INTERPARFUMS INC

Previous wording

Statements in this report which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases, you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. You should not rely on forward-looking statements because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and “Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2023, and the reports Inter Parfums files from time to time with the Securities and Exchange Commission (“SEC”). Inter Parfums does not intend to and undertakes no duty to update the information contained in this report.

Current wording

Statements in this report which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases, you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. You should not rely on forward-looking statements because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and “Risk Factors” in Interparfums’ annual report on Form 10-K for the fiscal year ended December 31, 2023, and the reports Interparfums files from time to time with the Securities and Exchange Commission (“SEC”). Interparfums does not intend to and undertakes no duty to update the information contained in this report.

Previous wording

We produce and distribute fragrance products through our European based operations primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 68% and 69% of net sales for thesix months ended June 30, 2024 and 2023, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lacoste, Lanvin, Moncler, Montblanc, Rochas and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world. Our exclusive and worldwide license for the production and distribution of Lacoste brand perfumes and cosmetics became effective in January 2024.

Current wording

We produce and distribute fragrance products through our European based operations primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 67% of net sales for thenine months ended September 30, 2024 and 2023, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lacoste, Lanvin, Moncler, Montblanc, Rochas and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world. Our exclusive and worldwide license for the production and distribution of Lacoste brand perfumes and cosmetics became effective in January 2024.

Previous wording

Through our United States based operations, we also market fragrance and fragrance related products. United States based operations represented 32% and 31% of net sales for thethree months ended June 30, 2024 and 2023, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Emanual Ungaro, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Roberto Cavalli brands.

Current wording

Through our United States based operations, we also produce and distribute fragrance and fragrance related products. United States based operations represented 33% of net sales for thenine months ended September 30, 2024 and 2023, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan/DKNY, Emanual Ungaro, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Roberto Cavalli brands.

Previous wording

Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Montblanc, Jimmy Choo, Coach, GUESS, Donna Karan/DKNY, Lacoste, and Ferragamo brand names.

Current wording

Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Jimmy Choo, Montblanc, Coach, GUESS, Donna Karan/DKNY, Lacoste, and Ferragamo brand names.

Previous wording

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

Current wording

Our reported net sales are impacted by changes in foreign currency exchange rates as greater than 50% of net sales of our European based operations are denominated in U.S. dollars, while almost all costs of our European based operations are incurred in euro. 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.

Previous wording

Net sales for thethree months ended June 30, 2024 increased 10.7% from thethree months ended June 30, 2023. At comparable foreign currency exchange rates, net sales increased 11.1% from the second quarter of 2023. The average dollar/euro exchange rate for the current second quarter was 1.08 compared to 1.09 in the second quarter of 2023, while the average dollar/euro exchange rate was 1.08 for both the six months ended June 30, 2024 and 2023. Net sales for thesix months ended June 30, 2024 increased 7.3% as compared to thesix months ended June 30, 2023.

Current wording

Net sales for thethree months ended September 30, 2024 increased 15.4% from thethree months ended September 30, 2023. At comparable foreign currency exchange rates, net sales increased 15.0% from the third quarter of 2023. The average dollar/euro exchange rate for the current third quarter was 1.10 compared to 1.09 in the third quarter of 2023, while the average dollar/euro exchange rate was 1.09 for thenine months ended September 30, 2024 compared to 1.08 for thenine months ended September 30, 2023. Net sales for thenine months ended September 30, 2024 increased 10.3% as compared to thenine months ended September 30, 2023.

Previous wording

For European based operations, Jimmy Choo grew sales by 31% while Montblanc and Coach saw decreases in sales of 3% and 5%, respectively, as compared to the corresponding period of the prior year. This was largely driven by the substantial increases in sales of Montblanc and Coach in the second quarter of 2023 of 16% and 28%, respectively, as compared to the second quarter of 2022. During the first quarter of 2024, we began selling the Lacoste brand, which added $39.5 million in sales during the first half of the year.

Current wording

For European based operations, Jimmy Choo and Montblanc sales grew by 17% and 10%, respectively, compared to the corresponding period of the prior year, driven by the launch of Jimmy Choo I Want Choo Le Parfum and the ongoing strength in the Montblanc Explorer and Legend lines. Sales of Coach remained flat as compared to the corresponding period of the prior year. This was largely driven by the substantial increase in sales of Coach in the third quarter of 2023 of 32% as compared to the third quarter of 2022. During the first quarter of 2024, we began selling the Lacoste brand, which added $29 million and $68 million in sales during thethree andnine months ended September 30, 2024, respectively. During the third quarter of 2024, we rolled out the international launch of Lacoste Original and launched a new Karl Lagerfeld pillar, Ikonik.

Previous wording

Sales by our United States based operations grew a modest 7.9% in the second quarter of 2024 off a high 2023 base when second quarter sales had expanded 42%. The addition and extension of Roberto Cavalli contributed to the continued growth in United States based operations. For the first half of 2024, we saw growth of 8% and 14% for GUESS and Donna Karan/DKNY, respectively, following successful and continued brand expansions.

Current wording

Sales by our United States based operations grew a modest 8.7% in the third quarter of 2024 off a high 2023 base when third quarter sales had expanded 64%. The addition and extension of Roberto Cavalli contributed to the continued growth in United States based operations with the debut of Sweet Ferocious in August of this year. GUESS and Donna Karan/DKNY rose 16% and 4%, respectively, compared to the corresponding period of the prior year, following the roll-out of GUESS Iconic and DKNY 24/7 building upon the strong performance of our legacy scents for both brands.

Previous wording

The second quarter growth was in line with expectations, and we are confident in our future as we look forward to executing our plans for the remainder of 2024. Our brands are in high demand in a robust environment for the fragrance industry, and we have many exciting developments planned for the Company. We have a large number of brand extensions across many of our brands launching throughout the year, plus the upcoming international expansion of Lacoste Original. Additionally, there is a new flanker for Roberto CavalliSignatureand a new DKNY blockbuster fragrance, DKNY 24/7, that launched in select markets at the end of the second quarter and will see full scale distribution in September 2024. In sum,2024 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds.

Current wording

The third quarter growth was in line with expectations, and we are confident in our future as we look forward to executing our plans for the remainder of 2024. Our brands are in high demand in a robust environment for the fragrance industry, and we have many exciting developments planned for the Company. We have a large number of holiday programs planned as well as the launch of the Roberto Cavalli Wild Heart duo planned for the fourth quarter. While the pace of growth in the market is starting to slow down, the power of our diverse brand portfolio, in combination with our agile operating model, should help us gain market share.

Previous wording

In the first half of 2024, second quarter sales in our largest market, North America, rose 5%, followed by Western Europe and Asia/Pacific where comparable half year sales in both regions increased 11% and 6%, respectively. Our sales in Central and South America and the Middle East and Africa were also robust, up 26% and 8%, respectively. Additionally, our travel retail business is continuing to show signs of renewed life. Eastern Europe was adversely impacted by sourcing constraints in the first quarter, which showed signs of improvement during the second quarter 2024.

Current wording

In the nine months ended September 30, 2024, net sales in our largest market, North America, rose 8% as compared to the prior year period, followed by increases in the Western Europe and Asia/Pacific markets of 16% and 9%, respectively. Our net sales in Central and South America and the Middle East and Africa were also robust, up 24% and 4%, respectively in the nine months ended September 30, 2024 as compared to the prior year period. Additionally, our travel retail business is continuing to strengthen. Eastern Europe was adversely impacted by sourcing constraints earlier in the year, which returned to normal business levels in the third quarter of 2024.

Previous wording

For European based operations, gross profit margin as a percentage of net sales was 68.8%and 66.3% for thethree and six months ended June 30, 2024, respectively, as compared to 63.0% and 65.6% for the corresponding periods of the prior year. European based operations were positively impacted by geographic and channel mix. The cost inflation impacts on raw materials purchased in Europe related to increased energy costs largely abated in second quarter. Excluding theone-time impacts related to the inventory reserves, gross margins would have decreased by approximately 70 basis points for thesix months ended June 30, 2024 as compared to the corresponding period of the prior year.

Current wording

For European based operations, gross profit margin as a percentage of net sales was 66.2%and 66.3% for thethree and nine months ended September 30, 2024, respectively, as compared to 68.6% and 66.6% for the corresponding periods of the prior year. European based operations were negatively impacted by brand and channel mix during the three and nine months ended September 30, 2024 as compared to the prior year period.

Previous wording

Generally, we do not bill customers for shipping and handling costs, and such costs, which aggregated $2.5 millionand $5.0 million for thethree and six months ended June 30, 2024, respectively, as compared to $3.6 million and $7.5 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. The improvement in shipping and handling costs in the first half of 2024 as compared to corresponding period in 2023 was a direct benefit of lower transportation costs seen globally.

Current wording

Generally, we do not bill customers for shipping and handling costs, and such costs, which aggregated $3.8 millionand $8.8 million for thethree and nine months ended September 30, 2024, respectively, as compared to $3.9 million and $11.4 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. The improvement in shipping and handling costs during the three and nine months ended September 30, 2024 as compared to corresponding periods in 2023 is a direct benefit of lower transportation costs seen globally.

Previous wording

The Company’s selling, general and administrative expenses as a percentage of net sales was 45.6% and 43.6% for thethree andsix months ended June 30, 2024 as compared to 43.1% and 39.6% for thethree andsix months ended June 30, 2023. The increase was largely driven by increased spending on promotional and advertising activities in both the second quarter and first half of 2024 as compared to the prior year periods. Additionally, starting in 2024, the Company began to amortize the cost of the Lacoste license which represented $3.2 million during the first half of the year. These costs will be incurred at approximately $1.6 million quarterly over the remaining life of the license.

Current wording

The Company’s selling, general and administrative expenses as a percentage of net sales were 38.9% and 41.8% for thethree andnine months ended September 30, 2024 as compared to 40.2% and 39.8% for thethree andnine months ended September 30, 2023. The increase in the first three quarters of the year was largely driven by increased spending on promotional and advertising activities as compared to the prior year period. Additionally, starting in 2024, the Company began to amortize the cost of the Lacoste license which represented $4.8 million during the first nine months of the year. These costs are being incurred at approximately $1.6 million quarterly over the remaining life of the license. The decrease in the third quarter was driven by the phasing of promotional and advertising activities by our European based operations discussed in detail below.

Previous wording

For European based operations, selling, general and administrative expenses increased 21.2%and 19.2% for thethree and six months ended June 30, 2024 as compared to the corresponding period of the prior year, and represented 47.8% and 43.4% of net sales for thethree and six months ended June 30, 2024, respectively, as compared to 45.1% and 38.9% for thethree and six months ended June 30, 2023, respectively. As discussed above, this increase is driven by increased promotion and advertising spending as well as the impact of the amortization of the Lacoste license. For United States based operations, selling, general and administrative expenses increased 8.2%and 15.4% for thethree andsix months ended June 30, 2024, as compared to the corresponding period of the prior year, and represented 39.8% and 42.5% of net sales for thethree andsix months ended June 30, 2024, respectively, as compared to 39.7% and 41.3% for thethree andsix months ended June 30, 2024, respectively. The increase was largely driven by continued investment in infrastructure and headcount to support the growth of the business.

Current wording

For European based operations, selling, general and administrative expenses increased 9.6%and 15.6% for the three andnine months ended September 30, 2024 as compared to the corresponding period of the prior year, and represented 38.3% and 41.5% of net sales for thethree and nine months ended September 30, 2024, respectively, as compared to 42.3% and 40.1% for thethree and nine months ended September 30, 2023, respectively. As discussed above, this increase is driven by increased promotion and advertising spending as well as the impact of the amortization of the Lacoste license. While promotion and advertising spend increased on a year to date basis, a portion of the activities planned for the third quarter were pushed into the fourth quarter resulting in a decrease in selling, general and administrative expenses as a percentage of net sales in the current quarter as compared to the prior year period. For United States based operations, selling, general and administrative expenses increased 16.1%and 15.7% for thethree andnine months ended September 30, 2024, as compared to the corresponding period of the prior year, and represented 39.0% and 41.1% of net sales for thethree andnine months ended September 30, 2024, respectively, as compared to 36.5% and 39.3% for thethree andnine months ended September 30, 2023, respectively. The increase was largely driven by continued investment in infrastructure and headcount to support the growth of the business as well as increased promotional and advertising spending.

Previous wording

Promotion and advertising included in selling, general and administrative expenses aggregated $66.4 million and $114.7 million for thethree andsix months ended June 30, 2024, respectively, as compared to $54.6 million and $89.8 million for the corresponding periods of the year and represented 19.4% and 17.2% of net salesfor thethree andsix months ended June 30, 2024, respectively, as compared to 17.7% and 14.5% for the corresponding periods of the prior year.. Promotion and advertising are integral parts of our industry, and we continue to invest heavily to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have a beneficial effect on sales. Historically, the Company incurred the majority of our promotional and advertising expenditures in the second half of the year. Beginning in 2024, the Company implemented a strategy to increase spending in the first half of the year to better support and drive business growth throughout the year. Additionally, as the second quarter of 2024 saw a lighter innovation program than prior years, the Company focused on increasing promotional and advertising spending to support the continued success of our existing brands and to support the initial launch of our new brands, Lacoste and Roberto Cavalli. We also continue to develop and implement omnichannel concepts and compelling content to deliver an integrated consumer experience. Long term, we continue to anticipate that on a full year basis, promotion and advertising expenditures will aggregate approximately 21% of net sales.

Current wording

Promotion and advertising included in selling, general and administrative expenses aggregated $66.8 million and $181.5 million for thethree andnine months ended September 30, 2024, respectively, as compared to $62.8 million and $152.6 million for the corresponding periods of the prior year and represented 15.7% and 16.6% of net salesfor thethree andnine months ended September 30, 2024, respectively, as compared to 17.1% and 15.4% for the corresponding periods of the prior year. Promotion and advertising are integral parts of our industry, and we continue to invest heavily to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have a beneficial effect on sales. Historically, the Company incurred the majority of our promotional and advertising expenditures in the second half of the year. Beginning in 2024, the Company implemented a strategy to increase spending in the first half of the year to better support and drive business growth throughout the year. Additionally, as the first three quarters of 2024 saw a lighter innovation program than prior years, the Company focused on increasing promotional and advertising spending to support the continued success of our existing brands and to support the initial launches of our new brands, Lacoste and Roberto Cavalli. We also continue to develop and implement omnichannel concepts and compelling content to deliver an integrated consumer experience. Long term, we continue to anticipate that on a full year basis, promotion and advertising expenditures will aggregate approximately 21% of net sales.

Previous wording

Royalty expense included in selling, general and administrative expenses aggregated $27.0 million and $54.2 million for thethree and six months ended June 30, 2024, respectively, as compared to $24.0 million and $48.1 million for the corresponding periods of the prior year. Royalty expense represented 7.9% and 8.1% of net sales for thethree and six months ended June 30, 2024, respectively, as compared to 7.8% and 7.7% of net sales for the corresponding periods of the prior year. This increase was primarily driven by unfavorable brand mix.

Current wording

Royalty expense included in selling, general and administrative expenses aggregated $34.0 million and $88.2 million for thethree and nine months ended September 30, 2024, respectively, as compared to $29.1 million and $77.2 million for the corresponding periods of the prior year. Royalty expense represented 8.0% and 8.1% of net sales for thethree and nine months ended September 30, 2024, respectively, as compared to 7.9% and 7.8% of net sales for the corresponding periods of the prior year. This increase was primarily driven by unfavorable brand mix.

Previous wording

As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 18.9% and 19.9% for thethree and six months ended June 30, 2024, respectively, as compared to 17.8% and 23.4% for the corresponding periods of the prior year.

Current wording

As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 25.0% and 21.9% for thethree and nine months ended September 30, 2024, respectively, as compared to 23.7% and 23.5% for the corresponding periods of the prior year.

Previous wording

Overall, other income and expense for thesix months ended June 30, 2024, was $1.5 million as compared to a gain of $2.8 million in the corresponding prior year period. The main driver of the decrease was theone-time gain recognized in 2023 related to the sale of marketable securities discussed below.

Current wording

Overall, other income and expense for thenine months ended September 30, 2024, was a loss of $7.1 million as compared to a gain of $2.2 million in the corresponding prior year period. The main drivers of this change are discussed in more detail below. These include an increase in interest expense on borrowings of $0.3 million, a loss on foreign currency of $3.7 million, and a reduction of interest income related to cash and cash equivalents and short-term investments of $1.4 million. Additionally, there was a one-time gain of $3.1 million recognized in 2023 related to the sale of marketable securities.

Previous wording

Interest expense is primarily related to the financing of brand and licensing acquisitions. In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a $53.5 million (€50 million)four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. Additionally, in April 2021, we completed the acquisition of the headquarters of Interparfums SA. The acquisition was financed by a 10-year approximately $128.5 million (€120 million) bank loan which bears interest atone-month Euribor plus 0.75%. Approximately $85.6 million (€80 million) of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate of 2% per annum. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%. Long-term debt including current maturities aggregated $137.2 million and $157.5 million as of June 30, 2024 and December 31, 2023, respectively.

Current wording

Interest expense is primarily related to the financing of brand and licensing acquisitions. In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a $56 million (€50 million)four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. Additionally, in April 2021, we completed the acquisition of the headquarters of Interparfums SA. The acquisition was financed by a 10-year approximately $128.5 million (€120 million) bank loan which bears interest atone-month Euribor plus 0.75%. Approximately $89.6 million (€80 million) of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate of 2% per annum. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%. Additionally in July 2024, the Company entered into a$44.8 million (€40 million)three-year loan agreement that bears a fixed interest rate of 4.03%. The loan was used to purchase additional short-term investments. Long-term debt including current maturities aggregated $179.1 million and $157.5 million as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

We enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Greater than 50% of net sales of our European based operations are denominated in U.S. dollars. Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying consolidated income statements. Such gains and losses were immaterial in thethree and six months ended June 30, 2024 and 2023.

Current wording

We enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Greater than 50% of net sales of our European based operations are denominated in U.S. dollars. Gains and losses in derivatives designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges are included in (gain) loss on foreign currency on the accompanying consolidated income statements. Such gains and losses were immaterial in thethree and nine months ended September 30, 2024 and 2023.

Previous wording

Interest and investment income represents interest earned on cash and cash equivalents and short-term investments. As of June 30, 2024, short-term investments include approximately $8.8 million of marketable equity securities of other companies in the luxury goods sector. In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million. The Company purchased additional marketable securities throughout 2023 and in the first half of 2024, resulting in an unrealized loss of $0.6 million for the first half of 2024.

Current wording

Interest and investment income represents interest earned on cash and cash equivalents and short-term investments and realized and unrealized gains and losses on marketable equity securities. Interest income was $2.5 million in the nine months ended September 30, 2024 compared to $3.9 million in the prior year period. As of September 30, 2024, short-term investments also include approximately $8.9 million of marketable equity securities of other companies in the luxury goods sector. In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million. The Company purchased additional marketable securities throughout 2023 and in the first nine months of 2024, resulting in an unrealized loss of $0.9 million for the first nine months of 2024.

Previous wording

Our consolidated effective tax rate was 23.9% and 23.4% for thesix months ended June 30, 2024 and 2023, respectively. The effective tax rate for European based operations was 25.0% for both thesix months ended June 30, 2024 and 2023, while the effective tax rate for United States based operations was 19.9% for thesix months ended June 30, 2024, as compared to 17.4% for the corresponding period of the prior year. Our effective tax rate for United States based operations differs from the 21% statutory rate in the United States as it is a blended rate across multiple jurisdictions and takes into account benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes. Other than as discussed above, we did not experience any significant changes in tax rates, and none were expected in jurisdictions where we operate.

Current wording

Our consolidated effective tax rate was 23.7% and 23.5% for thenine months ended September 30, 2024 and 2023, respectively. The effective tax rate for European based operations was 25.0% for both thenine months ended September 30, 2024 and 2023, while the effective tax rate for United States based operations was 19.8% for thenine months ended September 30, 2024, as compared to 18.8% for the corresponding period of the prior year. Our effective tax rate for United States based operations differs from the 21% statutory rate in the United States as it is a blended rate across multiple jurisdictions, and takes into account benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes. Other than as discussed above, we did not experience any significant changes in tax rates, and none were expected in jurisdictions where we operate.

Previous wording

Net income attributable to European based operations was $33.2 millionand $78.1 million for thethree and six months ended June 30, 2024, respectively, as compared to $27.0 million and $87.5 million for the corresponding periods of the prior year, while net income attributable to United States based operations was $15.2 millionand $24.8 million for thethree and six months ended June 30, 2024, respectively, as compared to $15.6 million and $25.9 million for the corresponding periods of the prior year. The significant fluctuations in net income for both European based operations and United States based operations are directly related to the previous discussions pertaining to changes in sales, gross margin, and selling, general and administrative expenses.

Current wording

Net income attributable to European based operations was $54.4 millionand $132.6 million for thethree and nine months ended September 30, 2024, respectively, as compared to $46.0 million and $133.5 million for the corresponding periods of the prior year, while net income attributable to United States based operations was $24.3 millionand $49.0 million for thethree and nine months ended September 30, 2024, respectively, as compared to $20.2 million and $46.1 million for the corresponding periods of the prior year. The significant fluctuations in net income for both European based operations and United States based operations are directly related to the previous discussions pertaining to changes in sales, gross margin, and selling, general and administrative expenses.

Previous wording

The noncontrolling interest arises from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext. Net income attributable to the noncontrolling interest is directly related to the profitability of our European based operations and aggregated 28% of European based operations net income for both thesix months ended June 30, 2024 and 2023. Net profit margins attributable to Inter Parfums, Inc. as of June 30, 2024 and 2023 aggregated 11.7% and 14.3%, respectively.

Current wording

The noncontrolling interest arises from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext. Net income attributable to the noncontrolling interest is directly related to the profitability of our European based operations and aggregated 28% of European based operations net income for both thenine months ended September 30, 2024 and 2023. Net profit margins attributable to Interparfums, Inc. for thenine months ended September 30, 2024 and 2023 aggregated 12.8% and 14.4%, respectively.

Previous wording

Our conservative financial tradition has enabled us to amass significant cash balances. As of June 30, 2024, we had $77 million in cash, cash equivalents and short-term investments, most of which are held in euro by our European based operations and is readily convertible into U.S. 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.

Current wording

Our conservative financial tradition has enabled us to amass significant cash balances. As of September 30, 2024, we had $157.2 million in cash, cash equivalents and short-term investments, most of which are held in euro by our European based operations and is readily convertible into U.S. 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.

Previous wording

As of June 30, 2024, working capital aggregated $525 million. Approximately 75% of the Company’s total assets are held by European based operations, and approximately $244 million of trademarks, licenses and other intangible assets are also held by European based operations.

Current wording

As of September 30, 2024, working capital aggregated $617 million. Approximately 76% of the Company’s total assets are held by European based operations, and approximately $253 million of trademarks, licenses and other intangible assets are also held by European based operations.

Previous wording

Cash used in operating activities aggregated $26.5 million for thesix months ended June 30, 2024 and cash provided by operating activities aggregated $6.8 million for thesix months ended June 30, 2023. For thesix months ended June 30, 2024, working capital items used $140.2 million in cash from operating activities, as compared to $115.4 million in the 2023 period. Although from a cash flow perspective accounts receivables are up 24% from year end 2023, the balance is reasonable based on second quarter 2024 record sales levels and seasonality of the business. Although day’s sales outstanding was 72 days, up from 65 days in the corresponding period of the prior year, we are down from 73 days at the end of the first quarter of 2024, are still seeing strong collection activity and do not anticipate any issues with collections of accounts receivable. From a cash flow perspective, inventory levels as of June 30, 2024 increased 19% from year end 2023 in support of our overall sales growth as well as the building up of inventory related to the inclusion of the Lacoste and Roberto Cavalli licenses which require large inventory needs to support the launches of these brands. Additionally, as we are working to manage down our inventory levels, we have seen increased conversion of raw materials into finished goods resulting in finished goods making up 60% of our inventory levels at June 30, 2024 as compared to 52% at June 30, 2023. Since 2021, we have strived to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold.

Current wording

Cash provided by operating activities aggregated $49.7 million for thenine months ended September 30, 2024 and compared to $24.3 million for thenine months ended September 30, 2023. For thenine months ended September 30, 2024, working capital items used $147.0 million in cash from operating activities, as compared to $169.1 million in the 2023 period. Although from a cash flow perspective accounts receivables are up 41% from year end 2023, the balance is reasonable based on third quarter 2024 record sales levels and seasonality of the business. While day’s sales outstanding was 83 days, up from 71 days in the corresponding period of the prior year driven by changes in our channel mix, we are still seeing strong collection activity and do not anticipate any issues with collections of accounts receivable. From a cash flow perspective, inventory levels as of September 30, 2024 increased 9% from year end 2023 in support of our overall sales growth as well as the building up of inventory related to the inclusion of the Lacoste and Roberto Cavalli licenses which require large inventory needs to support the launches of these brands. Additionally, as we are working to manage down our inventory levels, we have seen increased conversion of raw materials into finished goods resulting in finished goods making up 63% of our inventory levels at September 30, 2024 as compared to 58% at September 30, 2023. Due to past supply constraints, we had strived to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. These constraints have largely abated and we are gradually reversing some of these previous interventions. We are beginning to see the impacts of these recent inventory management efforts and will continue to work to optimize inventory levels.

Previous wording

Cash flows provided by investing activities in 2024 reflect purchases and sales of short-term investments. These investments consist of certificates of deposit with maturities greater than three months, marketable equity securities and other contracts. At June 30, 2024, approximately $2.0 million of certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.

Current wording

Cash flows provided by investing activities in 2024 reflect purchases and sales of short-term investments. These investments consist of certificates of deposit with maturities greater than three months, marketable equity securities and other contracts. At September 30, 2024, approximately $2.2 million of certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.

Previous wording

Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we typically spend approximately $5.0 million on tools and molds, depending on our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers.

Current wording

Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we typically spend approximately $5 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.

Previous wording

Cash flows used in financing activities in the first half of 2024 reflect issuances and repayments of debt and payment of dividends to stockholders.

Current wording

Cash flows used in financing activities in 2024 reflect issuances and repayments of debt and payment of dividends to stockholders.

Previous wording

Our short-term financing requirements are expected to be met by available cash on hand at June 30, 2024, and by short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2024 consist of a $25 million unsecured revolving line of credit provided by a domestic commercial bank and approximately $8 million in credit lines provided by a consortium of international financial institutions. There was $18.5 million of short-term borrowings outstanding pursuant to these facilities as of June 30, 2024 and $5 million outstanding as of June 30, 2023.

Current wording

Our short-term financing requirements are expected to be met by available cash on hand at September 30, 2024, and by short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2024 consist of a $25 million unsecured revolving line of credit provided by a domestic commercial bank and approximately $8 million in credit lines provided by a consortium of international financial institutions. There was $9.0 million of short-term borrowings outstanding pursuant to these facilities as of September 30, 2024 and $4.5 million outstanding as of September 30, 2023.

Previous wording

Inflation rates in the United States and foreign countries in which we operate did impact operating results for thesix months ended June 30, 2024, as they resulted in slightly higher costs of inventory and were not fully offset by price increases we passed onto our respective customers or operating efficiencies.

Current wording

Inflation rates in the United States and foreign countries in which we operate did not have a significant impact on operating results for thenine months ended September 30, 2024