it may affect future gross profit margins~~world has caused the temporary re-implementation of governmental restrictions to prevent further spread of the virus. In addition, international air travel remains curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. While COVID-19 has significantly restricted international travel, the travel retail business is beginning to pick up. 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 ~~sales in that territory.~~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.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Recent Important Events

~~Subsequent Event~~Salvatore Ferragamo

In ~~2012,~~October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the ~~French government introduced a 3% tax on dividends or deemed dividends for entities~~production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to ~~French corporate income tax. On~~certain minimum advertising expenditures and royalty payments as are customary in our industry. The license became effective in October ~~6, 2017~~2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.

With respect to the ~~French Constitutional Court released a decision declaring that~~management and coordination of activities related to the ~~3% tax on dividends or deemed dividends is unconstitutional. As a result of that decision,~~license agreement, the Company ~~has filed~~operates through a ~~claim~~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 ~~refund of approximately $3.3 million (€2.8 million) for these taxes paid since 2015.~~ as an asset acquisition.

The French government has not yet determined if, how, or when they will reimburse companies who have filed claims. There is even discussion of additional tax measures to offset this cost. Therefore, due tofollowing table summarizes the ~~unknown factors involved in the potential reimbursement~~estimated fair values of the ~~claim,~~assets acquired and liabilities assumed on October 1, 2021. All amounts have been translated to U.S. dollars at the ~~Company did not recognize the refund claim in the accompanying financial statements as of September 30, 2017. The Company will continue to monitor future events as they relate to this matter.~~October 1, 2021 exchange rate.

(In thousands)

Inventories	$	17,805
Trademarks and licenses		15,880
Other assets		3,033

Assets acquired		36,718

Liabilities assumed		(958	)
Total consideration	$	35,760

~~License Renewal~~Emanuel Ungaro

In ~~May 2017, the Company, through its majority owned Paris based subsidiary, Interparfums SA, renewed its license~~October 2021, we also entered into a 10-year exclusive global licensing agreement ~~for an additional four years~~a with ~~Paul Smith~~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 ~~through December 2021, without any material changes~~under the Emanuel Ungaro brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in ~~terms and conditions. Our initial 12-year license agreement with Paul Smith was signed in 1998, and had previously been extended through December 31, 2017.~~our industry.

~~Buyout of License~~Donna Karan and DKNY

In ~~December 2016,~~September 2021, we entered into a long-term global licensing agreement for the ~~Company reached an~~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 ~~Balmain brand calling for Balmain~~grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to ~~buyout~~ the ~~Balmain~~licensor. The exclusive license ~~agreement,~~became effective ~~December 31, 2016,~~July 1, 2022, and we are planning to launch new fragrances under these brands in exchange for a payment aggregating $5.7 million. As a result of the buyout, the Company recognized a gain of $4.7 million as of December 31, 2016, and received the buyout payment in May 2017. As of March 31, 2017, the three month inventory sell-off period concluded and Balmain purchased all remaining inventory aggregating $1.4 million.2024.

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INTER PARFUMS, INC. AND SUBSIDIARIES

~~Settlement with French Tax Authorities~~Land and Building Acquisition – Future Headquarters in Paris

~~As previously reported, the French Tax Authorities examined the 2012 tax return of~~In April 2021, Interparfums SA, our 73% owned French Subsidiary, completed the acquisition of its headquarters at 10 rue de Solférino in the 7^th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.

The purchase price includes the complete renovation of the site and includes the purchase of several apartments in ~~August 2015 issued a $6.9~~the surrounding area to be used as additional office space. As of September 30, 2022, $135.5 million ~~tax adjustment.~~of the purchase price, including approximately $4.1 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2022. The ~~main issues challenged by the French Tax Authorities related~~purchase price has been allocated approximately $55.9 million to land and $79.6 million to the ~~commission rate and royalty rate paid to Interparfums Singapore Pte. and Interparfums (Suisse) SARL, respectively. Due to~~building. The building, which was delivered on February 28, 2022, includes the ~~subjective nature~~building structure, development of the ~~issues involved,~~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 ~~April 2016, Interparfums SA reached an agreement~~escrow is included in ~~principle to settle~~property, equipment and leasehold improvements on the ~~entire matter~~accompanying balance sheet as of September 30, 2022.

The acquisition was financed by a 10-year €120 million (approximately $117 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 ~~the French Tax Authorities. The settlement required Interparfums SA to pay~~ a ~~tax assessment~~maximum rate of $1.9 million covering the issues for not only the 2012 tax year, but also covering the issues for the tax years ended 2013 through 2015. The settlement, which was finalized by the French Tax Authorities in the first quarter of 2017, was accrued in March 2016.2% per annum.

Discussion of Critical Accounting Policies

~~We make estimates and assumptions in the preparation of~~Information regarding 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~~can be found in 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 estimates2021 Annual Report on Form 10-K filed with the ~~Audit Committee of the Board of Directors.~~

~~Revenue Recognition~~

We sell our products to department stores, perfumeries, specialty stores, and domestic and international wholesalers and distributors. Sales of such products by our domestic subsidiaries are denominated in U.S. dollars and sales of such products by our foreign subsidiaries are primarily denominated in either euro or U.S. dollars. We recognize revenues when merchandise is shipped and the risk of loss passes to the customer. Net sales are comprised of gross revenues less returns, trade discounts and allowances.

~~Accounts Receivable~~

Accounts receivable represent payments due to the Company for previously recognized net sales, reduced by allowances for sales returns and doubtful accounts. Accounts receivable balances are written-off against the allowance for doubtful accounts when they become uncollectible. Recoveries of accounts receivable previously recorded against the allowance are recorded in the consolidated statement of income when received. We generally grant credit based upon our analysis of the customer’s financial position as well as previously established buying patterns.

~~Page 18~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Sales Returns~~

Generally, we do not permit customers to return their unsold products. However, for U.S. distribution of our prestige products, we allow returns if properly requested, authorized and approved. We regularly review and revise, as deemed necessary, our estimate of reserves for future sales returns based primarily upon historic trends and relevant current data, including information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that we have considered, and will continue to consider, include, but are not limited to, the financial condition of our customers, store closings by retailers, changes in the retail environment and our decision to continue to support new and existing products. We record estimated reserves for sales returns as a reduction of sales, cost of sales and accounts receivable. Returned products are recorded as inventories and are valued based upon estimated realizable value. The physical condition and marketability of returned products are the major factors we consider in estimating realizable value. Actual returns, as well as estimated realizable values of returned products, may differ significantly, either favorably or unfavorably, from our estimates, if factors such as economic conditions, inventory levels or competitive conditions differ from our expectations.

~~Inventories~~

Inventories are stated at the lower of cost and net realizable value. Cost is principally determined by the first-in, first-out method. We record adjustments to the cost of inventories based upon our sales forecast and the physical condition of the inventories. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions or competitive conditions differ from our expectations.

~~Equipment and Other Long-Lived Assets~~

Equipment, which includes tools and molds, is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in circumstances such as technological advances, changes to our business model or changes in our capital spending strategy can result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of equipment should be shortened, we would depreciate the net book value in excess of the salvage value, over its revised remaining useful life, thereby increasing depreciation expense. Factors such as changes in the planned use of equipment, or market acceptance of products, could result in shortened useful lives.

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 6.2%. 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.

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable and currently no impairment indicators exist for our indefinite-lived intangible assets. 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, 2016 indefinite-lived intangible assets aggregated approximately $116 million. The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2016 assuming all other assumptions remained constant:

$ in millions Increase (decrease)
Change to fair value

Weighted average cost of capital +10 % $ (16.2 )
Weighted average cost of capital -10 % $ 20.0
Future sales levels +10 % $ 17.0
Future sales levels -10 % $ (17.0 )

Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is recorded. If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment charge would be recorded to reduce the intangible asset to its fair value. The cash flow projections are based upon a number of assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature. In those cases where we determine that the useful life of long-lived assets should be shortened, we would amortize the net book value in excess of the salvage value (after testing for impairment as described above), over the revised remaining useful life of such asset thereby increasing amortization expense. We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable.

In determining the useful life of our Lanvin brand names and trademarks, we applied the provisions of ASC topic 350-30-35-3. The only factor that prevented us from determining that the Lanvin brand names and trademarks were indefinite life intangible assets was Item c. “Any legal, regulatory, or contractual provisions that may limit the useful life.” The existence of a repurchase option in 2025 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.

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

With respect to the application of ASC topic 350-30-35-8, the Lanvin brand names and trademarks would only have a finite life to our Company if the repurchase option were exercised, and in applying ASC topic 350-30-35-8, we assumed that the repurchase option is exercised. When exercised, Lanvin has an obligation to pay the exercise price and the Company would be required to convey the Lanvin brand names and trademarks back to Lanvin. The exercise price to be received (Residual Value) is well in excess of the carrying value of the Lanvin brand names and trademarks, therefore no amortization is required.

~~Derivatives~~

We account for derivative financial instruments in accordance with ASC topic 815, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. This topic also requires the recognition of all derivative instruments as either assets or liabilities on the balance sheet and that they are measured at fair value.

We currently use derivative financial instruments to hedge certain anticipated transactions and interest rates, as well as receivables denominated in foreign currencies. We do not utilize derivatives for trading or speculative purposes. Hedge effectiveness is documented, assessed and monitored by employees who are qualified to make such assessments and monitor the instruments. Variables that are external to us such as social, political and economic risks may have an impact on our hedging program and the results thereof.

~~Income Taxes~~

The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements or tax returns. The net deferred tax assets assume sufficient future earnings for their realization, as well as the continued application of currently anticipated tax rates. Included in net deferred tax assets is a valuation allowance for deferred tax assets, where management believes it is more-likely-than-not that the deferred tax assets will not be realized in the relevant jurisdiction. If the Company determines that a deferred tax asset will not be realizable, an adjustment to the deferred tax asset will result in a reduction of net income at that time. In addition, the Company follows the provisions of uncertain tax positions as addressed in ASC topic 740.

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~SEC.

Results of Operations

Three and Nine Months Ended September 30, ~~2017~~2022 as Compared to the Three and Nine Months Ended September 30, ~~2016~~2021

Net Sales:

(in millions)	Three months ended September 30,							Nine months ended September 30,
	2022		2021		% Change			2022		2021		% Change

European based product sales	$	198.3	$	206.1		(4	%)	$	546.7	$	527.0		4	%
United States based product sales		82.2		56.6		45	%		229.2		141.8		62	%
	$	280.5	$	262.7		7	%	$	775.9	$	668.8		16	%

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~~Net Sales~~INTER PARFUMS, INC. AND SUBSIDIARIES

(In millions)
Three months ended
September 30,

Nine months ended
September 30,

2017 2016 % Change 2017 2016 % Change
(in millions)
European based brand product sales $ 134.6 $ 123.4 9.1 % $ 361.0 $ 304.1 18.7 %
United States based product sales 34.9 34.2 2.0 % 80.7 82.2 (1.8 )%
Total net sales $ 169.5 $ 157.6 7.6 % $ 441.7 $ 386.3 14.3 %

Net sales for the three months ended September 30, ~~2017~~2022, increased ~~7.6% to $169.5 million, as compared to $157.6 million for~~7% from the ~~corresponding period of the prior year.~~three months ended September 30, 2021. At comparable foreign currency exchange rates, net sales increased ~~5.2%.~~12% from the third quarter of 2021 of which 9% is related to new brands. The average dollar/euro exchange rate for the current third quarter was 1.01 compared to 1.18 in the third quarter of 2021, while for the nine months ended September 2022 the average dollar/euro exchange rate was 1.06 compared to 1.19 in the nine months ended September 2021. Net sales for the nine months ended September 30, ~~2017~~2022, increased ~~14.3% to $441.7 million,~~16% as compared to ~~$386.3 million for~~ the ~~corresponding period of the prior year. There was no discernible effect on net sales from changes in~~nine months ended September 2021. At comparable foreign currency exchange rates, net sales increased 21% from the nine months ended September 2021 of which 8% is related to new brands.

Despite supply chain disruptions, inflation, lockdowns, transportation issues, the strength of the dollar, sanctions, the slow recovery of international travel, logistics difficulties in the U.S. caused by a change in shipping software by our local partner in the first half of this year, and the war in Eastern Europe, 2022 is proving to be an exceptionally strong year for us on both sides of the Atlantic. Our U.S. operations growth was substantially due to the incremental sales of Ferragamo, Donna Karan and DKNY. New flankers which launched this year includes Away by Abercrombie & Fitch, and Wave X by Hollister.

For the three months ended September 30, 2022, the surge in the dollar masked the gains by our leading brands within our European operations. Montblanc, for example, net sales declined by 6% in dollars but grew 10% in euro. Similarly, Jimmy Choo brand sales rose 12% in dollars and 32% in euro, while Coach sales decreased 12% in dollars and grew 3% in euros. In fact, in total, our European operations generated sales growth of 12% in euro but decreased 4% in dollars. This year, we launched Coach Open Road and Jimmy Choo I Want Choo Forever, along with the continued rollouts of the Moncler duo and Montblanc Legend Red, Jimmy Choo Man Aqua, Lanvin Mon Éclat, Kate Spade Sparkle and Coach Wild Rose.

The favorable trends in the first half continued into the third quarter and we look forward to executing our plans for the ~~nine month period.~~remainder of the year. Our brands are in high demand in a robust environment for the fragrance industry. We have a number of new product launches in the fourth quarter of the year, including Cosmic Sky for Anna Sui, Ferragamo AMO Oriental Wood and Signorina Limited Edition for U.S. operations. In addition, during the fourth quarter of the year, we will continue the distribution of existing Donna Karan and DKNY fragrances. For European operations, Kate Spade Cherie and a new member of the Collection Extraordinaire by Van Cleef & Arpels will debut. In sum, 2022 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds.

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INTER PARFUMS, INC. AND SUBSIDIARIES

*Net Sales to Customers by Region*	Nine months ended September 30,
(In millions)	2022		2021

North America	$	284.7	$	273.4
Western Europe		196.3		146.8
Asia		120.2		97.8
Middle East		66.3		46.8
Central and South America		56.2		43.8
Eastern Europe		45.6		54.0
Other		6.6		6.2
	$	775.9	$	668.8

Our U.S. distribution subsidiary for European based ~~product~~products had encountered shipping related issues following a change in the distribution software by its logistics partner in the first half of 2022. Although those issues have been resolved, U.S. sales of European brands were negatively impacted. As a result, sales in our largest market, North America, rose only 4% as compared to Western Europe and Asia where comparable sales increased ~~9.1%~~34% and ~~18.7%~~23%, respectively. Our sales in the Middle East, and Central and South America, were also robust, up 41% and 28%, respectively. Only sales in Eastern Europe declined owing to the war in Ukraine.

Gross Profit margin	Three months ended						Nine months ended
	September 30,						September 30,
(in millions)	2022			2021			2022			2021

European operations
Net sales	$	198.2		$	206.1		$	546.7		$	527.0
Cost of sales		60.5			68.7			176.1			177.4
Gross margin	$	137.7		$	137.4		$	370.6		$	349.6
Gross margin as a % of net sales		69.5	%		66.6	%		67.8	%		66.3	%

United States operations
Net sales	$	82.2		$	56.6		$	229.1		$	141.8
Cost of sales		38.0			26.6			105.4			66.4
Gross margin	$	44.2		$	30.0		$	123.7		$	75.4
Gross margin as a % of net sales		53.8	%		53.1	%		54.0	%		53.2	%

For European based operations, gross profit margin as a percentage of net sales was 69.5% and 67.8% for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~the corresponding periods of the prior year. Montblanc, our largest brand, generated sales of $37.2 million~~66.6% and $99.0 million for the three and nine months ended September 30, 2017, respectively, representing an increase of 13% and 5%, as compared to the corresponding periods of the prior year. The 5% increase in nine month 2017 Montblanc product sales reflects the difficult period comparison, as we achieved a 23% increase in 2016 nine months sales when we launched our highly successful scent,~~Montblanc Legend Spirit~~. Our second largest brand, Jimmy Choo, generated sales of $28.2 million and $87.6 million for the three and nine months ended September 30, 2017, respectively, representing an increase of 3% and 24%, as compared to the corresponding periods of the prior year. The increase is due to two recent extensions,~~Jimmy Choo L’Eau~~ ~~for women and~~~~Jimmy Choo Man Ice,~~as well as from solid sales of the brand’s established collections for men and women. Lanvin brand sales, although down 8% for the 2017 third quarter, are up 14% year-to-date resulting from gains in the brand’s best performing product line,~~Éclat d’Arpège,~~ ~~coupled with the international launch of~~~~Modern Princess~~~~. Lanvin brand sales aggregated $19.4 million and $52.4 million for the three and nine months ended September 30, 2017, respectively.~~

The excellent performance of our two newest brands, Coach and Rochas, is especially gratifying. Coach brand sales rose 34% over the comparable period last year and aggregated $18.6 million and $35.2 million for the three and nine months ended September 30, 2017, respectively. Strong sales of the Coach women’s line which rolled out in 2016, combined with the recent launch of the brand’s signature scent for men, generated the exceptional brand sales growth. Rochas fragrance sales aggregated $9.3 million and $29.6 million for the three and nine months ended September 30, 2017, respectively, representing an increase of 33% and 32%, as compared to the corresponding periods of the prior year. The dramatic increase in Rochas fragrance sales was primarily attributable to the strength of the~~Eau de Rochas~~ ~~line and the successful rollout of~~~~Mademoiselle Rochas~~ ~~in approximately fifteen markets thus far.~~

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

United States based product sales increased 2.0% and decreased 1.8% for the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods of the prior year. The quarterly and year-to-date comparisons are particularly difficult because in the second quarter of 2016, we commenced international distribution of our first ever Abercrombie & Fitch men’s scent~~First Instinct~~ ~~and the Hollister fragrance duo,~~~~Wave~~~~. The 2017 third quarter included initial shipments of~~~~Icon Racing~~ ~~by Dunhill and~~~~Fantasia~~ ~~by Anna Sui, which are expected to energize sales by U.S. operations for the remainder of the year.~~

We maintain confidence in our future and we have strengthened advertising and promotional investments supporting most portfolio brands and accelerated brand development. We plan to continue to build upon the strength of our brands and our worldwide distribution network.

Net Sales to Customers by Region Nine months ended September 30,
(In millions) 2017 2016

North America $ 122.3 $ 106.4
Western Europe 121.8 115.5
Asia 70.5 61.9
Middle East 41.6 33.8
Central and South America 42.4 35.0
Eastern Europe 35.5 25.0
Other 7.6 8.7
$ 441.7 $ 386.3

Virtually all regions registered strong growth for the nine months ended September 30, 2017, as compared to the corresponding period of the prior year. Some of the strongest performing regions were the laggards of recent years, namely Eastern Europe, the Middle East and Asia which increased 42%, 23% and 14%, respectively. Our largest markets, North America and Western Europe increased 15% and 6%, respectively.

Gross margin Three months ended
September 30, Nine months ended
September 30,
(In millions) 2017 2016 2017 2016

Net sales $ 169.5 $ 157.6 $ 441.7 $ 386.3
Cost of sales 66.0 62.8 164.2 145.7

Gross margin $ 103.5 $ 94.8 $ 277.5 $ 240.6
Gross margin as a percent of net sales 61 % 60 % 63 % 62 %

~~Gross profit margin was 61% and 63% of net sales for the three and nine months ended September 30, 2017, as compared to 60% and 62%~~66.3% for the corresponding periods of the prior year. ~~For European operations, gross profit margin was 65% and 66% for the three and nine months ended September 30, 2017, as compared to 64% and 66% for the corresponding periods of the prior year.~~

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

We carefully monitor movements in foreign currency exchange rates as almost ~~45%~~50% of our European based operations net sales ~~are~~is denominated in U.S. dollars, while most of our costs are incurred in euro. From a margin standpoint, a strong U.S. dollar has a positive effect on our gross ~~profit~~ margin while a weak U.S. dollar has a negative effect. The average dollar/euro exchange rate was 1.01 in the 2022 third quarter compared to 1.18 in the third quarter of 2021. The margin gains in 2022 are primarily the result of the stronger U.S. dollar. Our pricing actions as well as favorable mix, resulting from less giftset sales compared to the prior year, also added to our gross margin gains, however, increased transportation and component costs offset much of those benefits.

As previously mentioned, supply chain disruptions affecting the procurement of components, the ability to transport goods, and related cost increases have and are expected to continue to have a negative impact on sales and gross margin. We have been addressing these issues and have implemented processes to mitigate the potential impact.

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INTER PARFUMS, INC. AND SUBSIDIARIES

For United States operations, gross profit margin was 53.8% and 54.0% for the three and nine months ended September 30, ~~2017 was 1.17 and 1.11,~~2022, respectively, as compared to 1.12 for both corresponding periods of the prior year giving rise to a slight decrease in gross margin as a percentage of sales for the three months ended September 30, 2017. This decrease however, was mitigated by increased gross margins from higher product sales made directly to retailers through our own distribution subsidiaries. Increased sales of Rochas brand fragrances was a major contributor as its sales are concentrated in France53.1% and ~~Spain, both of which are countries where we distribute directly to retailers.~~

~~For U.S. operations, gross profit margin was 47% and 48% for the three and nine months ended September 30, 2017, respectively, as compared to 47% and 49%~~53.2% for the corresponding periods of the prior year. The ~~decrease~~increase in sales for the nine months ended September 30, ~~2017 is primarily~~2022, as compared to the ~~result~~corresponding period of ~~a decline in sales~~the prior year, allowed us to better absorb fixed expenses such as depreciation and point of ~~higher margin prestige products for Abercrombie & Fitch~~sale expenses, and ~~Hollister.~~we also benefited from favorable giftset mix.

Generally, we do not bill customers for shipping and handling costs, and such costs, which aggregated ~~$1.8~~$5.5 million and ~~$4.3~~$11.0 million for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~$1.7~~$3.3 million and ~~$3.9~~$7.1 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 other companies, which may include these expenses as a component of cost of goods sold.

Selling, general and administrative expenses	Three months ended September 30,						Nine months ended September 30,						Three months ended						Nine months ended,
													September 30,						September 30,
(In millions)	2017			2016			2017			2016			2022			2021			2022			2021

European Operations
Selling, general and administrative expenses	$	70.3		$	62.5		$	203.7		$	179.3		$	83.4		$	79.9		$	231.2		$	210.2
Selling, general and administrative expenses as a percent of net sales		41	%		40	%		46	%		46	%		42.1	%		38.8	%		42.3	%		39.9	%

United States Operations
Selling, general and administrative expenses													$	34.0		$	19.9		$	92.1		$	52.2
Selling, general and administrative expenses as a percent of net sales														41.4	%		35.1	%		40.2	%		36.8	%

~~Selling,~~For European operations, selling, general and administrative expenses increased ~~12%~~4.4% and ~~14%~~10.0% for the three and nine months ended September 30, ~~2017, respectively,~~2022, as compared to the corresponding ~~periods~~period of the prior ~~year. Selling, general~~year, and ~~administrative expenses were 41%~~represented 42.1% and ~~46%~~42.3% of net sales for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~40%~~38.8% and ~~46% for the corresponding periods of the prior year. For European operations, selling, general and administrative expenses increased 16% and 18%~~39.9% for the three and nine months ended September 30, ~~2017, as compared to the corresponding periods of the prior year~~2021, respectively. For United States operations, selling, general and ~~represented 44%~~administrative expenses increased 71.1% and ~~48% of sales~~76.5% for the three and nine months ended September 30, ~~2017,~~2022, as compared to ~~41% and 48% for~~ the corresponding ~~periods~~period of the prior ~~year. For U.S. operations, selling, general~~year, and ~~administrative expenses were 32%~~represented 41.4% and ~~39% of sales for the three and nine months ended September 30, 2017, as compared to 34% and 40% for the corresponding periods of the prior year.~~

~~Promotion and advertising represented 15% and 18%~~40.2% of net sales for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~13%~~35.1% and ~~16%~~36.8% for the three and nine months ended September 30, 2021, respectively. As discussed in more detail below, the increased selling, general and administrative expenses as a percent of net sales are primarily the result of increases in promotion and advertising expenditures. Additionally, as the US based operations have been growing, expenses related to salaries and benefits has grown more rapidly as we build the organization to support the growth.

Promotion and advertising included in selling, general and administrative expenses aggregated $44.8 million and $124.9 million for the three and nine months ended September 30, 2022, respectively, as compared to $40.3 million and $95.3 million for the corresponding periods of the prior year. Promotion and advertising represented 16.0% and 16.1% of net sales for the three and nine months ended September 30, 2022, respectively, as compared to 15.3% and 14.2% for the corresponding periods of the prior year. Throughout 2021, sales rebounded far more rapidly than originally anticipated causing us to play catchup with promotional and adverting programs throughout the 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 online net 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. We anticipate that on a full year basis, promotion and advertising expenditures will aggregate approximately 21% of net sales, which is in line with pre-COVID historical averages.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Royalty expense included in selling, general and administrative expenses aggregated ~~$26.2~~$23.1 million and ~~$79.6~~$61.4 million for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~$20.8~~$20.5 million and $61.9 million for the corresponding periods of the prior year. The increase in 2017 is the result of expenditures incurred within our European operations in connection with new product launches in 2017. We have significant promotion and advertising programs underway for the final quarter of 2017, and anticipate that on a full year basis, promotion and advertising expenditure will aggregate approximately 21% of 2017 net sales.

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

Royalty expense included in selling, general and administrative expenses aggregated $11.2 million and $29.2 million for the three and nine months ended September 30, 2017, respectively, as compared to $11.1 million and $27.7$52.0 million for the corresponding periods of the prior year. Royalty expense represented ~~6.6%~~8.3% and 7.9 % of net sales for both the three and nine months ended September 30, 2017, as compared to 7.0% and 7.2% of net sales for the corresponding periods of the prior year. The decline in royalty expense as a percentage of sales relates primarily to a lower minimum guaranteed royalty in the renewal of the S.T. Dupont license and the exit from the Balmain license.

~~Service fees relating to the activities of our distribution subsidiaries aggregated $2.9 million and $8.2 million~~ for the three and nine months ended September 30, ~~2017, respectively,~~2022, as compared to ~~$2.7 million and $7.2 million~~7.8% of net sales for both the corresponding periods of the prior year. AsRoyalty expense as a percentage of net sales ~~service fees represented 1.7% and 1.9% for~~increased in 2022 as the ~~three and nine months ended September 30, 2017, unchanged~~mix of sales with a royalty basis has increased year over year.

Income from ~~that of the corresponding periods of the prior year.~~Operations

As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, income from operations increased 20% to $73.8 million for the nine months ended September 30, 2017, as compared to $61.3 million for the corresponding period of the prior year. For the three months ended September 30, 2017, income from operations increased 3% to $33.2 million, as compared to $32.3 million for the corresponding period of the prior year. Operatingour operating margins ~~were 20%~~aggregated 23.0% and ~~17% of net sales~~22.1% for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~20%~~25.7% and ~~16%~~24.0% for the corresponding periods of the prior year.

Other Income and Expense

~~Interest~~Traditionally, interest expense aggregated $0.5 million and $1.5 million for the three and nine months ended September 30, 2017, respectively, as compared to $0.5 million and $2.2 million for the corresponding periods of the prior year. Interest expense iswas primarily related to the financing of brand and licensing acquisitions. However, in April 2021, we completed the ~~Rochas brand~~ acquisition ~~and~~of the headquarters of Interparfums SA. The acquisition was financed by a 10-year €120 million (approximately $117 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 ~~the nine months ended September 30, 2016, includes~~variable rate debt with a ~~$0.2 million loss relating to the~~maximum interest rate swap as compared to a $0.4 million gain in the 2017 period. We use the credit lines available to us, as needed, to finance our working capital needs as well as our financing needs for brand acquisitions. Long-term debt including current maturities aggregated $65.6 million and $84.7 million as of ~~September 30, 2017 and 2016, respectively.~~2%.

Foreign currency loss aggregated $0.3 and $1.3 million for the three and nine months ended September 30, 2017, respectively, as compared to $0.3 million and $0.4 million for the corresponding periods of the prior year. We ~~typically~~ 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. 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. dollars.

Interest and investment income for the three months ended September 30, 2022, includes a gain of $2.3 million, as compared to a loss of $0.1 million for the corresponding period of the prior year, 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.

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INTER PARFUMS, INC. AND SUBSIDIARIES

Income Taxes

Our consolidated effective tax rate was 23% for the nine months ended September 30, 2022, as compared to 28% for the corresponding periods of the prior year.

The effective tax rate for European operations was 25% for the nine months ended September 30, 2022, as compared to 30% for the corresponding period of the prior year. As previously disclosed, a global settlement agreement was reached with the French Tax Authorities in June 2021, whereby Interparfums SA agreed to pay €2.5 million (approximately $3.0 million) relating to activities between Interparfums SA and its wholly owned subsidiary, Inter Parfums (Suisse) Sarl. The balance of the decline is primarily the result of a decrease in the French corporate income tax rate from 28% to 25%.

Our effective tax rate for U.S. operations was 11% for the nine months ended September 30, 2022, as compared to 17% for the corresponding period of the prior year. 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 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 is deemed likely. The lower effective tax rate in 2021 is primarily a result of discrete tax items related to benefits received from the exercise of stock options.

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

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~~Interest~~

INTER PARFUMS, INC. AND SUBSIDIARIES

Net Income

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
(In thousands)

Net income European operations	$	42,417	$	41,455	$	106,722	$	96,822
Net income United States operations		10,880		8,372		27,386		18,667

Net income		53,297		49,827		134,108		115,489

Less: Net income attributable to the noncontrolling interest		11,874		11,511		29,769		26,854

Net income attributable to Inter Parfums, Inc.	$	41,423	$	38,316	$	104,339	$	88,635

Net income ~~aggregated $0.6~~attributable to European operations was $42.4 million and ~~$2.8~~$106.7 million for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~$0.8~~$41.5 million and ~~$2.7 million for the corresponding periods of the prior year. Cash and cash equivalents and short-term investments are primarily invested in certificates of deposit with varying maturities.~~

~~Income Taxes~~

Excluding the 2016 settlement, our effective income tax rate was 33% for both the three and nine months ended September 30, 2017, as compared to 33% and 34% for the corresponding periods of the prior year. Our effective tax rates differ from statutory rates due to the effect of state and local taxes and tax rates in foreign jurisdictions. We did not experience any significant changes in tax rates during the period, and none were expected in jurisdictions where we operate.

~~Net income and earnings per share~~

(In thousands except per share data) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

Net income European operations $ 18,435 $ 18,629 $ 44,347 $ 33,852
Net income U.S. operations 3,668 2,850 5,134 4,804

Net income 22,103 21,479 49,481 38,656

Less: Net income attributable to the noncontrolling interest 5,026 5,240 12,287 9,252

Net income attributable to Inter Parfums, Inc. $ 17,077 $ 16,239 $ 37,194 $ 29,404

Earnings per share:

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic $ 0.55 $ 0.52 $ 1.19 $ 0.95
Diluted $ 0.55 $ 0.52 $ 1.19 $ 0.94

Weighted average number of shares outstanding:
Basic 31,175 31,080 31,163 31,058
Diluted 31,307 31,171 31,281 31,138

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Net income increased 3% to $22.1 million for the three months ended September 30, 2017, as compared to $21.5~~$96.8 million for the corresponding period of the prior year. Net income ~~increased 28%~~attributable to ~~$49.5~~United States operations was $10.9 million and $27.4 million for the three and nine months ended September 30, ~~2017,~~2022, respectively, as compared to ~~$38.7~~$8.4 million and $18.7 million for the corresponding period of the prior year. The ~~reasons for 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, selling, general and administrative expenses and the settlement with the French Tax Authorities. As previously discussed, European based product sales increased 19% for the nine months ended September 30, 2017, as compared to the corresponding period of the prior year, while gross profit margins as a percentage of sales for European operations were relatively unchanged and selling, general and administrative expenses increased 18% for the period. In addition, for our European operations, net income for the nine months ended September 30, 2016, includes the effect of the $1.9 million income tax settlement with the French Tax Authorities.expenses.

With respect to our United States operations, for the nine months ended September 30, 2017, sales declined 2% while gross margin and selling, general and administrative expenses both declined 1% as a percentage of sales, as compared to the corresponding period of the prior year.

The noncontrolling interest arises from our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 27% of Interparfums SA shares trade on the NYSE Euronext. ~~The noncontrolling interest is also affected by the profitability of Interparfums SA’s 51% owned distribution subsidiaries in Germany and Spain.~~ Net income attributable to the noncontrolling interest is directly related to the profitability of our European operations and aggregated ~~27% and~~ 28% of European ~~operations’~~operations net income for all periods presented. Net margins attributable to Inter Parfums, Inc. for the ~~three and~~ nine months ended September 30, ~~2017, respectively, as compared to 28%~~2022 and ~~27% for the corresponding periods of the prior year.~~2021 aggregated 13.4% and 13.3%, respectively.

~~Adjusted Net Income Attributable to Inter Parfums, Inc.~~

Adjusted Net Income Attributable to Inter Parfums, Inc., is deemed a “non-GAAP financial measure” under the rules of the Securities and Exchange Commission. This non-GAAP measure is calculated using GAAP amounts derived from our consolidated financial statements. Adjusted net income attributable to Inter Parfums, Inc. has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted income may not be comparable to a similarly titled measure of other companies.

~~Adjusted Net Income Attributable to Inter Parfums, Inc. Reconciliation~~

Adjusted net income attributable to Inter Parfums, Inc. is defined as net income attributable to Inter Parfums, Inc., plus the 2016 nonrecurring tax settlement, net of the portion of the settlement attributable to the noncontrolling interest. We believe that certain investors consider adjusted net income attributable to Inter Parfums, Inc. a useful means of evaluating our financial performance.

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~The following table provides a reconciliation of net income attributable to Inter Parfums, Inc. to adjusted net income attributable to Inter Parfums, Inc.~~

(in thousands except per share data) Nine Months Ended
September 30,
2017 2016

Net income attributable to Inter Parfums, Inc. $ 37,194 $ 29,404
Nonrecurring tax settlement (net of portion attributable to the noncontrolling interest of $500) — 1,400

Adjusted net income attributable to Inter Parfums, Inc. $ 37,194 $ 30,804

Adjusted net income attributable to Inter Parfums, Inc. common stockholders:
Basic $ 1.19 $ 0.99
Diluted $ 1.19 $ 0.99

Weighted average number of shares outstanding:
Basic 31,163 31,058
Diluted 31,281 31,138

Liquidity and Capital Resources

~~The Company’s~~Our conservative financial ~~position remains strong. At~~tradition has enabled us to amass significant cash balances. As of September 30, ~~2017, working capital aggregated $377 million and~~2022, we had ~~a working capital ratio of 3.4 to 1. Cash and~~$177 million in cash, cash equivalents and short-term investments, ~~aggregated $231 million,~~ most of which is held in euro by our European operations and is readily convertible into U.S. dollars. We have not had any liquidity issues to date, and do not expect any liquidity issues relating to such cash and cash equivalents and short-term investments. As of September 30, 2022, short-term investments ~~held by our European operations.~~include approximately $16.2 million of marketable equity securities.

As of September 30, 2022, working capital aggregated $459 million and we had a working capital ratio of 2.9 to 1. Approximately ~~88%~~77% of the Company’s total assets are held by European operations, and approximately ~~$191~~$146 million of trademarks, licenses and other intangible assets are also held by European operations.

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INTER PARFUMS, INC. AND SUBSIDIARIES

The Company is party to a number of license and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2033. In connection with certain of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments. See Item 8. Financial Statements and Supplementary Data – Note 12 – Commitments in our 2021 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, 2021, 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. As we recently reported, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance related products under the Donna Karan and DKNY brands. This license took effect on July 1, 2022. Opportunities for external growth ~~continue to be~~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 used in operating activities aggregated ~~$16.1 million and $12.6~~$8.2 million for the nine months ended September 30, ~~2017 and 2016, respectively.~~2022, as compared to cash provided by operating activities of $101.3 million for the corresponding period of the prior year. For the nine months ended September 30, ~~2017,~~2022, working capital items used ~~$70.9~~$159.2 million in cash from operating activities, as compared to ~~$57.0~~$36.8 million in the ~~2016~~2021 period. As usual, the most significant usage for both periods relates to the increase in accounts receivables as of September as compared to that of the prior December year end. This is expected and reflects the seasonality in our business whereby sales in the third quarter are significantly higher than those in the fourth quarter. Although ~~as set forth on the~~from a cash flow ~~statement,~~perspective accounts receivable ~~shows a 41% increase~~is up 56% from ~~2016~~ year end 2021, the ~~September 31, 2017 ending~~ balance is reasonable based on ~~third quarter 2017~~2022 record sales levels and reflects ~~continued strong collection activity~~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 resulting in day’s sales outstanding ~~is relatively unchanged at 87~~increasing to 80 days, ~~as compared to 85~~up from 70 days ~~for~~in the corresponding period of the prior year. ~~We continue to monitor~~While the day’s sales outstanding has increased, we are still seeing strong collection ~~activities actively~~activity and ~~adjust customer credit limits~~do not anticipate any issues with collections of accounts receivable. From a cash flow perspective, inventory levels as ~~needed. Inventory levels are up approximately 28%~~of September 30, 2022, increased 55% from ~~2016~~ year end ~~and reflect levels~~2021. As of December 31, 2021, although inventories include product needed to support new launches, the overall balance was lower than historic levels due primarily to supply chain disruptions. We have been addressing this issue 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 believe that our inventory levels are reasonable to support our projected sales ~~expectations~~ and ~~our~~ new product ~~launches.~~pipeline while not exceeding reasonable levels and creating excess and obsolete liabilities.

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~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

Cash flows used in investing activities in ~~2017~~2022 reflect ~~the purchase~~purchases and sales ~~in our European operations,~~ of short-term investments. These investments ~~are primarily~~include certificates of deposit with maturities greater than three months. Approximately ~~$62~~$41 million of such 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. ~~However, on~~On a full year basis, we typically spend approximately ~~$4.0~~$5.0 million on tools and molds, depending on our new product development calendar. During the nine months ended September 30, 2022, approximately $23.7 million was added to property costs relating to our new Paris corporate headquarters. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers. In December 2016, the Company agreed to a buyout of its Balmain license, effective December 31, 2016, for a payment aggregating €5.4 million (approximately $5.9 million). The Company received the buyout payment in May 2017.

Page 28

In connection with the 2015 acquisition of the Rochas brand, we entered into a 5-year term loan payable in equal quarterly installments of €5.0 million ($5.9 million) plus interest. In order to reduce exposure to rising variable interest rates, the Company entered into a swap transaction effectively exchanging the variable interest rate to a fixed rate of approximately 1.2%. The swap is a derivative instrument and is therefore recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income.

INTER PARFUMS, INC. AND SUBSIDIARIES

Our short-term financing requirements are expected to be met by available cash on hand at September 30, ~~2017, cash generated by operations~~2022, and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for ~~2017~~2022 consist of a $20.0 million unsecured revolving line of credit provided by a domestic commercial bank and approximately ~~$30.0~~$26 million in credit lines provided by a consortium of international financial institutions. There were no short-term borrowings outstanding pursuant to these facilities as of both September 30, ~~2017~~2022 and ~~September 30, 2016.~~2021.

In ~~October 2016, the~~February 2021, our Board of Directors authorized an annual dividend of $1.00, payable quarterly. In February 2022, our Board authorized a ~~13%~~100% increase in the annual dividend to ~~$0.68 per share and in October 2017, the Board authorized a further 24% increase in the annual dividend to $0.84~~$2.00 per share. The next quarterly cash dividend of ~~$0.21~~$0.50 per share is payable on ~~January 15, 2018~~December 30, 2022, to shareholders of record on December 29, 2017. Dividends paid also include dividends paid once per year to the noncontrolling shareholders of Interparfums SA, which aggregated $5.9 million and $4.9 million for the nine months ended September 30, 2017 and 2016, respectively. The annual cash dividends represent a small part of our cash position and are not expected to have any significant impact on our financial position.15, 2022.

We believe that funds provided by or used in operations can be supplemented by our present cash position and available credit facilities, so that they will provide us with sufficient resources to meet all present and reasonably foreseeable future operating needs.

Inflation rates in the U.S. and foreign countries in which we operate did not have a significant impact on operating results for the nine months ended September 30, ~~2017.~~2022.

~~Page 29~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

Item 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

We address certain financial exposures through a controlled program of risk management that primarily consists of the use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts in order to reduce the effects of fluctuating foreign currency exchange rates. We do not engage in the trading of foreign currency forward exchange contracts or interest rate swaps.

Foreign Exchange Risk Management

We periodically enter into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a currency other than our functional currency. We enter into these exchange contracts for periods consistent with our identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the receivables and cash flows of Interparfums SA, ~~our French subsidiary,~~ whose functional currency is the euro. All foreign currency contracts are denominated in currencies of major industrial countries and are with large financial institutions, which are rated as strong investment grade.

All derivative instruments are required to be reflected as either assets or liabilities in the balance sheet measured at fair value. Generally, increases or decreases in fair value of derivative instruments will be recognized as gains or losses in earnings in the period of change. If the derivative is designated and qualifies as a cash flow hedge, then the changes in fair value of the derivative instrument will be recorded in other comprehensive income.

Page 29

INTER PARFUMS, INC. AND SUBSIDIARIES

Before entering into a derivative transaction for hedging purposes, we determine that the change in the value of the derivative will effectively offset the change in the fair value of the hedged item from a movement in foreign currency rates. Then, we measure the effectiveness of each hedge throughout the hedged period. Any hedge ineffectiveness is recognized in the income statement.

At September 30, ~~2017,~~2022, we had foreign currency contracts in the form of forward exchange contracts ~~in the amount~~ of approximately U.S. ~~$22.6~~$90.0 million, GB £2.0 million and ~~GB £11.5~~JPY ¥50.0 million ~~which all have~~with maturities of less than one year. We believe that our risk of loss as the result of nonperformance by any of such financial institutions is remote.

Interest Rate Risk Management

We mitigate interest rate risk by monitoring interest rates, and then determining whether fixed interest rates should be swapped for floating rate debt, or if floating rate debt should be swapped for fixed rate debt. We entered into an interest rate swap in June 2015 on €100 million of debt, effectively exchanging the variable interest rate to a fixed rate of approximately 1.2%. This derivative instrument is recorded at fair value and changes in fair value are reflected in the accompanying consolidated statements of income.

~~Page 30~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based on their review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the Evaluation Date, our Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the quarterly period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Items 1. Legal Proceedings, 1A. Risk Factors, 2. Unregistered Sales of Equity Securities and Use of Proceeds, 3. Defaults Upon Senior Securities, 4. Mine Safety Disclosures and 5. Other Information, are omitted as they are either not applicable or have been included in Part I.

~~Item 2:~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

On September 12, 2017, we granted an option to purchase 2,000 shares for a five year period at the exercise price of $40.15 per share, the fair market value of our common stock on the date of grant, to one nonemployee director who was elected to our board of directors for the first time, under our 2004 Nonemployee Director Stock Option Plan. Such option vests 25% each year over a four year period on a cumulative basis. This transaction was exempt from the registration requirements of Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities Act. The option holder agreed that, if the option is exercised, the option holder would purchase her common stock for investment and not for resale to the public.

Page 31 30

INTER PARFUMS, INC. AND SUBSIDIARIES

Item 6.

~~EXHIBITS~~Exhibits.

The following documents are filed herewith:

Exhibit No.	Description	Page Number

31.1	Certifications required by Rule 13a-14(a) of Chief Executive Officer	32

31.2	Certifications required by Rule 13a-14(a) of Chief Financial Officer and Principal Accounting Officer	33

32.1	Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Executive Officer	34

32.2	Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Financial Officer and Principal Accounting Officer	35

101	Interactive data files

Page 31

Exhibit No. Description Page Number

31.1 Certifications required by Rule 13a-14(a) of Chief Executive Officer 33

31.2 Certifications required by Rule 13a-14(a) of Chief Financial Officer and Principal Accounting Officer 34

32.1 Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Executive Officer 35

32.2 Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Financial Officer and Principal Accounting Officer 36

101 Interactive data files

~~SIGNATURES~~INTER PARFUMS, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the ~~8th~~9th day of November ~~2017.~~2022.

		INTER PARFUMS, INC.

	By:	/s/ ~~Russell Greenberg~~Michel Atwood
		~~Executive Vice President and~~ Chief Financial Officer

Page 32

(In thousands)	September 30, 2017		December 31, 2016
Raw materials and component parts	$	43,261	$	36,821
Finished goods		91,019		60,156

	$	134,280	$	96,977

	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2017		684,540		$	26.94
Options granted		7,000			35.72
Options forfeited		(12,080	)		29.70
Options exercised		(44,140	)		19.02

Outstanding at September 30, 2017		635,320		$	27.54

Options exercisable		245,025		$	25.13
Options available for future grants		1,086,735

$ in millions				Increase (decrease)
	Change			to fair value

Weighted average cost of capital		+10	%	$	(16.2	)
Weighted average cost of capital		-10	%	$	20.0
Future sales levels		+10	%	$	17.0
Future sales levels		-10	%	$	(17.0	)

Net Sales to Customers by Region	Nine months ended September 30,
(In millions)	2017		2016

North America	$	122.3	$	106.4
Western Europe		121.8		115.5
Asia		70.5		61.9
Middle East		41.6		33.8
Central and South America		42.4		35.0
Eastern Europe		35.5		25.0
Other		7.6		8.7
	$	441.7	$	386.3