UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

( MARK ONE )

~~(MARK ONE)~~

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
for the quarterly period ended ~~March 31,~~June 30, 2020.

☐ 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 York			10176
(Address of Principal Executive Offices)		~~(Zip~~ (Zip Code)

	(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, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).

Large accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging Growth company	☐

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

Indicate by check mark whether the registrant 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.

~~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~~

At ~~May 11,~~August 10, 2020, there were ~~31,531,958~~31,532,558 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	1

		Consolidated Balance Sheets as of ~~March 31,~~June 30, 2020 and December 31, 2019	2

		Consolidated Statements of Income (Loss) for the Three and Six Months Ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019	3

		Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019	4

		Consolidated Statements of Changes in Equity for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019	5

		Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019	6

		Notes to Consolidated Financial Statements	7

	Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

	Item 4.	Controls and Procedures	2726

Part II.	Other Information		27

	Item 1A.	Risk Factors	27

	Item 6.	Exhibits	29

~~Part II. Other Information~~Signatures		27

~~Item 1A.~~	~~Risk Factors~~	27

~~Item 6.~~	~~Exhibits~~	28

~~Signatures~~		2930

INTER PARFUMS, INC. AND SUBSIDIARIES

Part I. Financial Information

Item 1.

Financial Statements

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. We have condensed such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the consolidated financial statements were issued by filing with the SEC. These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2019 included in our annual report filed on Form 10-K.

The results of operations for the ~~three~~six months ended ~~March 31,~~June 30, 2020 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)

	March 31, 2020			December 31, 2019			June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	142,557		$	192,417		$	127,463		$	192,417
Short-term investments		61,539			60,714			67,505			60,714
Accounts receivable, net		133,640			133,010			77,399			133,010
Inventories		169,477			167,809			194,831			167,809
Receivables, other		2,936			2,054			919			2,054
Other current assets		21,630			17,123			18,254			17,123
Income taxes receivable		137			169			1,231			169

Total current assets		531,916			573,296			487,602			573,296

Equipment and leasehold improvements, net		11,194			11,107			10,742			11,107

Right-of-use assets, net		27,174			28,359			26,284			28,359
Trademarks, licenses and other intangible assets, net		196,813			201,983			199,680			201,983
Deferred tax assets		8,285			8,004			8,672			8,004

Other assets		6,050			6,083			20,739			6,083

Total assets	$	781,432		$	828,832		$	753,719		$	828,832

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	6,555		$	12,326		$	5,551		$	12,326
Current portion of lease liabilities		4,960			5,356			4,894			5,356
Accounts payable – trade		46,355			54,098			33,904			54,098
Accrued expenses		69,343			96,421			51,789			96,421
Income taxes payable		7,894			5,865			5,836			5,865
Dividends payable		10,406			10,399			--			10,399

Total current liabilities		145,513			184,465			101,974			184,465

Long–term debt, less current portion		9,781			10,734			18,858			10,734

Lease liabilities, less current portion		23,849			24,635			23,057			24,635

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 31,531,958 and 31,513,018 shares at March 31, 2020 and December 31, 2019, respectively		31			31
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 31,532,558 and 31,513,018 shares at June 30, 2020 and December 31, 2019, respectively								32			31
Additional paid-in capital		73,618			70,664			72,535			70,664
Retained earnings		473,947			474,637			471,462			474,637
Accumulated other comprehensive loss		(48,097	)		(39,853	)		(40,566	)		(39,853	)
Treasury stock, at cost, 9,864,805 shares at March 31, 2020 and December 31, 2019		(37,475	)		(37,475	)
Treasury stock, at cost, 9,864,805 shares at June 30, 2020 and December 31, 2019								(37,475	)		(37,475	)

Total Inter Parfums, Inc. shareholders’ equity		462,024			468,004			465,988			468,004

Noncontrolling interest		140,265			140,994			143,842			140,994

Total equity		602,289			608,998			609,830			608,998

Total liabilities and equity	$	781,432		$	828,832		$	753,719		$	828,832

See notes to consolidated financial statements.

Page 2

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands except per share data)

(Unaudited)

	Three months ended March 31,
	2020			2019			Three Months Ended June 30,						Six Months Ended June 30,
							2020			2019			2020			2019

Net sales	$	144,824		$	178,242		$	49,506		$	166,242		$	194,330		$	344,484

Cost of sales		55,783			68,401			22,662			59,268			78,444			127,669

Gross margin		89,041			109,841			26,844			106,974			115,886			216,815

Selling, general and administrative expenses		71,262			76,552			32,367			84,514			103,630			161,067

Income from operations		17,779			33,289
Income (loss) from operations								(5,523	)		22,460			12,256			55,748

Other expenses (income):
Interest expense		1,001			626			361			203			1,362			830
(Gain) loss on foreign currency		(954	)		151			(13	)		546			(967	)		697
Interest income		(1,007	)		(1,906	)		(754	)		(419	)		(1,761	)		(2,325	)

		(960	)		(1,129	)		(406	)		330			(1,366	)		(798	)

Income before income taxes		18,739			34,418
Income (loss) before income taxes								(5,117	)		22,130			13,622			56,546

Income taxes		5,440			9,440
Income taxes (benefit)								(2,134	)		6,530			3,306			15,969

Net income		13,299			24,978
Net income (loss)								(2,983	)		15,600			10,316			40,577

Less: Net income attributable to the noncontrolling interest		3,240			6,084			135			3,282			3,375			9,366

Net income attributable to Inter Parfums, Inc.	$	10,059		$	18,894
Net income (loss) attributable to Inter Parfums, Inc.							$	(3,118	)	$	12,318		$	6,941		$	31,211

Net income attributable to Inter Parfums, Inc. common shareholders:
Earnings (loss) per share:

Net income (loss) attributable to Inter Parfums, Inc. common shareholders:
Basic	$	0.32		$	0.60		$	(0.10	)	$	0.39		$	0.22		$	0.99
Diluted	$	0.32		$	0.60		$	(0.10	)	$	0.39		$	0.22		$	0.99

Weighted average number of shares outstanding:
Basic		31,530			31,431			31,532			31,449			31,531			31,440
Diluted		31,708			31,679			31,532			31,687			31,667			31,683

Dividends declared per share	$	0.33		$	0.28			--		$	0.28		$	0.33		$	0.55

See notes to consolidated financial statements.

Page 3

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Unaudited)

	Three months ended March 31,						Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019			2020			2019		2020			2019
Comprehensive income:

Net income	$	13,299		$	24,978
Net income (loss)							$	(2,983	)	$	15,600	$	10,316		$	40,577

Other comprehensive income:

Net derivative instrument gain (loss), net of tax		257			(59	)		(276	)		342		(19	)		283

Transfer from other comprehensive income into earnings		(52	)		(136	)
Transfer from OCI into earnings								--			--		(52	)		(136	)

Translation adjustments, net of tax		(11,921	)		(8,545	)		11,087			5,550		(834	)		(2,994	)

Comprehensive income		1,583			16,238			7,828			21,492		9,411			37,730

Comprehensive income attributable to the noncontrolling interests:

Net income		3,240			6,084			135			3,282		3,375			9,366

Other comprehensive income:
Other comprehensive income (loss):

Net derivative instrument gain (loss), net of tax		57			(52	)
Net derivative instrument (loss), net of tax								(76	)		91		(19	)		39

Translation adjustments, net of tax		(3,529	)		(2,241	)		3,356			1,476		(173	)		(765	)

Comprehensive income (loss) attributable to the noncontrolling interests		(232	)		3,791
Comprehensive income attributable to the noncontrolling interests								3,415			4,849		3,183			8,640

Comprehensive income attributable to Inter Parfums, Inc.	$	1,815		$	12,447		$	4,413		$	16,643	$	6,228		$	29,090

See notes to consolidated financial statements.

Page 4

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(Unaudited)

	Three months ended March 31,						Six months ended June 30,
	2020			2019			2020			2019

Common stock, beginning and end of period	$	31		$	31
Common stock, beginning of period							$	31		$	31
Shares issued upon exercise of stock options								1			--
Common stock, end of period								32			31

Additional paid-in capital, beginning of period		70,664			69,970			70,664			69,970
Shares issued upon exercise of stock options		641			2,251			656			2,281
Share-based compensation		427			350			855			701
Purchase of subsidiary shares from noncontrolling interest		—			(468	)		--			(4,610	)
Transfer of subsidiary shares purchased		1,886			—			360			--
Additional paid-in capital, end of period		73,618			72,103			72,535			68,342

Retained earnings, beginning of period		474,637			448,731			474,637			448,731
Net income		10,059			18,894			6,941			31,211
Dividends		(10,406	)		(8,649	)		(10,406	)		(17,298	)
Share-based compensation (adjustment)		(343	)		353
Share-based compensation								290			1,218
Retained earnings, end of period		473,947			459,329			471,462			463,862

Accumulated other comprehensive loss, beginning of period		(39,853	)		(33,650	)		(39,853	)		(33,650	)
Foreign currency translation adjustment, net of tax		(8,392	)		(6,304	)		(661	)		(2,229	)
Transfer from other comprehensive income into earnings		(52	)		(136	)		(52	)		(136	)
Net derivative instrument loss, net of tax		200			(7	)		--			244
Accumulated other comprehensive loss, end of period		(48,097	)		(40,097	)		(40,566	)		(35,771	)

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

Noncontrolling interest, beginning of period		140,994			138,139			140,994			138,139
Net income		3,240			6,084			3,375			9,366
Foreign currency translation adjustment, net of tax		(3,529	)		(2,241	)		(173	)		(765	)
Net derivative instrument loss, net of tax		57			(52	)		(19	)		39
Share-based compensation (adjustment)		(34	)		321
Share-based compensation								128			135
Purchase of subsidiary shares from noncontrolling interest		—			(376	)		--			(1,477	)
Transfer of subsidiary shares purchased		(139	)		—			(139	)		--
Dividends		(324	)		—			(324	)		(9,654	)
Noncontrolling interest, end of period		140,265			141,875			143,842			135,783

Total equity	$	602,289		$	595,766		$	609,830		$	594,772

See notes to consolidated financial statements.

Page 5

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three months ended March 31,						Six months ended June 30,
	2020			2019			2020			2019
Cash flows from operating activities:
Net income	$	13,299		$	24,978		$	10,316		$	40,577
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		2,230			2,150			4,456			4,114
Provision for doubtful accounts		444			38			682			332
Lease expense		19			196			37			881
Noncash share-based compensation		124			955
Deferred tax benefit		(463	)		(565	)
Share based compensation								1,190			1,905
Deferred tax (benefit)								(681	)		(553	)
Change in fair value of derivatives		(170	)		(294	)		(663	)		(701	)
Changes in:
Accounts receivable		(4,545	)		(33,385	)		54,791			(9,924	)
Inventories		(4,702	)		(6,698	)		(27,076	)		(19,689	)
Other assets		(3,545	)		1,738			37			(1,969	)
Accounts payable and accrued expenses		(29,821	)		(8,875	)		(63,415	)		(16,637	)
Income taxes, net		2,013			5,156			(961	)		2,272

Net cash used in operating activities		(25,117	)		(14,606	)
Net cash provided by (used in) operating activities								(21,287	)		608

Cash flows from investing activities:
Purchases of short-term investments		(2,342	)		(22,366	)		(6,878	)		(27,743	)
Proceeds from sale of short-term investments		—			17,037			--			28,253
Purchase of equity investment								(13,998	)		--
Purchases of equipment and leasehold improvements		(1,254	)		(964	)		(1,571	)		(2,932	)
Payment for intangible assets acquired		(460	)		(53	)		(819	)		(660	)

Net cash used in investing activities		(4,056	)		(6,346	)		(23,266	)		(3,082	)

Cash flows from financing activities:
Repayment of long-term debt		(6,577	)		(5,655	)
Proceeds from exercise of options		641			2,251
Repayments of long-term debt								(12,086	)		(11,256	)
Proceeds from issuance of long-term debt								13,438			--
Proceeds from exercise of stock options								657			2,281
Purchase of subsidiary shares from noncontrolling interest								--			(6,087	)
Dividends paid		(10,399	)		(8,630	)		(20,805	)		(17,279	)
Purchase of subsidiary shares from noncontrolling interest		—			(844	)
Dividends paid to minority interest		(324	)		—
Dividends paid to noncontrolling interest								(324	)		(9,654	)

Net cash used in financing activities		(16,659	)		(12,878	)		(19,120	)		(41,995	)

Effect of exchange rate changes on cash		(4,028	)		(2,924	)		(1,281	)		(1,877	)

Net decrease in cash and cash equivalents		(49,860	)		(36,754	)		(64,954	)		(46,346	)

Cash and cash equivalents - beginning of period		192,417			193,136			192,417			193,136

Cash and cash equivalents - end of period	$	142,557		$	156,382		$	127,463		$	146,790

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	462		$	301		$	693		$	1,156
Income taxes		3,706			5,185			4,741			12,615

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, 2019.

Impact of COVID-19 Pandemic:

A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States and France. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has disrupted our business operations and caused a significant unfavorable impact on our results of operations.

In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate ~~have~~initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. ~~As of the date of this filing,~~More recently, those governments have set guidelines in allowing businesses to reopen and employees to return to offices. Beginning in March 2020, we ~~have~~ implemented travel restrictions and we are following social distancing practices. Our teams were set up to work from home and carry on business as efficiently as possible. In ~~the U.S. and France,~~all jurisdictions in which we operate we are ~~endeavoring to follow~~following guidance from authorities and health officials in allowing our teams to gradually return to our offices, including, ~~but not limited to,~~ requiring ~~our~~ personnel to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitization routines at our offices and distribution centers as the health and safety of our employees ~~are~~is paramount. ~~Our teams are set up~~

The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and ~~now work from home and carry on business as efficiently as possible. Those decrees however, have resulted in~~ a shutdown of international air travel brought our sales to a majority of retail stores selling fragrance products, a slowdown in air traffic, effecting our travel retail business, and supply chain disruption. Additionally, our distribution facilities have also experienced a short-term suspension of operations for COVID-19 employee health concerns.

virtual standstill. The duration and intensity of this global health emergency and its related disruptions are uncertain. WeSince March 2020, retail stores in several jurisdictions around the world began reopening and business is slowly picking up. However, we anticipate that ~~retail store closings,~~limited traffic in reopened stores and the ~~slowdown in~~shutdown of international air traffic ~~potential supply chain disruptions~~have and ~~short-term suspensions of activities in our distribution centers~~ will continue to unfavorably impact our business.

We ~~also~~ anticipate significant challenges for the remainder of 2020 due to uncertain market conditions. WeWhile we expect ~~a larger net sales decline~~business with many of our retail partners to improve considerably in the second ~~quarter~~half of 2020, ~~as many retail stores~~we do not see a resurgence anytime soon in ~~our major markets may remain closed for the entire period.~~connection with travel retail. In addition, the COVID-19 pandemic has led to high levels of unemployment and deteriorating economic conditions in many ~~of the~~ countries where our products are sold, forcing many consumers to limit discretionary purchases. We believe ~~it is possible~~ that the impact of the COVID-19 pandemic ~~could~~will continue to have a material adverse effect on ~~the~~our results of our operations, financial position and cash flows through at least the end of this year.

Page 7

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

3.	Recent Agreements:

Origines-parfums

In June 2020, the Company, through its 73% owned French subsidiary, Interparfums SA, and Divabox SAS (“Divabox”), owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired 25% of Divabox capital for €12.5 million ($14 million), through a capital increase. The difference between the purchase price and the fair value of net assets acquired of €7.9 million has been allocated to goodwill, pending final purchase price allocation, and the entire purchase price is included in other assets on the accompanying balance sheet as of ~~and~~June 30, 2020. In connection with the acquisition, the Company entered into a €12 million ($13.4 million), three-year term loan payable in three equal annual installments bearing interest at 0.85% above the EURIBOR 3-month rate. The loan requires the maintenance of certain financial covenants, tested annually, including a maximum leverage ratio.

Moncler

In June 2020, the Company entered into an exclusive, 5-year worldwide license agreement with a potential 5-year extension with Moncler for the ~~year ending~~creation, development and distribution of fragrances under the Moncler brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.

S.T. Dupont

In January 2020, we renewed our license agreement with S.T. Dupont for the creation, development and distribution of fragrance products through December 31, ~~2020.~~2020, without any material changes in terms and conditions. Our initial 11-year license agreement with S.T. Dupont was signed in June 1997, and had previously been extended through December 31, 2019. The agreement will be extended annually in September of each year upon mutual consent.

Recent Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as updated in 2019 and 2020, which require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The new rules eliminate the probable initial recognition threshold and, instead, reflect an entity’s current estimate of all expected credit losses. The new rules are effective for the Company in the first quarter of 2020 and there was no material impact on our consolidated financial statements.

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

5.	Inventories:

Inventories consist of the following:

(In thousands)	June 30, 2020		December 31, 2019

Raw materials and component parts	$	78,954	$	71,895
Finished goods		115,877		95,914

	$	194,831	$	167,809

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INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

4.6.

~~Inventories:~~

~~Inventories consist of the following:~~

(In thousands) March 31,
2020 December 31,
2019
Raw materials and component parts $ 63,181 $ 71,895
Finished goods 106,296 95,914

$ 169,477 $ 167,809

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 March 31, 2020
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 $ 61,539 $
—
$ 61,539 $
—

Foreign currency forward exchange contracts accounted for using hedge accounting 131

131

Foreign currency forward exchange contracts not accounted for using hedge accounting 140
—
140
—

$ 61,810 $
—
$ 61,810 $
—

Liabilities:
Interest rate swap $ 8 $
—
$ 8 $
—

~~Page 8~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

			Fair Value Measurements at June 30, 2020
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments	$	67,505	$	—	$	67,505	$	—
Foreign currency forward exchange contracts not accounted for using hedge accounting		770		—		770		—

	$	68,275	$	—	$	68,275	$	—

			Fair Value Measurements at December 31, 2019
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments	$	60,714	$	—	$	60,714	$	—
Foreign currency forward exchange contracts accounted for using hedge accounting		16				16
Foreign currency forward exchange contracts not accounted for using hedge accounting		112		—		112		—

	$	60,842	$	—	$	60,842	$	—
Liabilities:
Interest rate swap	$	30	$	—	$	30	$	—

~~Notes to Consolidated Financial Statements~~

Fair Value Measurements at December 31, 2019
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 $ 60,714 $
—
$ 60,714 $
—

Foreign currency forward exchange contracts accounted for using hedge accounting 16

16

Foreign currency forward exchange contracts not accounted for using hedge accounting 112
—
112
—

$ 60,842 $
—
$ 60,842 $
—

Liabilities:
Interest rate swap $ 30 $
—
$ 30 $
—

The carrying amount of cash and cash equivalents including money market funds, ~~short-term investments,~~ accounts receivable, other receivables, and accounts payable and accrued expenses approximates fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable approximates fair value as the interest rates on the Company’s indebtedness approximate current market rates. The fair value of the Company’s long-term debt was estimated based on the current rates offered to companies for debt with the same remaining maturities and is approximately equal to its carrying value.

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

Page 9

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Derivative Financial Instruments:

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

~~Page 9~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

In connection with a 2015 brand acquisition, $108 million of the purchase price was paid in cash on the closing date and was financed entirely through a 5-year term loan. As the payment at closing was due in dollars and we had planned to finance it with debt in euro, the Company entered into foreign currency forward contracts to secure the exchange rate for the $108 million purchase price at $1.067 per 1 euro. This derivative was designated and qualified as a cash flow hedge.

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 ~~three~~six month periods ended ~~March 31,~~June 30, 2020 and 2019. ~~For the three months ended March 31, 2020 and 2019, interest expense was reduced by a gain of $0.02 and $0.05 million relating to the interest rate swap.~~

All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps resulted in a liability which is included in long-term debt on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts at ~~March 31,~~June 30, 2020 resulted in an asset and is included in other current assets on the accompanying balance sheet.

At ~~March 31,~~June 30, 2020, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. ~~$40.0 million, GB £1.0 million and JPY ¥170.0~~$2.7 million which all have maturities of less than one year.

Leases:

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

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

Page 10

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of ~~March 31,~~June 30, 2020, the weighted average remaining lease term was ~~6.3~~6.1 years and the weighted average discount rate used to determine the operating lease liability was ~~2.8%~~2.6%. Rental expense related to operating leases was ~~$1.8~~$1.5 million and $3.3 million for ~~both~~the three and six months ended June 30, 2020, respectively, as compared to $1.1 million and $2.9 million for the corresponding periods ~~ending March 31, 2020 and 2019.~~of the prior year. Operating lease payments included in operating cash flows totaled ~~$1.6~~$3.0 million and $3.2 million for ~~both three~~the six months ended ~~March 31,~~June 30, 2020 and 2019, ~~and noncash~~respectively. Noncash additions to operating lease assets totaled ~~$0.7~~$1.0 million and ~~$31.8~~$35.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively.

~~Page 10~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

~~Share-Based~~Share Based Payments:

The Company maintains a stock option ~~program~~programs for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to five-year period. The fair value of shares vested ~~during~~for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 aggregated $0.08 million and ~~$0.06~~$0.07 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 ~~three~~six month period ended ~~March 31,~~June 30, 2020:

	Number of Shares			Weighted Average Grant-Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested options – beginning of period		514,210		$	12.36		514,210		$	12.36
Nonvested options granted		9,000		$	12.16		9,000		$	12.16
Nonvested options vested or forfeited		(10,180	)	$	10.10		(13,680	)	$	10.53
Nonvested options – end of period		513,030		$	12.40		509,530		$	12.40

~~Share-based~~Share based payment expense decreased income before income taxes by ~~$0.12~~$1.07 million and ~~$0.96~~$1.19 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to $0.95 million and ~~2019, respectively, and~~$1.9 million for the corresponding periods of the prior year. Share based payment expense decreased ~~net~~ income attributable to Inter Parfums, Inc. by ~~$0.18~~$0.67 million and ~~$0.58~~$0.86 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to $0.56 million and ~~2019.~~$1.14 million for the corresponding periods of the prior year.

~~Page 11~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

The following table summarizes stock option information as of ~~March 31,~~June 30, 2020:

	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2020		815,800		$	49.89
Options granted		9,000			69.11
Options forfeited		(5,740	)		56.10
Options exercised		(19,540	)		33.64

Outstanding at June 30, 2020		799,520		$	50.45

Options exercisable		289,990		$	35.31
Options available for future grants		570,435

Page 11

Shares Weighted Average Exercise Price

Outstanding at January 1, 2020 815,800 $ 49.89
Options granted 9,000 69.11
Options forfeited (2,140 ) 57.03
Options exercised (18,940 ) 33.82

Outstanding at March 31, 2020 803,720
$ 50. 46

Options exercisable 290,690 $ 35.09
Options available for future grants 566,835

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of ~~March 31,~~June 30, 2020, the weighted average remaining contractual life of options outstanding is ~~3.78~~3.53 years ~~(2.38~~(2.13 years for options exercisable);, the aggregate intrinsic value of options outstanding and options exercisable is ~~$5.3~~$6.1 million and ~~$3.9~~$4.3 million, ~~respectively;~~respectively, and unrecognized compensation cost related to stock options outstanding aggregated ~~$5.6~~$5.2 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and ~~March 31,~~ 2019 were as follows:

(In thousands)	March 31, 2020		March 31, 2019		June 30, 2020		June 30, 2019

Cash proceeds from stock options exercised	$	641	$	2,251	$	657	$	2,281
Tax benefits		—		300		--		300
Intrinsic value of stock options exercised		733		2,226		740		2,267

The weighted average fair values of the options granted by Inter Parfums, Inc. during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 were $12.16 and $14.83 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted.

The assumptions used in the Black-Scholes pricing model for the periods ended ~~March 31,~~June 30, 2020 and 2019 are set forth in the following table:

	March 31, 2020			March 31, 2019			June 30, 2020			June 30, 2019

Weighted average expected stock-price volatility		25	%		27	%		25	%		27	%
Weighted average expected option life		5 years			5 years			5 years			5 years
Weighted average risk-free interest rate		1.4	%		2.5	%		1.4	%		2.5	%
Weighted average dividend yield		2.5	%		2.0	%		2.5	%		2.0	%

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 continue to increase.

~~Page 12~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

In December 2018, Interparfums SA, our 73% owned French subsidiary, approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, ~~will~~are expected to be distributed in June 2022. In order to avoid dilution of the Company’s ownership of Interparfums SA, all shares to be distributed pursuant to the plan will be pre-existing shares of Interparfums SA purchased in the open market by Interparfums SA in prior years.

In March 2020, due to the potential impact on future net sales and operating results resulting from the COVID-19 pandemic, the estimated number of shares to be distributed, after forfeited shares, was reduced from 142,571 to 82,162. As the Company had already purchased shares in contemplation of the higher anticipated distribution, shares purchased in excess of the reduced anticipated distribution were transferred to treasury shares at Interparfums SA level. ~~Employee turnover was also taken into account in the calculation.~~

The fair value of the grant had been determined based on the quoted stock price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant. The original cost of the grant was approximately $4.4 million, and the March 2020 revaluation resulted in a reduction of the cost, to approximately $2.5 million. As a result, a $0.3 million reduction of cost, net, was recorded for the three months ended March 31, 2020.

In June 2020, the performance conditions were modified effecting 96 employees and resulting in an increase in the estimated number of shares to be distributed, after forfeited shares, to 125,341. The increase in shares anticipated to be distributed were transferred from treasury shares at the Interparfums SA level.

Page 12

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The original cost of the grant was approximately $4.4 million, and the June 2020 modification resulted in a revised cost of approximately $3.8 million.

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 ~~earnings~~income attributable to Inter Parfums, Inc. by the weighted average number of shares outstanding. Net ~~earnings~~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				Three months ended					Six months ended
(In thousands, except per share data)	March 31,
(In thousands)					June 30,					June 30,
	2020		2019		2020			2019		2020		2019
Numerator:
Net income attributable to Inter Parfums, Inc.	$	10,059	$	18,894
Net income (loss) attributable to Inter Parfums, Inc.					$	(3,118	)	$	12,318	$	6,941	$	31,211
Denominator:
Weighted average shares		31,530		31,431		31,532			31,449		31,531		31,440
Effect of dilutive securities:
Stock options		178		248		—			238		136		243
Denominator for diluted earnings per share		31,708		31,679		31,532			31,687		31,667		31,683

Earnings per share:
Net income attributable to Inter Parfums, Inc.
common shareholders:
Net income (loss) attributable to Inter Parfums, Inc. common shareholders:
Basic	$	0.32	$	0.60	$	(0.10	)	$	0.39	$	0.22	$	0.99
Diluted		0.32		0.60		(0.10	)		0.39		0.22		0.99

~~Page 13~~

~~INTER PARFUMS, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements~~

Not included in the above computations isare the effect of antidilutive potential common shares which consist of outstanding options to purchase ~~0.37~~0.80 and 0.59 million shares of common stock for both the three and six months ended June 30, 2020, as compared to 0.18 million shares of common stock for the three and six months ended ~~March 31, 2020 and 2019, respectively.~~June 30, 2019.

11.

~~10.~~

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 ~~primarily represent the sale of prestige brand name fragrances~~ and United States operations primarily represent the sale of prestige brand name ~~and specialty retail fragrance.~~fragrances.

Page 13

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Information on our operations by geographical areas is as follows:

(In thousands)	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019			2020			2019
Net sales:
United States	$	31,618		$	35,616		$	10,226		$	40,730		$	41,844		$	76,346
Europe		114,123			143,767			39,424			125,659			153,547			269,426
Eliminations		(917	)		(1,141	)		(144	)		(147	)		(1,061	)		(1,288	)
	$	144,824		$	178,242
							$	49,506		$	166,242		$	194,330		$	344,484
Net income attributable to Inter Parfums, Inc.:

Net income (loss) attributable to Inter Parfums, Inc.:
United States	$	1,606		$	2,887		$	(3,523	)	$	3,786		$	(1,917	)	$	6,673
Europe		8,453			16,007			405			8,532			8,858			24,538
	$	10,059		$	18,894
							$	(3,118	)	$	12,318		$	6,941		$	31,211

							June 30,			December 31,
	March 31, 2020			December 31, 2019			2020			2019
Total Assets:
United States	$	148,547		$	166,180		$	134,903		$	166,180
Europe		646,984			670,657			642,393			670,657
Eliminations of investment in subsidiary		(14,099	)		(8,005	)
Eliminations								(23,577	)		(8,005	)
	$	781,432		$	828,832
							$	753,719		$	828,832

12.

~~11.~~

~~Recent Agreements:~~

~~S.T. Dupont~~

In January 2020, we renewed our license agreement with S.T. Dupont for the creation, development and distribution of fragrance products through December 31, 2020, without any material changes in terms and conditions. Our initial 11-year license agreement with S.T. Dupont was signed in June 1997, and had previously been extended through December 31, 2019. The agreement will be extended annually in September of each year upon mutual consent.

~~12.~~

Reclassifications:

Certain prior year’s amounts in the accompanying consolidated ~~balance sheet and~~ statements of cash flows have been reclassified to conform to current period presentation.

Page 14

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"~~“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and ~~"would"~~“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"~~“Risk Factors” in Inter ~~Parfums'~~Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2019 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.

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 79% and ~~81%~~78% of net sales for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade New York, Lanvin, Moncler, Montblanc, Paul Smith, S.T. Dupont, Repetto, Rochas ~~S.T. Dupont~~ and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world.

Through our United States operations, we also market fragrance and fragrance related products. United States operations represented 21% and ~~19%~~22% of net sales for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively. These fragrance products are sold or to be sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, bebe, Dunhill, French Connection, Graff, GUESS, Hollister, MCM and Oscar de la Renta brands.

Page 15

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 ~~Coach~~ and GUESS brand names. As a percentage of net sales, product sales for the Company’s largest brands were as follows:

	Three Months Ended March 31,						Six Months Ended June 30,
	2020			2019			2020			2019

Montblanc.		21	%		26	%		21	%		24	%
Coach.		20	%		17	%		19	%		14	%
Jimmy Choo.		15	%		12	%		15	%		15	%
GUESS.		11	%		9	%
Guess.								11	%		8	%

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 sell directly to retailers in France as well as through our own distribution subsidiaries in 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 strong brand portfolio with global reach and potential. As part of our strategy, we plan to continue to make investments behind fast-growing markets and channels to grow market share.

Our reported net sales are impacted by changes in foreign currency exchange rates. A strong U.S. dollar has a negative impact on our net sales. However, earnings are positively affected by a strong dollar, because over 45% 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. We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments and primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.

Page 16

Impact of COVID-19 Pandemic ~~and the Resulting Changes to our 2020 Financial Outlook~~

In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate ~~have~~initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. ~~As of the date of this filing,~~More recently, those governments have set guidelines in allowing businesses to reopen and employees to return to offices. Beginning in March, 2020, we ~~have~~ implemented travel ~~restrictions;~~restrictions and we are following social distancing practices. Our teams were set up to work from home and carry on business as efficiently as possible. In ~~the U.S. and France,~~all jurisdictions in which we operate we are ~~endeavoring to follow~~following guidance from authorities and health officials in allowing our teams to gradually return to our offices, including, ~~but not limited to,~~ requiring ~~our~~ personnel to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitization routines at our offices and distribution centers as the health and safety of our employees is paramount. Our teams are set up and now work from home and carry on business as efficiently as possible. Those decrees however, have resulted in a shutdown of a majority of retail stores selling fragrance products, a slowdown in air traffic, effecting our travel retail business, and supply chain disruption. Additionally, our distribution facilities have also experienced a short-term suspension of operations for COVID-19 employee health concerns.

The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and ~~the slowdown~~a shutdown of international air travel brought our sales to a virtual standstill. Customer orders were cancelled and shipping activities were minimal. As a result, we estimate that approximately $34 million ($28 million for our European operations and $6 million for our U.S operations) in sales were lost in the three months ended March 31, 2020 as compared to our initial expectations. Furthermore, due to the sudden nature of the shutdown, advertising and promotional programs in the period were well underway and could not be curtailed in time. As a result, advertising and promotional expenses aggregated $28.5 million or 19.7% of net sales for the three months ended March 31, 2020, as compared to $27.3 million or 15.4% for the corresponding period of the prior year.

The duration and intensity of this global health emergency and its related disruptions are uncertain. WeSince March 2020, retail stores in several jurisdictions around the world began reopening and business is slowly picking up. However, we anticipate that the initial retail store closings and the ~~slowdown in~~shutdown of international air traffic ~~potential supply chain disruptions~~has and ~~short-term suspensions of activities in our distribution centers~~ will continue to unfavorably impact our business.

Operationally, we are preparing for increased demand in the post-COVID-19 environment, with business in Asia and many parts of Europe already showing signs of a comeback. ~~We have seen a resumption of more normalized sales levels in South Korea and China, with internet sales especially strong.~~ We are gearing up to be prepared to rapidly fill the distribution channels once the crisis is behind us. In that regard, we have maintained reasonable inventory levels of components and finished goods, and we are gaining local market intelligence from our distributors and production capacity data from our suppliers. We do not anticipate any material impairment of trademarks, licenses and other intangible assets.

Page 17

Our conservative financial tradition has enabled us to amass and maintain hefty cash balances and nominal long-term debt. As of ~~March 31,~~June 30, 2020 we had ~~$204~~$195 million in cash, cash equivalents and short-term investments, and only ~~$9.8~~$18.9 million of long-term debt. We also have ~~$47~~$48 million available in untapped credit facilities. Nonetheless, we have taken several actions to minimize expenses and protect cash flow. Our operating cost structure, of which variable costs ~~historically~~typically accounts for over two-thirds, ~~of net sales,~~ should enable us to minimize the impact of reduced net sales on our bottom line. In that regard, we have postponed the launch of several programs originally scheduled for this year until 2021 and moved related advertising and promotion expenses to 2021 as well. That includes our planned launches for the Kate Spade New York, Jimmy Choo, Anna Sui and GUESS brands. We have also taken several actions with an eye toward minimizing fixed expenses. While we have not terminated or furloughed any employees, we have instituted a hiring freeze and plan on significantly cutting bonuses ~~and other expenses~~ for ~~2020 in an effort to keep fixed expenses under $25 million per quarter.~~2020. We have also temporarily suspended our quarterly cash dividend. While these actions are expected to have a favorable impact on the Company’s fixed expenditures and cash flow, our cash and credit management teams, together with our executive management teams are paying particular attention to the management of working capital. As a result of the above, we do not anticipate any short-term liquidity problems, nor do we anticipate any material credit losses.

Recent Important Events

Origines-Parfums

In June 2020, the Company, through its 73% owned subsidiary, Interparfums SA, and Divabox SAS (“Divabox”), owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired a 25% of Divabox capital for €12.5 million ($14 million), through a capital increase. In connection with the acquisition, the Company entered into a €12 million ($13.4 million), three-year term loan payable in three equal annual installments plus interest. As a website of reference for all selective fragrance brands, Origines-parfums is a key French player in the online beauty market recognized for its customer relationship expertise. This agreement should enhance the introduction of dedicated fragrance lines and products designed to address a specific consumer demand for this distribution channel and accelerate our digital development.

Moncler

In June 2020, the Company entered into an exclusive, 5-year worldwide license agreement with a potential 5-year extension with Moncler for the creation, development and distribution of fragrances under the Moncler brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. Moncler was founded at Monestier-de-Clermont, Grenoble, France, in 1952 and is currently headquartered in Italy. Over the years the brand has combined style with constant technological research assisted by experts in activities linked to the world of the mountain. The Moncler outerwear collections marry the extreme demands of nature with those of city life. Our first fragrance launch for the Moncler brand is scheduled for the first quarter of 2022.

S.T. Dupont

~~Abercrombie & Fitch and Hollister~~

~~In November 2019, we extended our license for both the Abercrombie & Fitch and Hollister brands until December 31, 2022, and added automatic renewals unless terminated on 3 years’ notice.~~

~~MCM~~

In September 2019, we entered into an exclusive, 10-year worldwide license agreement with German luxury fashion house MCM for the creation, development and distribution of fragrances under the MCM brand. Our rights under such license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.

Page 18

~~Oscar de la Renta~~

In September 2019, we extended our license through December 31, 2031, and added an additional five-year extension option through December 31, 2036. The original license agreement, signed in October 2013, would have expired on December 31, 2025.

~~Kate Spade New York~~

In June 2019, we entered into an exclusive 11-year worldwide license agreement with Kate Spade New York for the creation, development and distribution of fragrances under the Kate Spade brand. Our rights under such license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.

Discussion of Critical Accounting Policies

Information regarding our critical accounting policies can be found in our 2019 Annual Report on Form 10-K filed with the SEC.

Results of Operations

Three and Six Months Ended ~~March 31,~~June 30, 2020 as Compared to the Three and Six Months Ended ~~March 31,~~June 30, 2019

Net Sales

Net Sales Three months ended
March 31,
(in millions) 2020 % Change 2019

European based product sales $ 114.1 (20.6 )% $ 143.7
United States based product sales 30.7 (10.9 )% 34.5
Total net sales $ 144.8 (18.7 )% $ 178.2

(In millions)	Three months ended June 30,							Six months ended June 30,
	2020		2019		% Change			2020		2019		% Change
	(in millions)

European based brand product sales	$	39.4	$	125.6		(68.6	)%	$	153.5	$	269.3		(43.0	)%
United States based product sales		10.1		40.6		(75.2	)%		40.8		75.2		(45.7	)%
Total net sales	$	49.5	$	166.2		(70.2	)%	$	194.3	$	344.5		(43.6	)%

Net sales for the three months ended ~~March 31,~~June 30, 2020 ~~declined 18.7%~~decreased 70.2% to ~~$144.8~~$49.5 million, as compared to ~~$178.2~~$166.2 million for the corresponding period of the prior year. At comparable foreign currency exchange rates, net sales declined ~~17.8%~~69.8%. For the three months ended June 30, 2020 ~~first quarter,~~and 2019, the average ~~U.S.~~ dollar/euro exchange rate was 1.10 and 1.12, respectively. Net sales for the six months ended June 30, 2020 decreased 43.6% to $194.3 million, as compared to ~~1.14 in the first quarter of 2019.~~

~~European based product sales decreased 20.6% to $114.1 million for the three months ended March 31, 2020, as compared to $143.7~~$344.5 million for the corresponding period of the prior year. ~~At comparable foreign currency exchange rates, net~~

European based product sales ~~declined 19.5%. The successful launch of Coach~~ ~~Dreams~~ early in the year spurred the 35.9% increase in Coach brand sales. Comparable quarter sales declined for our other major brands following the closure of virtually all points of sale throughout the world due to the global COVID-19 pandemic. In addition, for certain major brands like Montblancdecreased 68.6% and Jimmy Choo, the 9.9% and 25.7% respective increases in brand sales for the 2019 first quarter established a high benchmark in 2020. Net sales for the Montblanc and Jimmy Choo brands declined 33.4% and 28.3%43.0% for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to the corresponding ~~period~~periods of the prior year. United States based product sales decreased 75.2% and 45.7% for the three and six months ended June 30, 2020, respectively, as compared to the corresponding periods of the prior year.

As we expected, the impact of the COVID-19 pandemic, most notably store closures in many countries where our products are sold, was the primary reason for the steep decline in our second quarter sales across all brands and geographic markets. In May and June, as stores gradually began to reopen in certain markets, our sales began to improve from the dismal April levels. We expect that this trend will continue as more stores reopen and customers feel more confident about in-store shopping. However, we recognize that there will continue to be significant challenges for the remainder of 2020 and possibly into early 2021. In particular, the one market which shows no sign of a turnaround any time soon is travel retail.

Page 19

United States based product sales decreased 10.9% to $30.7 million for the three months ended March 31, 2020, as compared to $34.5 million for the corresponding period of the prior year. As with our European operations, comparable quarter sales declined for most brands within our U.S. operations following the closure of virtually all points of sale throughout the world due to the global COVID-19 pandemic. Offsetting the decline, GUESS legacy scents and brand extensions launched in 2019 drove a 28.9% increase in GUESS brand sales for the period.

Net Sales to Customers by Region	Six months ended June 30,
(In millions)	2020		2019

North America	$	59.2	$	96.9
Western Europe		57.8		87.5
Asia		28.6		61.9
Middle East		19.0		44.6
Central and South America		14.2		26.1
Eastern Europe		9.4		21.5
Other		6.1		6.0
	$	194.3	$	344.5

~~We anticipate that the effects~~The impact of the COVID-19 pandemic ~~will continue to unfavorably impact our business. We also anticipate significant challenges for~~has broadly impacted all regions, with the remainder of 2020 due to uncertain market conditions. We expect a larger net sales decline in the second quarter of 2020, as many retail stores in our major markets may remain closed for the entire period. In that regard, we have postponed the launch of several programs originally scheduled for this year until 2021 and moved related advertising and promotion expenses to 2021 as well. That includes our planned launches for the Kate Spade New York, Jimmy Choo, Anna Sui and GUESS brands.

Net Sales to Customers by Region Three months ended
March 31,
(in millions) 2020 2019

North America $ 46.5 $ 47.2
Western Europe 41.5 46.8
Asia 20.6 32.8
Middle East 14.4 25.5
Central and South America 10.9 13.3
Eastern Europe 7.1 9.0
Other 3.8 3.6
$ 144.8 $ 178.2

~~With respect to performances by region, shelter in place measures and store closings decreed by various governments weighed on net sales. The impact was most severe~~steepest declines in the Middle East, Eastern Europe and ~~Asia, where net sales declined 44% and 37%~~Asia. Travel retail accounted for ~~the three months ended March 31, 2020, respectively, compared to the corresponding period~~much of the ~~prior year. In North America and Western Europe, where shelter~~decline in ~~place and store closings were implemented later, sales declined 1% and 11% for~~ the ~~three months ended March 31, 2020, respectively, compared to the corresponding period of the prior year.~~Asian market.

Gross Profit Margin	Three months ended March 31,
(in millions)	2020			2019
Gross profit margin							Three months ended June 30,						Six months ended June 30,
(In millions)							2020			2019			2020			2019

Net sales	$	144.8		$	178.2		$	49.5		$	166.2		$	194.3		$	344.5
Cost of sales		55.8			68.4			22.7			59.2			78.4			127.7

Gross margin	$	89.0		$	109.8		$	26.8		$	107.0		$	115.9		$	216.8

Gross margin as a % of net sales		61.5	%		61.6	%
Gross margin as a percent of net sales								54	%		64	%		60	%		63	%

Gross profit margin was ~~61.5% of net sales~~54% and 60% for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to ~~61.6%~~64% and 63% as for the ~~corresponding period of the prior year.~~three and six months ended June 30, 2019, respectively. For European operations, gross profit margin was ~~63.9%~~57% and ~~63.2% in~~62% for the ~~first quarters~~three and six months ended June 30, 2020, respectively, as compared to 68% and 66% for the corresponding periods of ~~2020 and 2019, respectively.~~ the prior year.

We carefully monitor movements in foreign currency exchange rates as over 45% of our European based operations net sales are 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 stronger dollar in 2020 resulted in a small benefit to our gross margin during the three and six months ended ~~March 31,~~June 30, 2020. However, this benefit was offset by lower gross margins due to product mix, and includes a charge of approximately $2.0 million relating to the assumption of a return liability for products sold by the former licensee of a brand license entered into in 2019.

For U.S. operations, gross profit margin was 43% and 50% for the three and six months ended June 30, 2020, respectively, as compared to 52% and 53% for the corresponding periods of the prior year. As a consequence of the 75% decline in net sales, certain expenses such as depreciation of tools and molds together with the distribution of point of sale materials, exaggerated the decline in gross margin for the periods.

Page 20

For U.S. operations, gross profit margin was 52.6% and 55.1% in the first quarters of 2020 and 2019, respectively. The decline in gross profit margin is primarily the result of product sales mix. Anna Sui products, which are primarily sold in Asia and generate some of our highest gross margins, were down significantly in the first quarter of 2020, as compared to the corresponding period of the prior year.

Generally, we do not bill customers for shipping and handling costs, and such costs, which aggregated ~~$1.6~~$0.6 million and $2.2 million for ~~both~~ the three ~~months~~and six month periods ended ~~March 31,~~June 30, 2020, respectively, as compared to $1.9 million and ~~2019,~~$3.5 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 June 30,						Six months ended June 30,
(In millions)	2020			2019			2020			2019

Selling, general and administrative expenses	$	32.4		$	84.5		$	103.6		$	161.1
Selling, general and administrative expenses as a percent of net sales		65	%		51	%		53	%		47	%

Selling, General and Administrative Expenses Three months ended
March 31,
(in millions) 2020 2019

Selling, general and administrative expenses $ 71.3 $ 76.5
Selling, general and administrative expenses as a % of net sales 49.2 % 42.9 %

Selling, general and administrative expenses decreased ~~6.9%~~62% and 36% for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to the corresponding ~~period~~periods of the prior year. However, as a percentage of sales, selling, general and administrative expenses were ~~49.2%~~65% and ~~42.9%~~53% for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to 51% and 47% for the three and six months ended June 30, 2019, respectively. For European operations ~~with~~ sales ~~down 20.6%,~~decreased 69% and 43% for the three and six months ended June 30, 2020, respectively, as compared to the corresponding periods of the prior year, while selling, general and administrative expenses ~~declined 6.4% in 2020, as compared to 2019~~of our European operations decreased 66% and ~~represented 50.1% of sales in 2020, as compared to 42.5% of sales in 2019. For U.S. operations, with sales down 10.9%,~~38% for the same periods, respectively. In addition, selling, general and administrative expenses of our European operations represented 59% and 52% of net sales for the three and six months ended June 30, 2020, respectively, as compared to 54% and 48% for the three and six months ended June 30, 2019, respectively.

For U.S. operations sales decreased ~~8.8% in~~75% and 46% for the three and six months ended June 30, 2020, respectively, as compared to the corresponding periods of the prior year. At the same time, selling, general and administrative expenses of our U.S. operations decreased 44% and 27% for the three and six months ended June 30, 2020, as compared to ~~2019~~the corresponding periods of the prior year, and represented ~~45.8%~~91% and ~~44.7%~~57% of net sales for the three and six months ended June 30, 2020, respectively, as compared to 40% and 42% for the corresponding periods of the prior year. Our U.S. operations are significantly smaller than those of our European operations and carry higher fixed costs that could not be leveraged as efficiently as those of our European operations with the decline in ~~2020 and 2019, respectively.~~sales.

We had significant promotional programs planned for 2020. At the time of initial retail store closings, ~~our~~certain advertising and promotional programs were well ~~underway.~~underway and could not be halted. Since that time we have severely curtailed our promotional activities. We postponed the launch of several programs originally scheduled for this year until 2021 along with related advertising and promotion programs. Promotion and advertising included in selling, general and administrative expenses aggregated ~~approximately $28.5~~$5.8 million ~~(19.7% of net sales)~~and $34.4 million for the three and six months ended June 30, 2020, ~~period,~~respectively, as compared to ~~$27.4~~$36.4 million ~~(15.4%~~and $63.8 million for the corresponding periods of the prior year. Promotion and advertising represented 11.8% and 17.7% of net ~~sales)~~sales for the ~~2019 period. In addition, our entire operational budgets in Europe~~three and six months ended June 30, 2020, respectively, as compared to 21.9% and 18.5% for the ~~United States for this period were based on our originally projected sales levels.~~

corresponding periods of the prior year. Once the COVID-19 pandemic recedes, we will once again invest heavily in promotional spending to support new product launches and to build brand awareness. We had significant promotion and advertising programs planned for 2020. However, we have postponed the launch of several programs originally scheduled for this year until 2021 and, where possible, we also moved those related advertising and promotion expenses to 2021 as well.

Royalty expense included in selling, general and administrative expenses aggregated ~~$11.3~~$3.4 million and $14.6 million for the three and six months ended June 30, 2020, ~~period,~~respectively, as compared to ~~$13.0~~$12.1 million ~~in 2019~~ and $25.1 million for the corresponding periods of the prior year. Royalty expense represented ~~7.8%~~6.8% and 7.5% of net sales for the three and six months ended June 30, 2020, as compared to 7.3% of net sales ~~in 2020 and 2019, respectively. The increase in 2020, as~~for both corresponding periods of the prior year. As a ~~percentage~~result of ~~sales, is directly related~~the COVID-19 pandemic we reached agreements with most of our licensors to ~~increased royalty based product sales.~~waive or significantly reduce any minimum guaranteed royalties for 2020.

Page 21

As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, ~~income from operations decreased 46.6% to $17.8~~we incurred an operating loss of $5.5 million for the three months ended ~~March 31,~~June 30, 2020, as compared ~~to $33.3~~an operating profit of $22.5 million for the corresponding period of the prior year. ~~Operating margins were 12.3% of net sales in~~Income from operations was $12.3 million for the ~~current period~~six months ended June 30, 2020, as compared to ~~18.7%~~$55.7 million for the corresponding period of the prior year. For the six months ended June 30, 2020, our operating margin was 6.3%, as compared to 16.2% for the corresponding period of the prior year.

~~Page 21~~

Other Income and Expense

Interest expense aggregated ~~$1.0~~$0.4 million and ~~$0.6~~$1.4 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to $0.2 million and ~~2019, respectively.~~$0.8 million for the corresponding periods of the prior year. Interest expense is primarily related to the financing of brand ~~and licensing~~ acquisitions. We also use the credit lines available to us, as needed, to finance our working capital needs as well as our financing needs for acquisitions.

Foreign currency gains ~~(losses)~~ aggregated ~~$1.0 million~~zero and ~~$(0.2)~~$1.0 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to losses of $0.5 million and ~~2019, respectively.~~$0.7 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. ~~Over~~Approximately 45% of net sales of our European operations are denominated in U.S. dollars.

Interest income aggregated ~~$1.0~~$0.8 million and ~~$1.9~~$1.8 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, as compared to $0.4 million and ~~2019, respectively.~~$2.3 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

~~Our effective tax rate was 29.0% and 27.4% for the three months ended March 31, 2020 and 2019, respectively.~~ Pursuant to an action plan released by the French Prime Minister, the French corporate income tax rate is expected to be cut from 33% to 25% over a three-year period beginning in 2020. Our effective tax rate for European operations was ~~30% and 29%~~26% for the ~~three~~six months ended ~~March 31, 2020 and 2019, respectively.~~

~~Our effective tax rate for U.S. operations was 20.9% for the three months ended March 31,~~June 30, 2020, as compared to ~~12.1%~~30% for the corresponding period of the prior year. The decrease is the result of favorable tax rates in other jurisdictions where our European operations conduct business such as Singapore, Switzerland and the United States.

Our effective tax rate for U.S. operations resulted in a benefit of 33.8% for the six months ended June 30, 2020, as compared to an expense of 17.3% for the corresponding period of the prior year. Due to the loss incurred in 2020, for federal tax purposes, we will be able to carry back the loss to 2015 when the federal income tax rate was 35%. Our effective tax rate in 2019 differs from the 21% statutory rate due to benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income slightly offset by state and local taxes. ~~There was no benefit from the exercise of stock options for the three months ended March 31, 2020 as compared to a benefit of $0.3 million in the 2019 first quarter.~~

Page 22

The French authorities are considering that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not, in and of itself, constitute a permanent establishment and therefore Interparfums, SA should pay French taxes on all or part of the profits of that entity. The French Tax Authority recently notified the Company that IP Suisse will be the subject of a tax audit covering the period January 1, 2010 through December 31, 2018. No claim or assessment for any taxes or penalties has been made at this time. The Company disagrees and is prepared to vigorously defend its position. Consequently, no provision has been made in the accompanying ~~consolidated~~ financial statements as we believe it is more likely than not that our position will be sustained based on its technical merits. Although we believe that we have sufficient arguments to support our position, there exists a risk that the French authorities may prevail. The Company’s exposure in connection with this matter is approximately $5.8 million, net of ~~recover~~recovery taxes already paid to the Swiss authorities, and excluding interest.

~~Page 22~~

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

Net Income and Earnings per Share
(in thousands except per share data)
Three months ended
March 31,
2020 2019

Net income attributable to European operations $ 11,693 $ 22,091
Net income attributable to United States operations 1,606 2,887
Net income 13,299 24,978
Less: Net income attributable to the noncontrolling interest 3,240 6,084

Net income attributable to Inter Parfums, Inc. $ 10,059 $ 18,894

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic $ 0.32 $ 0.60
Diluted $ 0.32 $ 0.60

Weighted average number of shares outstanding:
Basic 31,530 31,431
Diluted 31,708 31,679

Net Income and Earnings per Share

~~Net income decreased 46.8% to $13.3~~

(In thousands except per share data)	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019

Net income European operations	$	539		$	11,814	$	12,232		$	33,904
Net income (loss) U.S. operations		(3,522	)		3,786		(1,916	)		6,673

Net income (loss)		(2,983	)		15,600		10,316			40,577
Less: Net income attributable to the noncontrolling interest		135			3,282		3,375			9,366

Net income (loss) attributable to Inter Parfums, Inc.	$	(3,118	)	$	12,318	$	6,941		$	31,211

Earnings (loss) per share:

Net income (loss) attributable to Inter Parfums, Inc. common shareholders:
Basic	($	0.10	)	$	0.39	$	0.22		$	0.99
Diluted	($	0.10	)	$	0.39	$	0.22		$	0.99

Weighted average number of shares outstanding:
Basic		31,532			31,449		31,531			31,440
Diluted		31,533			31,687		31,667			31,683

We incurred a net loss of $3.0 million for the three months ended ~~March 31,~~June 30, 2020, as compared to ~~$25.0~~a profit of $15.6 million for the corresponding period of the prior year. Net income was $10.3 million for the six months ended June 30, 2020, as compared to $40.6 million for the corresponding period of the prior year. The reasons for significant fluctuations in net income (loss) for both European operations and United States operations are directly related to the previous discussions relating to changes in sales, gross margin, and selling, general and administrative expenses, most of which was caused by the effects of the COVID-19 pandemic and effective tax rates.

Page 23

The noncontrolling interest arises ~~primarily~~ 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~~subsidiary in Spain. Net income attributable to the noncontrolling interest aggregated ~~28%~~25% and 27% of European ~~operations~~operations’ net income for ~~both~~ the three and six months ended ~~March 31,~~June 30, 2020, ~~and 2019. Net income attributable to Inter Parfums, Inc. decreased 47% to $10.1 million,~~respectively, as compared to ~~$18.9 million~~27% for the corresponding ~~period~~periods of the prior year.

~~Page 23~~

Liquidity and Capital Resources

Our conservative financial tradition has enabled us to amass hefty cash balances and nominal long-term debt. As of ~~March 31,~~June 30, 2020 we had ~~$204~~$195 million in cash, cash equivalents and short-term investments, 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 held by our European operations.~~investments. As of ~~March 31,~~June 30, 2020 long-term debt aggregated only ~~$9.8~~$18.9 million and we also have ~~$47~~$48 million available in untapped credit facilities. Nonetheless, in response to the COVID-19 pandemic, we have taken several actions to minimize expenses and protect cash flow. Our operating cost structure, of which variable costs ~~accounts~~in a typical year account for over two-thirds, ~~should enable~~has enabled us to minimize the impact of reduced net sales on our bottom line. In that regard, we have postponed the launch of several programs originally scheduled for this year until 2021 and moved related advertising and promotion ~~expenses~~programs to 2021 as well. We have also taken several actions with an eye toward minimizing fixed expenses. While we have not terminated or furloughed any employees, we have instituted a hiring freeze and plan on significantly cutting bonuses for 2020. We have also temporarily suspended our quarterly cash dividend. While these actions are expected to have a favorable impact on the Company’s fixed expenditures and cash flow, our cash and credit management teams, together with our executive management teams are paying particular attention to the management of working capital. As a result of the above, we have not had nor do we not anticipate any short-term liquidity problems.

As of ~~March 31,~~June 30, 2020, we had a working capital ratio of ~~3.7~~4.8 to 1. Approximately ~~82%~~85% of the Company’s total assets are held by European operations, and approximately ~~$171~~$175 million of trademarks, licenses and other intangible assets are also held by European operations.

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. 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 ~~$25.1 million and $14.6~~$21.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020, ~~and 2019, respectively.~~as compared to cash provided by operating activities of $0.6 million for the corresponding period of the prior year. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, working capital items used ~~$40.6~~$36.6 million in cash from operating activities, as compared to ~~$42.1~~$45.9 million in the 2019 period. Although accounts receivable is up 3.4% from year end, the balance is reasonable based on first quarter 2020 sales levels, and reflects continued strong collection activity as day’s sales outstanding is 85 days for both the three months endedAs mentioned in our March 31, 2020 ~~and 2019. Inventory levels are relatively unchanged from year end and includes inventory~~quarterly report on Form 10-Q, we anticipated ~~to be needed to support for 2020 new product launches. As previously mentioned, we anticipate~~ significant challenges for the remainder of 2020 due to uncertain market ~~conditions.~~conditions promulgated by the COVID-19 pandemic. We ~~expect a larger~~expected the significant net sales decline in the second quarter of 2020, as ~~many~~ retail stores in many of our major markets ~~may~~were expected to remain closed for the entire period. ~~As a result,~~Since March 2020, retail stores in several jurisdictions around the world began reopening and business is slowly picking up. It was also anticipated that inventory levels ~~are expected~~would increase as certain purchase commitments needed to ~~rise considerably. Our~~be honored. As previously mentioned, our cash and credit management teams, together with our executive management teams are ~~paying~~continuing to pay particular attention to the management of working capital.

Cash flows used in investing activities in 2020 reflect ~~the~~ purchases ~~and sales~~ of short-term investments. These investments are primarily certificates of deposit with maturities greater than three months. ~~At March 31, 2020, approximately $60~~Approximately $62 million of such certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.

��

Page 24

Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we expect to spend approximately $4.0 million on tools and molds, depending on our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers.

In ~~2018, in~~June 2020, the Company and Divabox, owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired 25% of Divabox capital for €12.5 million ($14 million), through a capital increase. In connection with ~~a license agreement, we agreed to pay $15.0 million in equal annual installments of $1.1 million including interest imputed at 4.1%. In 2015, in connection with a brand~~the acquisition, wethe Company entered into a ~~5-year~~€12.0 million ($13.4 million), three-year term loan payable in three equal ~~quarterly~~annual installments ~~of €5.0 million (approximately $5.7 million)~~ plus interest. ~~In order to reduce exposure to rising variable interest rates, we entered into a swap transaction effectively exchanging the variable interest rate to a fixed rate of approximately 1.2%.~~

Our short-term financing requirements are expected to be met by available cash on hand at ~~March 31,~~June 30, 2020, and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2020 consist of a $20.0 million unsecured revolving line of credit provided by a domestic commercial bank and approximately ~~$27.0~~$28 million in credit lines provided by a consortium of international financial institutions. There were no short-term borrowings outstanding as of both ~~March 31,~~June 30, 2020 and June 30, 2019.

Purchase of subsidiary shares from noncontrolling interest represents the purchase of treasury shares of Interparfums SA, which are expected to be issued to Interparfums SA employees pursuant to its Free Share Plan.

In October 2019, the Board of Directors authorized a 20% increase in the annual dividend to $1.32 per share. In April 2020, as a result of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the quarterly cash dividend. The Board also indicated that it will revisit this issue with an eye towards reinstitution of the dividend when the business environment is more favorable.

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 ~~three month period~~six months ended ~~March 31,~~June 30, 2020.

Page 25

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.

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 ~~March 31,~~June 30, 2020, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. ~~$40.0~~$2.7 million ~~GB £1.0 million and JPY ¥170.0 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 26~~

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~~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~~Company’s internal control over financial reporting.

Page 26

Part II. Other Information

Items 1. Legal Proceedings, 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 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, as updated and supplemented below, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K may not be the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

The COVID-19 pandemic has had, and we expect will continue to have a material adverse effect on our business, results of operations, financial condition and cash flows.

The public health crisis caused by the COVID-19 pandemic and the measures being taken by governments, businesses, including us, our suppliers, our distributors, retailers and the public, to limit ~~COVID-19's~~COVID-19’s spread, have had and we expect will continue to have, certain negative impacts on our business including, but not limited to, the following:

●

We have experienced a decrease in sales of our products in markets around the world that have been affected by the COVID-19 pandemic. In particular, sales of our products have been significantly negatively affected by shelter-in-place regulations and closings of retailers around the world. This negative trend is likely to continue, with the most significant impact expected ~~to occur~~ in ~~the~~this second quarter of 2020. IfHowever, if the COVID-19 pandemic intensifies its negative impacts on our sales could be more prolonged and may become more severe.

Page 27

●

Deteriorating economic and political conditions in many of our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns could cause a further decrease in demand for our products.

~~Page 27~~

●

Due to the closings of a substantial number of retailers that sell our products we have faced, and may continue to face, increasing delays in payment of accounts receivables from our customers. We may have to write-off certain receivables as a result of the COVID-19 pandemic’s damaging impacts on their respective businesses, the extent of which is not presently known.

●

We have faced, and may continue to face, increasing delays in the delivery of components as a result of shipping delays due to, among other things, additional safety requirements imposed by port authorities, closures of or congestion at ports, and capacity constraints of transportation contractors.

●

We may be required to record significant impairment charges with respect to noncurrent assets, including trademarks, licenses and other intangible assets whose fair values may be negatively affected by the effects of the COVID-19 pandemic on our operations.

●

As a result of the COVID-19 pandemic, in all jurisdictions in which we operate we are following guidance as well as requirements from authorities and health officials in allowing our teams to gradually return to our offices, including, ~~related governmental guidance or directives,~~requiring personnel to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitization routines at our offices and distribution centers. However, we ~~have required substantially all of our employees in New York, New Jersey and Paris, to work remotely. We~~ may experience reductions in productivity and disruptions to our business routines while ~~our remote work policy remains~~such guidance and restrictions remain in place.

●

Actions we have taken or may take, or decisions on potential actions that we did not take, as a consequence of the COVID-19 pandemic may result in claims or litigation against us.

●

The resumption of normal business operations after the disruptions caused by the COVID-19 pandemic may be delayed or constrained by its lingering effects on consumers, suppliers or third-party distributors.

COVID-19 pandemic and governmental responses could exacerbate many of our risk factors.

Any of the negative impacts of the COVID-19 pandemic, including those described above, alone or in combination with others, could exacerbate many of the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Page 28

COVID-19 pandemic and governmental responses could cause a global recession.

The pandemic has significantly increased economic and demand uncertainty. To date the impact of COVID-19 has caused a global economic slowdown, and it is possible that it could cause a global recession. There is a significant degree of uncertainty and lack of visibility as to the extent and duration of any such slowdown or recession. A global recession would exacerbate the risk factors discussed above that could have a material adverse effect on our results of operations, financial condition and cash flows.

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits.

The following documents are filed herewith:

Exhibit No. Description Page Number

10.173.1 Lease for Interparfums SA Distribution Center - English translation 32
(confidential information in this exhibit was omitted)

31.1 Certifications required by Rule 13a-14(a) of Chief Executive Officer
102

31.2 Certifications required by Rule 13a-14(a) of Chief Financial Officer and Principal Accounting Officer
103

32.1 Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Executive Officer
104

32.2 Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Financial Officer and Principal Accounting Officer 105

101 Interactive data files

Exhibit No.	Description	Page Number

31.1	Certifications required by Rule 13a-14(a) of Chief Executive Officer	31

31.2	Certifications required by Rule 13a-14(a) of Chief Financial Officer and Principal Accounting Officer	32

32.1	Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Executive Officer	33

32.2	Certification required by Section 906 of the Sarbanes-Oxley Act of Chief Financial Officer and Principal Accounting Officer	34

101	Interactive data files

Page 2829

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 ~~11th~~10th day of ~~May~~August 2020.

		INTER PARFUMS, INC.

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

Page 2930

~~50.46 P4Y P5Y false --12-31 Q1 0000822663~~iso4217:USD xbrli:shares

			Fair Value Measurements at March 31, 2020
			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	$	61,539	$	—	$	61,539	$	—
Foreign currency forward exchange contracts accounted for using hedge accounting		131				131
Foreign currency forward exchange contracts not accounted for using hedge accounting		140		—		140		—

	$	61,810	$	—	$	61,810	$	—
Liabilities:
Interest rate swap	$	8	$	—	$	8	$	—

	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2020		815,800		$	49.89
Options granted		9,000			69.11
Options forfeited		(2,140	)		57.03
Options exercised		(18,940	)		33.82

Outstanding at March 31, 2020		803,720			$ 50. 46

Options exercisable		290,690		$	35.09
Options available for future grants		566,835

Net Sales to Customers by Region	Three months ended March 31,
(in millions)	2020		2019

North America	$	46.5	$	47.2
Western Europe		41.5		46.8
Asia		20.6		32.8
Middle East		14.4		25.5
Central and South America		10.9		13.3
Eastern Europe		7.1		9.0
Other		3.8		3.6
	$	144.8	$	178.2

*Net Income and Earnings per Share* (in thousands except per share data)	Three months ended March 31,
	2020		2019

Net income attributable to European operations	$	11,693	$	22,091
Net income attributable to United States operations		1,606		2,887
Net income		13,299		24,978
Less: Net income attributable to the noncontrolling interest		3,240		6,084

Net income attributable to Inter Parfums, Inc.	$	10,059	$	18,894

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic	$	0.32	$	0.60
Diluted	$	0.32	$	0.60

Weighted average number of shares outstanding:
Basic		31,530		31,431
Diluted		31,708		31,679