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What changed in INTERPARFUMS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of INTERPARFUMS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+461 added−357 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in INTERPARFUMS INC's 2023 10-K

461 paragraphs added · 357 removed · 237 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

121 edited+183 added−74 removed49 unchanged
Biggest changeEcoVadis assessment results: Number of suppliers evaluated Average EcoVadis score Average Environmental score Average Labor and Human Rights score Average Ethics score Average Sustainable Procurement score 91 66.7 69.5 66.9 60.7 65.3 In addition, in 2022, Interparfums SA has calculated its total carbon footprint in accordance with international standards, and namely the Green House Gas Protocol (GHG Protocol) for the conversion of all emission sources into tons of CO 2 equivalent and the Base Carbone ® , a public database of emission factors made available by the French Agency for Ecological Transition (ADEME). 2021 Carbon footprint: 174,930 tCO2e - 2021 Carbon intensity: 312 KgCO2e per € thousand of revenue (in the low range of our industry) 13 In tons CO 2 equivalent 2021 Weight Scope 1 (gas and fuel energy consumption) 226 0,1 % Scope 2 (electricity consumption) 29 0,0 % Scope 3 (other indirect emissions) 174,675 99,9 % Total 174,930 100,0 % This first measurement is a crucial step before determining a low carbon trajectory in accordance with the European green deal regulation which aims to be climate-neutral by 2050.
Biggest changeInter Parfums, Inc. has calculated its total carbon footprint in accordance with international standards, and namely the International Green House Gas Protocol (GHG Protocol) for the conversion of all emission sources into tons of CO2 equivalent and the Base Carbone®, a public database of emission factors made available by the French Agency for Ecological Transition (ADEME). in tons of CO 2 equivalent 2022 Emissions Weighted Average Scope 1 23 0.02% Scope 2 702 0.61% Scope 3 113,996 99.37% Total 114,721 in tons of CO 2 equivalent 2022 Scope 3 Upstream Products and services purchased 111,150 Fixed assets 531 Emissions from fuels and energy not included in Scope 1 or 2 63 Upstream freight transport and distribution 2,252 Waste generated Negligible Business travel In services purchased Commuting to work Negligible Upstream leasing assets — Other indirect upstream emissions — Scope 3 Downstream Downstream freight transport and distribution In services purchased Transformation of products sold — Use of products sold — End of life of products sold Non determined for 2022 Downstream leasing assets — Franchises — Investments — Other indirect downstream emissions — Total scope 3 113,996 Interparfums carbon intensity is in the low end of its industry sector.
Production and Supply The stages of the development and production process for all fragrances are as follows: ● Simultaneous discussions with perfume designers and creators (includes analysis of esthetic and olfactory trends, target clientele and market communication approach) ● Concept choice ● Produce mock-ups for final acceptance of bottles and packaging ● Receive bids from component suppliers (glass makers, plastic processors, printers, etc.) and packaging companies ● Choose suppliers ● Schedule production and packaging ● Issue component purchase orders ● Follow quality control procedures for incoming components; and ● Follow packaging and inventory control procedures.
Production and Supply The stages of the development and production process for all fragrances are as follows: ● Simultaneous discussions with perfume designers and creators (includes analysis of esthetic and olfactory trends, target clientele and market communication approach) ● Concept choice ● Produce mock-ups for final acceptance of bottles and packaging ● Receive bids from component suppliers (glass makers, plastic processors, printers, etc.) and packaging companies ● Choose suppliers ● Schedule production and packaging 12 ● Issue component purchase orders ● Follow quality control procedures for incoming components; and ● Follow packaging and inventory control procedures.
We compete with an original strategy, regular and methodical development of quality fragrances for a growing portfolio of internationally renowned brand names. 23 Inventory We purchase raw materials and component parts from suppliers based on internal estimates of anticipated need for finished goods, which enables us to meet production requirements for finished goods.
We compete with an original strategy, regular and methodical development of quality fragrances for a growing portfolio of internationally renowned brand names. Inventory We purchase raw materials and component parts from suppliers based on internal estimates of anticipated need for finished goods, which enables us to meet production requirements for finished goods.
Like many of our industry competitors, we are applying a multifunctional and comprehensive approach in addressing the issues of corporate, environmental and social responsibility and transparency, building off the UN Sustainable Development Goals. Our European Operations have led the way on this initiative, but our US operations are actively catching up.
Like many of our industry competitors, we are applying a multifunctional and comprehensive approach in addressing the issues of corporate, environmental and social responsibility and transparency, building off the UN Sustainable Development Goals. Our European based operations have led the way on this initiative, but our US operations are actively catching up.
In 2021, employees were given an opportunity to participate role-playing workshop designed to give them a first-hand perspective of a person with a disability (hearing, visual, psychological, motor). Thanks to these opportunities for exchange, employees were able to talk about their all possible impediments and share their views and experiences.
In 2021, employees were given an opportunity to participate in a role-playing workshop designed to give them a first-hand perspective of a person with a disability (hearing, visual, psychological, motor). Thanks to these opportunities for exchange, employees were able to talk about their possible impediments and share their views and experiences.
Jimmy Choo— In 2009, we entered into an exclusive 12-year worldwide license agreement for the creation, development and distribution of fragrances and fragrance related products under the Jimmy Choo brand, and in 2017, we extended the license agreement which now runs through December 31, 2031. Jimmy Choo encompasses a complete luxury accessories brand.
Jimmy Choo — In 2009, we entered into an exclusive 12-year worldwide license agreement for the creation, development and distribution of fragrances and fragrance related products under the Jimmy Choo brand, and in 2017, we extended the license agreement which now runs through December 31, 2031. 7 Jimmy Choo encompasses a complete luxury accessories brand.
We selectively broaden our product offering beyond the fragrance category and offer other fragrance related products and personal care products under some of our existing brands. We believe such product offerings meet customer needs, generate trial and further strengthen customer loyalty. 10 Continue to build global distribution footprint .
We selectively broaden our product offering beyond the fragrance category and offer other fragrance related products and personal care products under some of our existing brands. We believe such product offerings meet customer needs, generate trial and further strengthen customer loyalty. Continue to build global distribution footprint .
In 2011, we launched our first new Montblanc fragrance, Legend, which quickly became our best-selling men’s line and has given rise to a plethora of flankers including Legend Night and Legend Spirit. In 2014, we launched our second men’s line, Emblem and like its predecessor, Emblem gave rise to brand extensions.
In 2011, we launched our first new Montblanc fragrance, Legend, which quickly became our best-selling men’s line and has given rise to a plethora of flankers including Legend Night , Legend Spirit, and Legend Red. In 2014, we launched our second men’s line, Emblem and like its predecessor, Emblem gave rise to brand extensions.
With new introductions, we leverage our ability and experience to gauge trends in the market and further leverage the brand name into different product families in order to maximize sales and profit potential. We have had success in introducing new fragrance families (sub-brands, flanker brands or flankers) within our brand franchises.
With new introductions, we leverage our ability and experience to gauge trends in the market and further leverage the brand name into different product families in order to maximize sales and profit potential. We have had success in introducing new fragrance families (sub-brands or flankers) within our brand franchises.
Furthermore, we promote the performance of our prestige fragrance operations through knowledge of the market, detailed analysis of the image and potential of each brand name, and a highly professional approach to international distribution channels. Continue to add new brands to our portfolio, through new licenses or acquisitions.
Furthermore, we promote the performance of our prestige fragrance operations through knowledge of the market, detailed analysis of the image and potential of each brand name, and a highly professional approach to international distribution channels. 11 Continue to add new brands to our portfolio, through new licenses or acquisitions.
Since 2017, it has adapted its plan by proposing an Interparfums stock ownership fund allowing employees to take advantage of the growth of Interparfums’ shares under favorable tax conditions. The amounts employees pay into this fund are supplemented by an important contribution by the company.
Since 2017, it has adapted its plan by proposing an Interparfums stock ownership fund allowing employees to take advantage of the growth of Interparfums’ shares under favorable tax conditions. The amounts employees pay into this fund are supplemented by an important contribution from the Company.
Since that time, we unveiled several new fragrances most notably the Authentic and Away duos as well as brand extensions. 4 Abercrombie & Fitch Co. is a leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids.
Since that time, we unveiled several new fragrances, most notably the Authentic and Away duos as well as brand extensions. Abercrombie & Fitch Co. is a leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids.
For our United States operations, we distribute products to retailers and distributors in the United States as well as internationally, including duty free and other travel-related retailers. We utilize our in-house sales team to reach our third party distributors and customers outside the United States.
For our United States operations, we distribute products to retailers and distributors in the United States as well as internationally, including duty free and other travel-related retailers. We also utilize our in-house sales team to reach our third party distributors and customers outside the United States.
The mysterious and seductive collection of Boucheron fragrances unquestionably continues this prestigious line of creations. Boucheron’s legacy scents, Femme and Homme , and the legendary Jaipur perfume form the foundation of brand sales.
The mysterious and seductive collection of Boucheron fragrances unquestionably continues this prestigious line of creations. 5 Boucheron’s legacy scents, Femme and Homme , and the legendary Jaipur perfume form the foundation of brand sales.
For our European operations components for our prestige fragrances are purchased from many suppliers around the world and are primarily manufactured in France. For United States operations, components for our prestige fragrances are sourced from many suppliers around the world and are primarily manufactured in the United States and Italy.
For our European based operations components for our prestige fragrances are purchased from many suppliers around the world and are primarily manufactured in France. For United States based operations, components for our prestige fragrances are sourced from many suppliers around the world and are primarily manufactured in the United States and Italy.
Women’s shoes remain the core of the product offering, alongside handbags, small leather goods, scarves, eyewear, belts, fragrance and men’s shoes. Jimmy Choo has a global store network encompassing more than 200 stores and is present in the most prestigious department and specialty stores worldwide. Jimmy Choo is part of the Capri Holdings Limited luxury fashion group.
Women’s shoes remain the core of the product offering, alongside handbags, small leather goods, scarves, eyewear, belts, fragrances and men’s shoes. Jimmy Choo has a global store network encompassing more than 200 stores and is present in the most prestigious department and specialty stores worldwide. Jimmy Choo is part of the Capri Holdings Limited luxury fashion group.
Recent Developments Lacoste In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted to Interparfums SA for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.
Lacoste In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted to Interparfums SA for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.
In addition, a group retirement savings plan (Plan d’Epargne Retraite Collectif or PERCOL) is available to employees as a vehicle for preparing for their retirement and to which the company contributes significantly. Employees also can transfer a portion of their unused annual vacation days into the Interparfums SA retirement savings plan.
In addition, a group retirement savings plan ( Plan d’Epargne Retraite Collectif or “PERCOL”) is available to employees as a vehicle for preparing for their retirement and to which the Company contributes significantly. Employees also can transfer a portion of their unused annual vacation days into the Interparfums SA retirement savings plan.
We discuss in greater detail risk factors relating to our business in Item 1A of this Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and the reports that we file from time to time with the SEC.
We discuss in greater detail risk factors relating to our business in Item 1A of this Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and the reports that we file from time to time with the SEC.
Through weekly memos and regular information meetings on business developments and trends, employees are kept up-to-date on expectations of management and the market. The organization’s flexibility largely made up of small teams facilitates its continuous adaptation to all changes or evolving external conditions.
Through regular information meetings on business developments and trends, employees are kept up-to-date on expectations of management and the market. The organization’s flexibility, largely made up of small teams, facilitates its continuous adaptation to all changes or evolving external conditions.
Under the creative direction of the late Karl Lagerfeld, one of the world’s most influential and iconic designers, the Lagerfeld Portfolio represents a modern approach to distribution, an innovative digital strategy and a global 360 degree vision that reflects the designer’s own style and soul.
Under the creative direction of the late Karl Lagerfeld, one of the world’s most influential and iconic designers, the Lagerfeld Portfolio represents a modern approach to distribution, an innovative digital strategy and a global 360 degree vision that reflect the designer’s own style and soul.
Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious , as well as a significant loyal consumer base around the world.
Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we have gained several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious , as well as a significant loyal consumer base around the world.
J3P SBG Packaging Group), Pumps (Silgan Dispensing Systems Thomaston Corp, Aptar, Rexam) or boxes (Autajon, Diamond Packaging, TPC Printing) ● Logistics (Bansard and Bolloré Logistics for storage, order preparation and shipment) 11 Suppliers’ accounts for our European operations are primarily settled in euro and for our United States operations, suppliers’ accounts are primarily settled in U.S. dollars.
J3P SBG Packaging Group), Pumps (Silgan Dispensing Systems Thomaston Corp, Aptar, Rexam) or boxes (Autajon, Diamond Packaging, TPC Printing) ● Logistics (DiFarco, Bansard, Bolloré Logistics for storage, order preparation and shipment) Suppliers’ accounts for our European based operations are primarily settled in euro and for our United States based operations, suppliers’ accounts are primarily settled in U.S. dollars.
Interparfums SA has decided to assist its employees in financing this supplemental retirement benefit, by assuming an important percentage of these contributions itself. 28
Interparfums SA has decided to assist its employees in financing this supplemental retirement benefit, by assuming an important percentage of these contributions itself. 34
By identifying and concentrating in the most receptive market segments and territories where our brands are known, and executing highly targeted launches that capture the essence of the brand, we have had a history of successful launches.
By identifying and concentrating in the most receptive market based operations and territories where our brands are known, and executing highly targeted launches that capture the essence of the brand, we have had a history of successful launches.
Montblanc has achieved a world-renowned position in the luxury segment and has become a purveyor of exclusive products, which reflect today’s exacting demands for timeless design, tradition and master craftsmanship.
Montblanc has achieved a world-renowned position in the luxury-based operations and has become a purveyor of exclusive products, which reflect today’s exacting demands for timeless design, tradition and master craftsmanship.
Karl Lagerfeld created the first fragrance that bears his name in 1978, and that legacy has expanded to include several growing multi-scent collections, Les Parfums Matières and more recently, Karl Cities, a new collection featuring entries for New York, Paris, Hamburg, Tokyo and Vienna was unveiled.
Karl Lagerfeld created the first fragrance that bears his name in 1978, and that legacy has expanded to include several growing multi-scent collection, Les Parfums Matières, and more recently, Karl Cities, a new collection featuring entries for New York, Paris, Hamburg, Tokyo and Vienna was unveiled. A new fragrance due is unveiling in 2024.
Subsequent flankers and extensions have enlarged the Coach fragrance enterprise as have entirely new collections, including Coach Dreams which debuted in early 2020, and its sister scent, Dreams Sunset , which debuted in 2021. For 2022, we unveiled Coach Wild Rose , and Coach Open Road , a new fragrance for men.
Subsequent flankers and extensions have enlarged the Coach fragrance enterprise as have entirely new collections, including Coach Dreams which debuted in early 2020, and its sister scent, Dreams Sunset , Coach Wild Rose , and Coach Open Road , a new fragrance for men.
Coach is part of the Tapestry house of brands. Donna Karan/DKNY— In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands, which took effect on July 1, 2022.
Donna Karan/DKNY — In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands, which took effect on July 1, 2022.
Our first fragrance for the Moncler brand has a revolutionary LED design, and the flask-shaped bottles of Moncler Pour Femme and Moncler Pour Homme forge a powerful bond with the House Moncler’s alpine roots and pioneering spirit.
Our first fragrance for the Moncler brand had a revolutionary LED design, and the flask-shaped bottles of Moncler Pour Femme and Moncler Pour Homme forged a powerful bond with the House Moncler’s alpine roots and pioneering spirit.
Additionally, we occasionally utilize third party manufacturers in China and Turkey. Environmental, Social & Governance Both our U.S. operations and our European operations are good corporate citizens and take our responsibilities seriously. We comply with all applicable laws, rules and regulations in general, and in particular with regard to chemicals and hazardous materials.
Additionally, we occasionally utilize third party manufacturers in China, Poland and Turkey. Environmental, Social & Governance Both our United States based operations and our European based operations are good corporate citizens and take our responsibilities seriously. We comply with all applicable laws, rules and regulations in general, and in particular with regard to chemicals and hazardous materials.
We have never been the subject of any material product liability claims. Government Regulation Under the Federal Food, Drug and Cosmetic Act, fragrance products are regulated as cosmetics, and fragrances include perfumes, colognes and aftershave. They must meet the same requirements for safety as other cosmetic ingredients.
We have never been the subject of any material product liability claims. Government Regulation Under the Federal Food, Drug and Cosmetic Act, fragrance products are regulated as cosmetics, and fragrances include, but are not limited to, perfumes, colognes, fragrance mists, body sprays and aftershave. They must meet the same requirements for safety as other cosmetic ingredients.
As of December 31, 2022, we had cash, cash equivalents and short-term investments of approximately $256 million, which we believe should assist us in entering new brand licenses or outright acquisitions.
As of December 31, 2023, we had cash, cash equivalents and short-term investments of approximately $182.8 million, which we believe should assist us in entering new brand licenses or outright acquisitions.
Item 1. Business General Business Development Founded in 1982, we operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrance, and fragrance related products.
Item 1. Business Introduction Founded in 1982, we operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrances, and fragrance related products.
United States Operations Prestige brand fragrance products are also produced and marketed through our United States operations, and represented approximately 32% of net sales for the year ended December 31, 2022.
United States Based Operations Prestige brand fragrance products are also produced and marketed through our United States based operations and represented approximately 35% of net sales for the year ended December 31, 2023.
These long-term executives and employees believe that our Company and their co-workers are an extended family and share the same values of entrepreneurship, commitment, creativity and passion. Their efforts and dedication are what allow our Company to prosper. Every year, United States operations organizes two seminars over several days for all its global sales staff.
These experienced executives and employees believe that our company and their co-workers are an extended family and share the same values of entrepreneurship, commitment, creativity and passion. Their efforts and dedication are what allow our company to prosper. Every year, Interparfums organizes two seminars over several days for all its global employees.
Product Liability Our United States operations maintain product liability coverage in an amount of $10.0 million, and our European operations maintain product liability coverage in an amount of €20 million (approximately $21 million). Based on our experience, we believe this coverage is adequate and covers substantially all of the exposure we may have with respect to our products.
Product Liability Our United States operations maintain product liability coverage in an amount of $10.0 million, and our European based operations maintain product liability coverage in an amount of €14.7 million (approximately $16.2 million). Based upon our experience, we believe this coverage is adequate and covers substantially all of the exposure we may have with respect to our products.
This diversity in terms of profiles, culture, age and gender constitutes a decisive strength of its teams, the company’s most important asset. 27 Women account for 72% of Interparfums’ workforce and 52% of management positions are occupied by women in 2021. Since 2019, Interparfums SA has organized an annual disability awareness raising campaign.
This diversity in terms of profiles, culture, age and gender constitutes a decisive strength of its teams, the Company’s most important asset. 33 Women account for 74% of Interparfums SA’s workforce and 60% of management positions are occupied by women in 2023. Since 2019, Interparfums SA has organized an annual disability awareness raising campaign.
This exclusive license became effective in July 2022. During 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted to Interparfums SA for the production and distribution of Lacoste brand perfumes and cosmetics.
During 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted to Interparfums SA for the production and distribution of Lacoste brand perfumes and cosmetics effective January 1, 2024.
Our fragrance products that are manufactured and marketed in Europe are also regulated as cosmetics and subject to EU Regulation 1223/2009, and after Brexit, the United Kingdom regulation of The UK Schedule 34 to the Product Safety and Metrology Regulation 2019. As of the date of this report, IP products are in compliance with these regulations.
Our fragrance products that are manufactured and marketed in Europe are also regulated as cosmetics and subject to EU Regulation 1223/2009, and after Brexit, the United Kingdom regulation of The UK Schedule 34 to the Product Safety and Metrology Regulation 2019.
By concentrating in markets where the brands are best known, we have had many successful product launches. We typically launch new fragrance families for our brands every few years, and more frequently seasonal and limited edition fragrances are introduced as well.
Our fragrance products focus on prestige brands, each with a devoted following. By concentrating in markets where the brands are best known, we have had many successful product launches. We typically launch new fragrance families for our brands every few years, and more frequently seasonal and limited edition fragrances are introduced as well.
Goals for our employees Company-wide are - developing a team spirit and cross-functional collaboration; - maintaining a high level of expertise; - cultivating a culture that promotes our values of entrepreneurship, commitment, creativity and passion; - developing a respectful and inclusive work environment; - ensuring equal opportunity employment; - empowering employees to develop their skills and grow their careers; - promoting dialogue between employees and management; - offering quality working conditions; - preserving the health and safety of all; - maintaining a proper balance between professional and private life. 25 United States Operations Our employees are one of our most valuable assets, and fostering long-term relationships are beneficial to the continuity of our business.
Goals for our employees Company-wide are: - // cultivating a culture that promotes our values of entrepreneurship, commitment, creativity and passion; - // developing a respectful and inclusive work environment; - // developing team spirit and cross-functional collaboration; - // ensuring equal opportunity employment; - // empowering employees to develop their skills and grow their career; - // maintaining a high level of expertise; - // maintaining a proper balance between professional and private life; - // promoting dialogue between employees and management; - // offering quality of working conditions; - // preserving the health and safety of all.
Today Ungaro fragrances uphold the same values of audacity and elegance, and the brand is best known and most prized internationally, and such presence will remain our sales focus as we continue to produce and distribute the brand’s legacy scents, notably Diva. Beginning in 2023, we plan to unveil a Diva brand extension.
Ungaro fragrances uphold the same values of audacity and elegance, and the brand is best known internationally, and such presence will remain our sales focus as we continue to produce and distribute the brand’s legacy scents, notably Diva.
Dupont Collection. Van Cleef & Arpels— In 2018, we renewed its license agreement for an additional six years with Van Cleef & Arpels for the creation, development, and distribution of fragrance products through December 2024.
Van Cleef & Arpels — In 2018, we renewed its license agreement for an additional six years with Van Cleef & Arpels for the creation, development, and distribution of fragrance products through December 2024. Our initial 12-year license agreement with Van Cleef & Arpels was signed in 2006.
These components are either received and stored directly at our third-party fillers or received at one of our distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers. 1 Our fragrance products focus on prestige brands, each with a devoted following.
These components are either received and stored directly at our third-party fillers or received at one of our distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers.
Each jewelry creation is designed and manufactured in Graff’s London atelier, where master craftsmen employ techniques to emphasize the beauty of each individual stone. The company remains a family business, overseen by Francois Graff, Chief Executive Officer.
Throughout its rich history, Graff has become the world leader for diamonds of rarity, magnitude and distinction. Each jewelry creation is designed and manufactured in Graff’s London atelier, where master craftsmen employ techniques to emphasize the beauty of each individual stone. The company remains a family business, overseen by Francois Graff, Chief Executive Officer.
Now the luxury brand that best embodies New York’s casual elegance, Coach also offers collections of ready-to-wear, lifestyle accessories and fragrances. Its contemporary approach to luxury combines authenticity and innovation, exported worldwide thanks to its thoroughly American non-conformist vision.
Founded in 1941, Coach is the ultimate American leather goods brand and has always been renowned for its quality craftsmanship. Now the luxury brand that best embodies New York’s casual elegance, Coach also offers collections of ready-to-wear, lifestyle accessories and fragrances. Its contemporary approach to luxury combines authenticity and innovation, exported worldwide thanks to its thoroughly American non-conformist vision.
Ferragamo— In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide 10-year license was granted for the production and distribution of Ferragamo brand perfumes, with a 5-year optional term if certain conditions are met.
Ferragamo — In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide 10-year license was granted for the production and distribution of Ferragamo brand perfumes, with a 5-year optional term if certain conditions are met. 10 Salvatore Ferragamo S.p.A. is the parent company of the Salvatore Ferragamo Group, one of the world’s leaders in the luxury industry and whose origins date back to 1927.
Today, through its association with music, art, travel and technology, MCM embodies the bold, rebellious and aspirational. Always with an eye on the disruptive, the driving force behind MCM centers on revolutionizing classic design with futuristic materials. MCM’s millennial and Gen Z audience is genderless, ageless, empowered and unconstrained by rules and boundaries.
Always with an eye on the disruptive, the driving force behind MCM centers on revolutionizing classic design with futuristic materials. MCM’s millennial and Gen Z audience is genderless, ageless, empowered and unconstrained by rules and boundaries.
Its unique style is expressed through unquestioning sensuality, purity of silhouette, flamboyant prints, and exquisite attention to details. Season after season, Emanuel Ungaro dared to be different, combining unexpected yet sensual clashes of bright colors and prints with beautiful draping.
Founded in 1965 in Paris, the house of Emanuel Ungaro is an icon of French refinement and haute couture. Its unique style is expressed through unquestioning sensuality, purity of silhouette, flamboyant prints, and exquisite attention to detail. Season after season, Emanuel Ungaro dared to be different, combining unexpected yet sensual clashes of bright colors and prints with beautiful draping.
Established in 1981, GUESS began as a jeans company and has since successfully grown into a global lifestyle brand. GUESS, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products. GUESS products are distributed through branded GUESS stores as well as better department and specialty stores around the world.
GUESS?, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products. GUESS products are distributed through branded GUESS stores as well as better department and specialty stores around the world. We began selling GUESS legacy scents in 2018.
We manage our business in two segments, European based operations and United States based operations. Certain prestige fragrance products are produced and marketed by our European operations through our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext.
Certain prestige fragrance products are produced and marketed by our European based operations through our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext. Our business is not capital intensive, and it is important to note that we do not own manufacturing facilities.
Our common stock is listed on The Nasdaq Global Select Market under the trading symbol “IPAR”. The common shares of our subsidiary, Interparfums SA, are traded on the Euronext. The Securities and Exchange Commission (“SEC”) maintains an internet site at http://www.sec.gov that contains financial reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The common shares of our subsidiary, Interparfums SA, are traded on the Euronext. The Securities and Exchange Commission (“SEC”) maintains an internet site at http://www.sec.gov that contains financial reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We maintain our internet website at www.interparfumsinc.com , which is linked to the SEC internet site.
Our team has enriched the portfolio with Quatre for men and women, along with several special editions, a growing collection of unique scents aptly named, La Collection , and Serpent Bohème. During 2022, we introduced a new men’s fragrance, Boucheron Singulier , as well as still another addition to our Boucheron Collection .
Our team has enriched the portfolio with Quatre for men and women, a new men’s fragrance, Singulier, along with several special editions, a growing collection of unique scents aptly named, La Collection , and Serpent Bohème. Boucheron operates through several boutiques worldwide as well as an e-commerce site.
Today, the brand is a global life and style house with handbags, ready-to-wear, jewelry, footwear, gifts, home décor and more. Polished ease, thoughtful details and a modern, sophisticated use of color—Kate Spade’s founding principles define a unique style synonymous with joy. Under the vision of its creative director, the brand continues to celebrate confident women with a youthful spirit.
Polished ease, thoughtful details and a modern, sophisticated use of color—Kate Spade’s founding principles define a unique style synonymous with joy. Under the vision of its creative director, the brand continues to celebrate confident women with a youthful spirit. Kate Spade is part of the Tapestry house of brands.
Moncler will also launch a new collection in Q1 2023. Montblanc— In 2010, we entered into an exclusive license agreement to create, develop and distribute fragrances and fragrance related products under the Montblanc brand. In 2015, we extended the agreement which now runs through December 31, 2025.
Montblanc — In 2010, we entered into an exclusive license agreement to create, develop, and distribute fragrances and fragrance related products under the Montblanc brand. In 2015, we extended the agreement to December 31, 2025 and in 2023, we extended the agreement for a second time through December 31, 2030.
You can obtain through our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, interactive data files, current reports on Form 8-K, beneficial ownership reports (Forms 3, 4 and 5) and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC.
You can obtain through our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, interactive data files, current reports on Form 8-K, beneficial ownership reports (Forms 3, 4 and 5) and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC. 1 The following information is qualified in its entirety by and should be read together with the more detailed information and audited financial statements, including the related notes, contained or incorporated by reference in this report.
These fragrance products are sold under trademarks owned by us or pursuant to license or other agreements with the owners of brands, which include Abercrombie & Fitch, Anna Sui, Dunhill, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Ungaro .
These fragrance products are sold under trademarks owned by us or pursuant to license or other agreements with the owners of brands, which include Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta, Roberto Cavalli, and Ungaro . 2 Recent Developments Abercrombie & Fitch In 2023, we announced our agreement to distribute Abercrombie & Fitch’s number one men's fragrance, Fierce, in selected markets.
The Donna Karan and DKNY brands, which draw from the energy and attitude of New York City, are powerhouses in fashion and fragrance. These global lifestyle brands will make excellent additions to our portfolio.
The Donna Karan and DKNY brands, which draw from the energy and attitude of New York City, are powerhouses in fashion and fragrance. These global lifestyle brands have been excellent additions to our portfolio. With this agreement, we have gained several well-established and valuable fragrance franchises.
Hollister— In 2014, we entered into a worldwide license to create, produce and distribute new fragrances and fragrance related products under the Hollister brand name. We distribute these fragrances in specialty stores, department stores and duty free shops, as well as select Hollister retail stores in the U.S.
Coach — In 2015, we entered into an exclusive 11-year worldwide license to create, produce and distribute new men’s and women’s fragrances and fragrance related products under the Coach brand name. We distribute these fragrances globally to department stores, specialty stores and duty free shops, as well as in Coach retail stores.
The business of our European operations has become increasingly seasonal due to the timing of shipments by our distribution subsidiaries and divisions to their customers, which are weighted to the second half of the year.
We primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates. The business of our European based operations has become increasingly seasonal due to the timing of shipments by our distribution subsidiaries and divisions to their customers, which are weighted to the second half of the year.
All of our executive senior officers have been with us for more than twenty years (other than our CFO who just joined our company in September 2022), and we have several senior and upper-level staff members, who have also been with us long-term.
All of our executive officers have been with us for a long time (other than our CFO and our head of HR who joined our Company in 2022), and we also have several senior members of staff with years of experience at Interparfums.
Our worldwide headquarters and the office of our wholly-owned United States subsidiaries, Jean Philippe Fragrances, LLC and Interparfums, USA LLC, are located at 551 Fifth Avenue, New York, New York 10176, and our telephone number is 212.983.2640. We also have wholly-owned subsidiaries in Italy, subsidiary, Interparfums Italia Srl and Hong Kong, Inter Parfums USA Hong Kong Limited.
Our worldwide headquarters and the office of our wholly owned United States subsidiary, Interparfums, USA LLC, are located at 551 Fifth Avenue, New York, New York 10176, and our telephone number is 212.983.2640.
As our business is a global one, we intend to continue to build our global distribution footprint. For the distribution of brands within our European based operations, we operate through our distribution subsidiaries or divisions in the major markets of the United States, France, Italy and Spain, in addition to our arrangements with third party distributors globally.
For the distribution of brands within our European based operations, we operate through our distribution subsidiaries or divisions in the major markets of the United States, France, Italy and Spain, in addition to our arrangements with third party distributors globally. Our third party distributors vary in size depending on the number of competing brands they represent.
Upon reopening, we implemented prevention protocols to minimize the spread of COVID-19 in our workplaces. These protocols, which remain in place, are in compliance with the Centers for Disease Control guidelines and state requirements.
In the early stages of the COVID-19 Pandemic we experienced brief closures at all of our locations and adapted to working remotely. Upon reopening, we implemented prevention protocols to minimize the spread of COVID-19 in our workplaces. These protocols, which remained in place until June 2023, are in compliance with the Centers for Disease Control guidelines and state requirements.
Over the past decade, we have worked in partnership with Anna Sui and her creative team to build upon the brand’s customer appeal and develop and market a family of fragrances including Fantasia , Sui Dreams and the newest scent, Sky, which was ranked as the second best perfume launch of 2021 by WWD Japan.
Over the past decade, we have worked in partnership with Anna Sui and her creative team to build upon the brand’s customer appeal and develop and market a family of fragrances including Fantasia , Sui Dreams , Sky, and Sundae , a new three fragrance collection.
In April 2015, this agreement was amended to provide more advantageous terms to employees, representing an important component of compensation and motivation for all staff and reviewed every year. Savings plan and pension plan All employees of Interparfums SA benefit from a company savings plan which proposes several types of funds corresponding to the specific projects of each.
Profit-sharing As required by French law, Interparfums SA maintains a statutory employee profit-sharing agreement, which represents an important component of compensation and motivation for all staff and reviewed every year. Savings plan and pension plan All employees of Interparfums SA benefit from a company savings plan which proposes several types of funds corresponding to the specific projects of each.
In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark after an independent expert concluded that the valuation of the trademark was $11.3 million. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value.
In the fourth quarter of 2022, we again took a $6.8 million impairment charge on the Rochas fashion trademark after an independent expert concluded that the valuation of the trademark was $11.3 million.
Lanvin fragrances occupy an important position in the selective distribution market in France, Eastern Europe and Asia, and we have several lines currently in distribution, including Éclat d’Arpège , Lanvin L’Homme , Jeanne Lanvin, Modern Princess and A Girl in Capri . The Éclat d’Arpège line accounts for almost 50% of brand sales.
A synonym of luxury and elegance, the Lanvin fashion house, founded in 1889 by Jeanne Lanvin, expanded into fragrances in the 1920s. 8 Lanvin fragrances occupy an important position in the selective distribution market in France, Eastern Europe and Asia, and we have several lines currently in distribution, including Éclat d’Arpège , Lanvin L’Homme , Jeanne Lanvin, Modern Princess, A Girl in Capri, and Les Fleurs de Lanvin.
Trademarks The market for our products depends to a significant extent upon the value associated with our trademarks and brand names.
As of the date of this report, Interparfums products are in compliance with these regulations. 29 Trademarks The market for our products depends to a significant extent upon the value associated with our trademarks and brand names.
The company has chosen to use a sheltered work enterprise to package its perfume boxes and a global communications agency called “Les Papillons de Jour” to organize the European Week for the Employment of People with Disabilities (EWPD). In 2021, the total cost for these services amounted to €974,094.
The Company has chosen to use a sheltered work enterprise to package its perfume boxes and a global communications agency called “Les Papillons de Jour” to organize the European Week for the Employment of People with Disabilities (“EWPD”). In addition, Interparfums SA has adopted action plans promoting the employment of seniors and equal opportunity between men and women.
As a percentage of net sales, product sales for the Company’s largest brands were as follows: Year Ended December 31, 2022 2021 2020 Montblanc 18 % 19 % 21 % Jimmy Choo 18 % 18 % 16 % Coach 15 % 16 % 17 % GUESS 12 % 12 % 11 % 3 Our licenses expire on the following dates: Brand Name Expiration Date Abercrombie & Fitch Extends until either party terminates on 3 years’ notice Anna Sui December 31, 2026, plus one 5-year optional term bebe Stores June 30, 2023 Boucheron December 31, 2025, plus a 5-year optional term if certain sales targets are met Coach June 30, 2026 DKNY December 31, 2032, plus a 5-year optional term if certain sales targets are met Donna Karan December 31, 2032, plus a 5-year optional term if certain sales targets are met Dunhill September 30, 2023 Emanuel Ungaro December 31, 2031, plus a 5-year optional term if certain sales targets are met French Connection December 31, 2027, plus a 10-year optional term if certain sales targets are met Graff December 31, 2026, plus 3 optional 3-year terms if certain sales targets are met GUESS December 31, 2033 Hollister Extends until either party terminates on 3 years’ notice Kate Spade June 30, 2030 Jimmy Choo December 31, 2031 Karl Lagerfeld October 31, 2032 Lacoste* December 31, 2038 MCM December 31, 2030, plus 4 option years Moncler December 31, 2026, plus a 5-year optional term if certain conditions are met Montblanc December 31, 2030 Oscar de la Renta December 31, 2031, plus a 5-year optional term if certain sales targets are met Ferragamo December 31, 2031, plus a 5-year optional term if certain sales targets are met S.T.
No one customer represented 10% or more of net sales in 2022 and 2021. 4 Our licenses expire on the following dates: Brand Name Expiration Date Abercrombie & Fitch Extends until either party terminates on 3 years’ notice Anna Sui December 31, 2026, plus one 5-year optional term Boucheron December 31, 2025, plus a 5-year optional term if certain sales targets are met Coach June 30, 2026 DKNY December 31, 2032, plus a 5-year optional term if certain sales targets are met Donna Karan December 31, 2032, plus a 5-year optional term if certain sales targets are met Dunhill Expired September 30, 2023, sell off period until September 30, 2024 Emanuel Ungaro December 31, 2031, plus a 5-year optional term if certain sales targets are met Ferragamo December 31, 2031, plus a 5-year optional term if certain sales targets are met French Connection December 31, 2027, plus a 10-year optional term if certain sales targets are met Graff December 31, 2026, plus 3 optional 3-year terms if certain sales targets are met GUESS December 31, 2033 Hollister Extends until either party terminates on 3 years’ notice Jimmy Choo December 31, 2031 Kate Spade June 30, 2030 Karl Lagerfeld October 31, 2032 Lacoste December 31, 2038 MCM December 31, 2030, plus 4 option years Moncler December 31, 2026, plus a 5-year optional term if certain conditions are met Montblanc December 31, 2030 Oscar de la Renta December 31, 2031, plus a 5-year optional term if certain sales targets are met Roberto Cavalli December 31, 2029 Van Cleef & Arpels December 31, 2024 In connection with the acquisition of the Lanvin brand names and trademarks for our class of trade, we granted the seller the right to repurchase the brand names and trademarks on July 1, 2027 for €70 million (approximately $77 million) in accordance with an amendment signed in 2021.
In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor. The exclusive license became effective on July 1, 2022, and we are planning to launch new fragrances under these brands in 2024 .
In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor.
As part of a continuous improvement process, Interparfums SA’s objective will be to monitor and encourage the CSR performance of its suppliers in four major areas: the environment, social and human rights, ethics and responsible procurement.
In 2023, 110 suppliers were assessed or in the process of being assessed, representing 92% of Interparfums SA’s purchasing activity. As part of a continuous improvement approach, Interparfums SA’ s objective is to monitor and encourage the CSR performance of its suppliers in 4 major areas: Environment, Social and Human Rights, Business Ethics and Responsible Purchasing.
For 2022, we unveiled a new extension to our Éclat d’Arpège line, Mon Éclat . 7 MCM— In 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 and fragrance related products under the MCM brand.
MCM — In 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 and fragrance related products under the MCM brand. The agreement has a 4-year automatic renewal option, potentially extending the license until December 31, 2034.
Since Laurence Graff OBE founded the company in 1960, Graff has been dedicated to sourcing and crafting diamonds and gemstones of untold beauty and rarity and transforming them into spectacular pieces of jewelry that move the heart and stir the soul. Throughout its rich history, Graff has become the world leader for diamonds of rarity, magnitude and distinction.
The agreement has three 3-year automatic renewal options, potentially extending the license until December 31, 2035. Since Laurence Graff OBE founded the company in 1960, Graff has been dedicated to sourcing and crafting diamonds and gemstones of untold beauty and rarity and transforming them into spectacular pieces of jewelry that move the heart and stir the soul.
Inspired by California’s laidback attitude, Hollister’s clothes are designed to be lived in and made your own, for wherever life takes you.
The quintessential apparel brand of the global teen consumer, Hollister celebrates the liberating spirit of the endless summer inside everyone. Inspired by California’s laidback attitude, Hollister’s clothes are designed to be lived in and made your own, for wherever life takes you.
Following through on our plan to develop extraordinary fragrances that capture the creative spirit of MCM, our first new fragrance, MCM , was released during the first quarter of 2021 to great, and somewhat unexpected success. We released a flanker in 2022, along with a limited edition called Graffiti .
Following through on our plan to develop extraordinary fragrances that capture the creative spirit of MCM, our first new fragrance, MCM , was released during the first quarter of 2021 to great success. In 2023, we debuted our first ever men’s scent, MCM Onyx , and have plans to enrich the fragrance line with extensions in 2024.
During 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. In 2021, we also entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands.
Also in 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. This exclusive license became effective in July 2022.
The agreement has a 4-year automatic renewal option, potentially extending the license until December 31, 2034. MCM is a luxury lifestyle goods and fashion house founded in 1976 with an attitude defined by the cultural Zeitgeist and its German heritage with a focus on functional innovation, including the use of cutting-edge techniques.
MCM is a luxury lifestyle goods and fashion house founded in 1976 with an attitude defined by the cultural Zeitgeist and its German heritage with a focus on functional innovation, including the use of cutting-edge techniques. Today, through its association with music, art, travel and technology, MCM embodies the bold, rebellious and aspirational.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe public health crisis caused by the COVID-19 pandemic, its variants and the measures being taken by governments, businesses, including us, our suppliers, our distributors, retailers and the public, to limit 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: ● Deteriorating economic and political conditions in certain 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 decrease in demand for our products. ● 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 re-emergence of the COVID-19 pandemic on our operations. ● Considerable uncertainty remains regarding the potential re-emergence of COVID-19 variants, including potential reinstatement of measures by various authorities and others in response to any such re-emergence.
Biggest changeAny reemergence of COVID-19, or a new pandemic, could have certain negative impacts on our business, including but not limited to, the following: ● Deteriorating economic and political conditions in certain of our major markets affected by such pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns could cause a decrease in demand for our products. ● 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 re-emergence of the COVID-19 pandemic or emergence of a new pandemic on our operations. ● Considerable uncertainty remains regarding the potential re-emergence of COVID-19 variants, or emergence of new a new pandemic, including potential reinstatement of measures by various authorities and others in response to any such re-emergence or new pandemic emergence.
In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any of such matters could have a material adverse effect on our business. Our business is subject to seasonal variability.
In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters could have a material adverse effect on our business. Our business is subject to seasonal variability.
Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of a re-emergence of COVID-19 variants. ● Actions we may take, or decisions on potential actions that we did not take, as a consequence of a resurgence of a COVID-19 variant pandemic may result in claims or litigation against us.
Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of a re-emergence of COVID-19 variants or new pandemic. ● Actions we may take, or decisions on potential actions that we did not take, as a consequence of a resurgence of a COVID-19 variant pandemic or new pandemic emergence may result in claims or litigation against us.
A substantial portion of our European operations’ net sales (over 50%) are sold in U.S. dollars. In an effort to reduce our exposure to foreign currency exchange fluctuations, we engage in a controlled program of risk management that includes the use of derivative financial instruments for all major currencies with which we operate.
A substantial portion of our European based operations’ net sales (over 50%) are sold in U.S. dollars. In an effort to reduce our exposure to foreign currency exchange fluctuations, we engage in a controlled program of risk management that includes the use of derivative financial instruments for all major currencies with which we operate.
However, we may not be able to continue increasing our prices indefinitely without causing a reduction in the number of consumers with sufficient disposable income to buy our certain of our fragrance products, which could have a material adverse effect on our business. 35 ● Fragrance Markets The success of our products is dependent on public taste.
However, we may not be able to continue increasing our prices indefinitely without causing a reduction in the number of consumers with sufficient disposable income to buy our certain of our fragrance products, which could have a material adverse effect on our business. ● Fragrance Markets The success of our products is dependent on public taste.
As these are third parties over whom we have little or no control, the failure of such third parties to provide components or finished goods on a timely basis could have a material adverse effect on our business, financial condition and operating results. Our reliance on third party distributors could have a material adverse effect on us.
As these are third parties over whom we have little or no control, the failure of such third parties to provide components or finished goods on a timely basis could have a material adverse effect on our business, financial condition and operating results. 40 Our reliance on third party distributors could have a material adverse effect on us.
These and other factors may make it difficult for outside observers, such as research analysts, to predict what our earnings will be in any given fiscal quarter or year. Outside analysts and investors have the right to make their own predictions of our financial results for any future period.
These and other factors may make it difficult for outside observers, such as research analysts, to predict what our earnings will be in any given fiscal quarter or year. 43 Outside analysts and investors have the right to make their own predictions of our financial results for any future period.
In addition, if we replace existing third party distributors with new third party distributors or with our own distribution arrangements, then transition issues could have a material adverse effect on our business, financial condition and operating results. 34 Our business is subject to governmental regulation, which could impact our operations.
In addition, if we replace existing third party distributors with new third party distributors or with our own distribution arrangements, then transition issues could have a material adverse effect on our business, financial condition and operating results. Our business is subject to governmental regulation, which could impact our operations.
Our business is somewhat seasonal due to the timing of shipments to our customers, which are weighted to the second half of the year. Accordingly, our financial performance, sales, working capital requirements, cash flow and borrowings generally experience variability during the third and fourth quarters. Our business is subject to inflationary pressures.
Our business is somewhat seasonal due to the timing of shipments to our customers, which are weighted to the second half of the year. Accordingly, our financial performance, sales, working capital requirements, cash flow and borrowings generally experience variability during the third and fourth quarters. 41 Our business is subject to inflationary pressures.
Our future expansion through acquisitions or new product licenses or distribution arrangements, if any, will depend upon the capital resources and working capital available to us. Further, we may be unable to obtain financing or credit that we may require for additional licenses, acquisitions or other transactions.
Our future expansion through acquisitions or new product license or distribution arrangements, if any, will depend upon the capital resources and working capital available to us. Further, we may be unable to obtain financing or credit that we may require for additional licenses, acquisitions or other transactions.
We may acquire or make investments in businesses or products in the future, and such acquisitions may entail numerous integration risks and impose costs on us, including: ● difficulties in assimilating acquired operations or products, including the loss of key employees from acquired businesses ● diversion of management’s attention from our core business ● adverse effects on existing business relationships with suppliers and customers 29 ● risks of entering markets in which we have no or limited prior experience ● dilutive issuances of equity securities ● incurrence of substantial debt ● assumption of contingent liabilities ● incurrence of significant amortization expenses related to intangible assets and the potential impairment of acquired assets and ● incurrence of significant immediate write-offs.
We may acquire or make investments in businesses or products in the future, and such acquisitions may entail numerous integration risks and impose costs on us, including: ● difficulties in assimilating acquired operations or products, including the loss of key employees from acquired businesses; 35 ● diversion of management’s attention from our core business; ● adverse effects on existing business relationships with suppliers and customers; ● risks of entering markets in which we have no or limited prior experience; ● dilutive issuances of equity securities; ● incurrence of substantial debt; ● assumption of contingent liabilities; ● incurrence of significant amortization expenses related to intangible assets and the potential impairment of acquired assets; and ● incurrence of significant immediate write-offs.
Such failures could be due to changes in distribution channels, new licenses or other acquisitions. Moreover, the standards by which corporate social responsibility are measured are developing and evolving, and certain areas are subject to assumptions that could change over time.
Such failures could be due to changes in distribution channels, new licenses or other acquisitions. Moreover, the standards by which corporate social responsibility is measured are developing and evolving, and certain areas are subject to assumptions that could change over time.
A negative determination or ultimate disposition in any tax audit, changes in tax laws or tax rates, or the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods. 33 The international character of our business renders us subject to fluctuation in foreign currency exchange rates and international trade tariffs, barriers and other restrictions.
A negative determination or ultimate disposition in any tax audit, changes in tax laws or tax rates, or the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods. 39 The international character of our business renders us subject to fluctuation in foreign currency exchange rates and international trade tariffs, barriers and other restrictions.
Our fragrance products that are manufactured and marketed in Europe are also regulated as cosmetics and subject to EU Regulation 1223/2009, and after Brexit, the United Kingdom regulation of The UK Schedule 34 to the Product Safety and Metrology Regulation 2019. As of the date of this report, IP products are in compliance with these regulations.
Our fragrance products that are manufactured and marketed in Europe are also regulated as cosmetics and subject to EU Regulation 1223/2009, and after Brexit, the United Kingdom regulation of The UK Schedule 34 to the Product Safety and Metrology Regulation 2019. As of the date of this report, Interparfums products are in compliance with these regulations.
We take no responsibility for any losses suffered as a result of such changes in the prices of our securities. Item 1B. Unresolved Staff Comments. None. 37
We take no responsibility for any losses suffered as a result of such changes in the prices of our securities. 44 Item 1B. Unresolved Staff Comments. None.
Despite significant inflationary pressures that started during 2022 affecting many aspects of our business, especially increase component costs and shipping, we were able to offset the effects of inflation during 2022 by increasing the prices of our products.
Despite significant inflationary pressures that started during 2022 and continued into 2023 affecting many aspects of our business, especially increase component costs and shipping, we were able to offset the effects of inflation during 2022 by increasing the prices of our products.
As we continue to monitor potential COVID-19 variant developments, including the impacts on our consumers, customers and suppliers, we take further measures as necessary to protect our business and our employees.
As we continue to monitor potential COVID-19 variant or new pandemic developments, including the impacts on our consumers, customers and suppliers, we will take further measures as necessary to protect our business and our employees.
Although we believe inflation will continue to be a major factor in 2023, a further increase in sales prices should help to mitigate its impact to some degree.
Although we believe inflation will continue to be a major factor in 2024, a further increase in sales prices, if necessary, should help to mitigate its impact to some degree.
If our products are found to be defective or unsafe, or if they otherwise fail to meet our consumers’ standards, then our relationships with customers or consumers could suffer, the appeal of one or more of our brands could be diminished, and we could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition.
If our products are found to be defective or unsafe, or if they otherwise fail to meet our consumers’ standards, then our relationships with customers or consumers could suffer, the appeal of one or more of our brands could be diminished, and we could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition. 42 Our failure to protect our reputation, or the failure of our partners to protect their reputations, could have a material adverse effect on our brand images.
Third parties may illegally distribute and sell counterfeit versions of the Company’s products. These counterfeit products may be inferior in terms of quality and other characteristics compared to the Company’s authentic products and/or the counterfeit products could pose safety risks that the Company’s authentic products would not otherwise present to consumers.
These counterfeit products may be inferior in terms of quality and other characteristics compared to the Company’s authentic products and/or the counterfeit products could pose safety risks that the Company’s authentic products would not otherwise present to consumers.
I f our intangible assets, such as trademarks and licenses, become impaired, we may be required to record a significant non-cash charge to earnings which would negatively impact our results of operations.
The costs required to protect our trademarks and brand names may be substantial. 36 I f our intangible assets, such as trademarks and licenses, become impaired, we may be required to record a significant non-cash charge to earnings which would negatively impact our results of operations.
Our inability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of others could therefore have a material adverse effect on our business, financial condition and results of operations. 31 ● COVID-19 Pandemic and Economic Downturn Although in both 2022 and 2021 we weathered the COVID-19 pandemic and its effects to date, if the pandemic reemerges, it may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our inability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of others could therefore have a material adverse effect on our business, financial condition and results of operations. 37 ● COVID-19 or New Pandemic and Economic Downturn Although we weathered the COVID-19 pandemic and its effects to date, if this pandemic reemerges or another pandemic emerges, any pandemic may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Damage to our reputation or the reputations of our brand partners or licensors or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation. 36 Our information systems and websites may be susceptible to outages, hacking and other risks.
Damage to our reputation or the reputations of our brand partners or licensors or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation.
We have information systems that support our business processes, including product development, production, marketing, order processing, sales, distribution, finance and intra-company communications. We also have Internet websites in the United States and Europe. These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, hacking and similar events.
Our information systems and websites may be susceptible to outages, hacking and other cybersecurity risks. We have information systems that support our business processes, including product development, production, marketing, order processing, sales, distribution, finance and intra-company communications. We also have Internet websites in the United States and Europe.
In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and brand names may be substantial.
In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States.
Failure to comply with ethical, social, product, labor and environmental standards, or related political considerations, such as animal testing, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts.
Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure to comply with ethical, social, product, labor and environmental standards, or related political considerations, such as animal testing, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts.
The extent and potential short and long-term impact of any other pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak, our customers’ willingness to travel and purchase our products, and the impact on our supply chain and the financial markets, all of which are highly uncertain and cannot be predicted. 32 ● Global Operations We are subject to risks related to our foreign operations, and a disruption in our operations or supply chain could adversely affect our business and financial results.
The extent and potential short and long-term impact of a re-emergence of COVID-19 variants any other pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak, our customers’ willingness to travel and purchase our products, and the impact on our supply chain and the financial markets, all of which are highly uncertain and cannot be predicted.
Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity or if we, or the third parties with whom we do business, do not comply with regulations or accepted practices. Any negative publicity about these types of concerns may reduce demand for our merchandise.
Our ability to maintain our reputation is critical to our various brand images. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity or if we, or the third parties with whom we do business, do not comply with regulations or accepted practices.
We believe that this longer-term focus is in the best interests of our Company and our stockholders. At the same time, however, we recognize that it may be helpful to provide investors with guidance as to our forecast of annual net sales and diluted earnings per share.
At the same time, however, we recognize that it may be helpful to provide investors with guidance as to our forecast of annual net sales and diluted earnings per share. Accordingly, we provide guidance as to our expected annual net sales, and diluted earnings per share, which is updated as appropriate throughout the year.
Accordingly, we provide guidance as to our expected annual net sales, and diluted earnings per share, which is updated as appropriate throughout the year. While we generally provide updates to our guidance when we report our results each fiscal quarter if called for, we assume no responsibility to update any of our forward-looking statements at such times or otherwise.
While we generally provide updates to our guidance when we report our results each fiscal quarter if called for, we assume no responsibility to update any of our forward-looking statements at such times or otherwise.
The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, tariffs, trade barriers and market contraction, could adversely affect the Company’s business and financial results. ● Operational Risks We are dependent upon Messrs. Jean Madar and Philippe Benacin, and the loss of their services could harm our business.
The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, tariffs, trade barriers and market contraction, could adversely affect the Company’s business and financial results. The wars between Russia and Ukraine, and Israel and Hamas could adversely impact our business and financial results.
Any significant impairment to our intangible assets would result in a significant charge to earnings in our financial statements during the period in which the impairment is determined to exist. 30 The illegal distribution and sale by third parties of counterfeit versions of the Company’s products or the unauthorized diversion by third parties of the Company’s products could have an adverse effect on the Company’s revenues and a negative impact on the Company’s reputation and business.
The illegal distribution and sale by third parties of counterfeit versions of the Company’s products or the unauthorized diversion by third parties of the Company’s products could have an adverse effect on the Company’s revenues and a negative impact on the Company’s reputation and business. Third parties may illegally distribute and sell counterfeit versions of the Company’s products.
Despite the implementation of network security measures, our systems may be vulnerable to computer viruses, hacking and similar disruptions from unauthorized tampering. The occurrence of these or other events could disrupt or damage our information systems and adversely affect our business and results of operations.
These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, hacking, attacks and similar events. Despite the implementation of network security measures, our systems may be vulnerable to computer viruses, hacking, attacks and similar disruptions from unauthorized tampering.
The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our earnings or other financial performance. Our business planning process is designed to maximize our long-term strength, growth and profitability, not to achieve an earnings target in any particular fiscal quarter.
Our business planning process is designed to maximize our long-term strength, growth and profitability, not to achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of our Company and our stockholders.
Any further material reduction in our sales could have a material adverse effect on our business, financial condition and operating results. An outbreak of any other disease, epidemic or pandemic, or similar public health threat on the scope of COVID-19, could have a material adverse impact on the Company’s business, operating results and financial condition.
Any further material reduction in our sales could have a material adverse effect on our business, financial condition and operating results. 38 ● Global Operations We are subject to risks related to our foreign operations, and a disruption in our operations or supply chain could adversely affect our business and financial results.
Removed
An outbreak of disease, epidemic or pandemic, or similar public threat on the scope of COVID-19, or fear of such an event, that negatively impacts consumer spending on our products could have a material adverse impact on the Company’s business, financial condition and operating results.
Added
Any significant impairment to our intangible assets would result in a significant charge to earnings in our financial statements during the period in which the impairment is determined to exist.
Removed
Our failure to protect our reputation, or the failure of our partners to protect their reputations, could have a material adverse effect on our brand images. Our ability to maintain our reputation is critical to our various brand images.
Added
The public health crisis caused by the COVID-19 pandemic, its variants and the measures being taken by governments, businesses, including us, our suppliers, our distributors, retailers and the public, to limit COVID-19’s spread, previously had certain negative impacts on our business.
Added
The wars between Russia and Ukraine, and Israel and Hamas have negatively impacted our operations to a limited degree to date. However, future impacts to our Company are difficult to predict due to the high level of uncertainty as to how these wars will evolve.
Added
Fuel supplies and supply chains increases, as well as retailers or consumers, could all be negatively impacted by these wars. Such negative impacts could have a material adverse effect on our net sales, earnings and cash flows. ● Operational Risks We are dependent upon Messrs. Jean Madar and Philippe Benacin, and the loss of their services could harm our business.
Added
The occurrence of these or other events could disrupt or damage our information systems and adversely affect our business and results of operations. The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our earnings or other financial performance.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis is an office complex combining three buildings connected by two inner courtyards and consists of approximately 40,000 total sq. ft. United States distribution operations for European operations maintain their headquarters in New York City, with a lease that expires in May 2029.
Biggest changeEuropean Based Operations Since March 2022, our European based operations have maintained their corporate headquarters at 10 rue de Solférino in the 7th arrondissement of Paris. This is an office complex combining three buildings connected by two inner courtyards and consists of approximately 40,000 total sq. ft.
Item 2. Properties United States Operations We maintain our corporate headquarters and United States operations in approximately 32,000 square feet with a term that expires on December 31, 2029, and have been at the same location in New York City since 1992.
Item 2. Properties United States Based Operations We maintain our corporate headquarters and United States based operations in approximately 32,000 square feet with a term that expires on December 31, 2029, and have been at the same location in New York City since 1992.
Interparfums SA also has several agreements for warehousing and distribution services which are renewed on an annual basis, as well as a one with a service provider that expires in 2024. Fees payable are partially calculated based upon a percentage of sales, which is customary in the industry.
Interparfums SA also has several agreements for warehousing and distribution services which are renewed on an annual basis, as well as one with a service provider that expires in 2024. Fees for such services are partially calculated based upon a percentage of sales, which is customary in the industry.
We believe our office and warehouse facilities are satisfactory for our present needs and those for the foreseeable future. Item 3. Legal Proceedings We are not a party to any material lawsuits. Item 4. Mine Safety Disclosures Not applicable. 38 PART II
We believe our office and warehouse facilities are satisfactory for our present needs and those for the foreseeable future. Item 3. Legal Proceedings We are not a party to any material lawsuits. Item 4. Mine Safety Disclosures Not applicable. 46 PART II
In addition, European operations maintain an approximately 37,000 square meters (approximately 398,265 square feet) distribution center located in Criquebeuf sur Seine, France, with a seven year term that expires May 2027 and an option to extend the term for an additional two years.
A small office is located in Singapore for Asia-Pacific distribution by European based operations. In addition, European based operations maintain an approximately 37,000 square meters (approximately 398,265 square feet) distribution center located in Criquebeuf sur Seine, France, with a term that expires May 2027 and an option to extend the term for an additional two years.
During 2022, we also purchased several small apartments at 96 rue de l’Université, Paris adjacent to the main office complex and have started the process of converting them into additional offices. A small office is located Singapore for Asia-Pacific distribution by European operations.
United States distribution operations for European based operations maintain their headquarters in New York City, with a lease that expires in May 2029. During 2022, we also purchased several small apartments at 96 rue de l’Université, Paris adjacent to the main office complex and have converted them into additional offices.
We also have a 140,000 square foot distribution center in New Jersey, and this lease expires on October 31, 2025. In addition, we maintain office space in Hong Kong with a lease that expires in June 2023, as well as a small leased distribution center in Hong Kong through December 2023.
We also have a 140,000 square foot distribution center in New Jersey, and this lease expires on October 31, 2025. In October 2021 we leased office space in Florence, Italy for a 6-year term with an option for an additional 6 years for Interparfums Italia Srl, and office space in Paris, France.
Removed
In October 2021 we leased office space in Florence, Italy for a 6-year term with an option for an additional 6 years for Interparfums Italia Srl. European Operations Since March 2022, our European operations have maintained their corporate headquarters at 10 rue de Solférino in the 7th arrondissement of Paris.
Added
We also maintain a distribution center in Liscate, Italy. In 2023 we obtained small, leased space for our new sales subsidiaries in Dubai and Switzerland, in addition to maintaining a leased sales office in Hong Kong.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCorporate Performance Graph The following graph compares the performance for the periods indicated in the graph of our common stock with the performance of the Nasdaq Market Index and the average performance of a group of the Company’s peer corporations consisting of: CCA Industries, Inc., Colgate-Palmolive Co., Estée Lauder Companies, Inc., Inter Parfums, Inc., Kimberly Clark Corp., Natural Health Trends Corp., Procter & Gamble Co., Stephan Co., Summer Infant, Inc. and United Guardian, Inc.
Biggest changeThe 2022 Peer Group consists of CCA Industries, Inc., Colgate-Palmolive Co., Estée Lauder Companies, Inc., Kimberly Clark Corp., Natural Health Trends Corp., Procter & Gamble Co., Revlon, Inc., Stephan Co., Summer Infant, Inc. and United Guardian, Inc. The 2023 Peer Group also includes Estée Lauder Companies, Inc. and Procter & Gamble Co. and replaces all other companies with e.l.f.
The next quarterly cash dividend of $0.625 per share is payable on March 31, 2023 to shareholders of record on March 15, 2023. Item 6. [RESERVED] 40
The next quarterly cash dividend of $0.75 per share is payable on March 29, 2024, to shareholders of record on March 15, 2024. Item 6. [RESERVED] 48
In February 2021, the Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly. In February 2022, the Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share. Just recently, in February 2023 the Board of Directors further increased the annual dividend to $2.50 per share.
In February 2022, our Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share and in February 2023 the Board of Directors increased the annual dividend to $2.50 per share. Just recently, in February 2024, the Board of Directors further increased the annual dividend to $3.00 per share.
Fiscal 2022 High Closing Price Low Closing Price Fourth Quarter 99.35 74.26 Third Quarter 86.78 70.02 Second Quarter 89.45 64.74 First Quarter 106.82 80.22 Fiscal 2021 High Closing Price Low Closing Price Fourth Quarter 106.90 75.89 Third Quarter 79.42 67.55 Second Quarter 77.95 69.96 First Quarter 76.75 59.17 As of February 8, 2023, the number of record holders, which include brokers and broker nominees, etc., of our common stock was 28.
Fiscal 2023 High Closing Price Low Closing Price Fourth Quarter 147.71 121.48 Third Quarter 150.70 129.06 Second Quarter 157.59 125.60 First Quarter 143.87 96.65 Fiscal 2022 High Closing Price Low Closing Price Fourth Quarter 99.35 74.26 Third Quarter 86.78 70.02 Second Quarter 89.45 64.74 First Quarter 106.82 80.22 As of February 9, 2024, the number of record holders, which include brokers and broker nominees, etc., of our common stock was 25.
The graph assumes that the value of the investment in our common stock and each index was $100 at the beginning of the period indicated in the graph, and that all dividends were reinvested. 39 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Inter Parfums, Inc., the NASDAQ Composite Index, and a Peer Group *$100 invested on 12/31/17 in stock or index, including reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Inter Parfums, Inc., the NASDAQ Composite Index, 2022 Peer Group and 2023 Peer Group *$100 invested on 12/31/18 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Below is the list of the data points for each year that corresponds to the lines on the above graph. 12/17 12/18 12/19 12/20 12/21 12/22 Inter Parfums, Inc. 100.00 153.33 172.84 144.75 259.11 239.94 NASDAQ Composite 100.00 97.16 132.81 192.47 235.15 158.65 Peer Group 100.00 99.33 136.46 159.01 192.02 171.79 Dividends 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 annual cash dividend.
Below is the list of the data points for each year that corresponds to the lines on the above graph. 12/18 12/19 12/20 12/21 12/22 12/23 Inter Parfums, Inc. 100.00 112.73 94.40 168.99 156.49 237.77 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 2022 Peer Group 100.00 137.57 160.49 193.85 173.59 161.94 2023 Peer Group 100.00 142.28 167.60 202.03 171.31 168.21 Dividends In February 2021, our Board of Directors authorized an annual dividend of $1.00 per share, payable quarterly.
Removed
We believe there are approximately 32,436 beneficial owners of our common stock.
Added
We believe there are approximately 47,503 beneficial owners of our common stock. 47 Corporate Performance Graph The following graph compares the performance for the periods indicated in the graph of our common stock with the performance of the Nasdaq Market Index, the average performance the Company’s peer group for the year ended December 31, 2022 (the “2022 Peer Group”), and the average performance of the Company’s peer group for the year ended December 31, 2023 (the “2023 Peer Group”).
Added
Beauty, Inc., Coty Inc., L’Oréal SA, LVMH Moët Hennessy Louis Vuitton, Natura &Co Holding SS, Olaplex Holdings, Inc., and Shiseido Co Ltd. The Company changed its peer group in order to reflect the current competitive landscape in our industry more accurately.
Added
The graph assumes that the value of the investment in our common stock and each index was $100 at the beginning of the period indicated in the graph, and that all dividends were reinvested.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn 2022, short-term investments include approximately $19.9 million of marketable equity securities of other companies in the luxury goods sector. Interest and investment income includes approximately $3.1 million of unrealized gains on marketable equity securities. Given our strong balance sheet and cash position, the increase in interest rates had a favorable impact on interest and investment income.
Biggest changeInterest and investment income represents interest earned on cash and cash equivalents and short-term investments. As of December 31, 2023, short-term investments include approximately $9.4 million of marketable equity securities of other companies in the luxury goods sector. In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million.
The cash flow projections are based upon a number of assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature.
The cash flow projections are based upon a number of assumptions, including future sales levels and future cost of goods and operating expense levels, as well as economic conditions, changes to our business model or changes in consumer acceptance of our products which are more subjective in nature.
However, earnings are positively affected by a strong dollar, because over 50% of net sales of our European operations are denominated in U.S. dollars, while almost all costs of our European operations are incurred in euro. Conversely, a weak U.S. dollar has a favorable impact on our net sales while gross margins are negatively affected.
However, earnings are positively affected by a strong dollar, because over 50% of net sales of our European based operations are denominated in U.S. dollars, while almost all costs of our European based operations are incurred in euro. Conversely, a weak U.S. dollar has a favorable impact on our net sales while gross margins are negatively affected.
Our effective tax rate differs from the 21% statutory rate due to state, local and foreign taxes, offset by benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income.
Our effective tax rate differs from the 21% statutory rate due to benefits received from the exercise of stock options as well as deductions we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrances and fragrance related products. We manage our business in two segments, European based operations and United States based operations.
If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded. 43 We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable.
If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded. We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable.
The noncontrolling interest arises primarily from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext.
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.
Certain prestige fragrance products are produced and marketed by our European operations through our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the NYSE Euronext.
Certain prestige fragrance products are produced and marketed by our European based operations through our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the Euronext.
We produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 68%, 75% and 78% of net sales for 2022, 2021 and 2020, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T.
We produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 65%, 68% and 75% of net sales for 2023, 2022 and 2021, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T.
The Company is party to a number of license and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2039. In connection with certain of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments. See
The Company is party to a number of licenses and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2039. In connection with most of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments. See
The only factor that prevented us from determining that the Lanvin brand names and trademarks were indefinite life intangible assets was Item c.
The only factor that prevented us from determining that the Lanvin brand names and trademarks were indefinite lived intangible assets was Item c.
When testing indefinite-lived intangible assets for impairment, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 9.80%.
When testing indefinite-lived intangible assets for impairment, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 10.39%.
Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Montblanc, Jimmy Choo, Coach and GUESS brand names.
Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Jimmy Choo, Montblanc, Coach, GUESS, Donna Karan/DKNY and Ferragamo brand names.
Additionally, in the third quarter of 2022, our U.S. operations recognized a one-time tax benefit of $2.5 million associated with the 2021 Salvatore Ferragamo acquisition. At the time of the acquisition, we had not recognized deferred tax benefits as there were uncertainties concerning its potential recoverability; however, as of September 30, 2022, the recoverability was deemed likely.
Additionally, in the third quarter of 2022, our United States based operations recognized a one-time tax benefit of $2.5 million associated with the 2021 Salvatore Ferragamo acquisition. At the time of the acquisition, we had not recognized deferred tax benefits as there were uncertainties concerning its potential recoverability; however, as of September 30, 2022, recoverability was deemed likely.
For 2022, had these estimates been changed simultaneously by 5% in either direction, our reported gross profit would have increased or decreased by approximately $0.8 million and selling, general and administrative expenses would have changed by approximately $0.1 million.
For 2023, had these estimates been changed simultaneously by 5% in either direction, our reported gross profit would have increased or decreased by approximately $0.7 million and selling, general and administrative expenses would have changed by approximately $0.1 million.
These components are either received and stored directly at our third-party fillers or received at one of our distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers. 41 As with any global business, many aspects of our operations are subject to influences outside our control.
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. 49 As with any global business, many aspects of our operations are subject to influences outside our control.
As such, our Company’s gross margins may not be comparable to other companies, which may include these expenses as a component of cost of goods sold.
As such, our Company’s gross margins may not be comparable to other companies, which may include these expenses as a component of cost of sales.
Generally, we do not bill customers for shipping and handling costs and such costs, which aggregated $15.8 million, $10.0 million and $5.0 million in 2022, 2021 and 2020, respectively, are included in selling, general and administrative expenses in the consolidated statements of income.
Generally, we do not bill customers for shipping and handling costs and such costs, which aggregated $14.2 million, $15.8 million and $10.0 million in 2023, 2022 and 2021, respectively, are included in selling, general and administrative expenses in the consolidated statements of income.
The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2022 assuming all other assumptions remained constant: $ in millions Change Increase (decrease) to fair value Weighted average cost of capital +10% $ (7.2 ) Weighted average cost of capital -10% $ 8.1 Future sales levels +10% $ 9.7 Future sales levels -10% $ (9.7 ) Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable.
The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2023 assuming all other assumptions remained constant: $ in millions Change Increase (decrease) to fair value Weighted average cost of capital +10 % $ 4.4 Weighted average cost of capital -10 % $ 31.8 Future sales levels +10 % $ 33.3 Future sales levels -10 % $ 7.5 Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable.
Distribution in the United States for European based operations is handled by a 100% owned subsidiary of Interparfums SA based in the United States. Therefore, sales are made at a wholesale price rather than at an ex-factory price, resulting in higher gross margins.
This decline was partially offset as distribution in the United States for European based operations is handled by a 100% owned subsidiary of Interparfums SA based in the United States. Therefore, sales are made at a wholesale price rather than at an ex-factory price, resulting in higher gross margins.
Costs relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $43.1 million, $36.9 million and $26.4 million in 2022, 2021 and 2020, respectively, and represented 4.0%, 4.2% and 4.9% of net sales, respectively.
Costs relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $52.3 million, $43.1 million and $36.9 million in 2023, 2022 and 2021, respectively, and represented 4.0%, 4.0% and 4.2% of net sales, respectively.
In certain markets where we sell directly to retailers, seasonality is more evident. We primarily sell directly to retailers in France and the United States. We grow our business and expand our shares in two distinct ways. First, by adding new brands to our portfolio, either through new licenses or other arrangements or out-right acquisitions of brands.
In certain markets where we sell directly to retailers, seasonality is more evident. We primarily sell directly to retailers in France, the United States, and Italy. We grow our business in two distinct ways. First, we grow by adding new brands to our portfolio, through new licenses, or other arrangements or outright acquisitions of brands.
While we believe the estimates we have made are proper and the related results of operations for the period are presented fairly in all material respects, other assumptions could reasonably be justified that would change the amount of reported net sales, cost of sales, and selling, general and administrative expenses as they relate to the provisions for anticipated sales returns, allowance for doubtful accounts and inventory obsolescence reserves.
The results of our business underlying these assumptions have not differed significantly from our expectations. 51 While we believe the estimates we have made are proper and the related results of operations for the period are presented fairly in all material respects, other assumptions could reasonably be justified that would change the amount of reported net sales, cost of sales, and selling, general and administrative expenses as they relate to the provisions for anticipated sales returns, allowance for doubtful accounts and inventory obsolescence reserves.
However, if future actual results do not meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results of operations. At December 31, 2022 indefinite-lived intangible assets aggregated $105.0 million.
However, if future actual results do not meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results of operations. 50 At December 31, 2023 indefinite-lived intangible assets aggregated $108.8 million.
As a percentage of net sales, product sales for the Company’s largest brands were as follows: Year Ended December 31, 2022 2021 2020 Montblanc 18 % 19 % 21 % Jimmy Choo 18 % 18 % 16 % Coach 15 % 16 % 17 % GUESS 12 % 12 % 11 % Quarterly sales fluctuations are influenced by the timing of new product launches as well as the third and fourth quarter holiday season.
As a percentage of net sales, product sales for the Company’s largest brands were as follows: Year Ended December 31, 2023 2022 2021 Jimmy Choo 17 % 18 % 18 % Montblanc 17 % 18 % 19 % Coach 15 % 15 % 16 % GUESS 12 % 12 % 12 % Donna Karan/DKNY 7 % 3 % — Ferragamo 5 % 5 % 1 % Quarterly sales fluctuations are influenced by the timing of new product launches as well as the third and fourth quarter holiday season.
For United States operations, selling, general and administrative expenses increased 70% and 58% in 2022 and 2021, respectively, as compared to the corresponding prior year period and represented 39.1%, 36.5% and 43.1% of sales in 2022, 2021 and 2020, respectively.
For United States based operations, selling, general and administrative expenses increased 35% and 70% in 2023 and 2022, respectively, as compared to the corresponding prior year period and represented 39.7%, 39.1% and 36.5% of net sales in 2023, 2022 and 2021, respectively.
The collective impact of these changes on 2022 operating income, net income attributable to Inter Parfums, Inc., and net income attributable to Inter Parfums, Inc. per diluted share would be an increase or decrease of approximately $0.8 million, $0.5 million and $0.02, respectively.
The collective impact of these changes on 2023 operating income, net income attributable to Inter Parfums, Inc., and net income attributable to Inter Parfums, Inc. per diluted share would be an increase or decrease of approximately $0.6 million, $0.3 million and $0.01, respectively.
All of our brands have benefitted from newly launched and enhanced e-commerce sites in existing markets in collaboration with our retail customers on their e-commerce sites. We also continue to develop and implement omnichannel concepts, the way brick-and-mortar stores and a business’ online operations work in tandem, and compelling content to deliver an integrated consumer experience.
All of our brands have benefitted from newly launched and enhanced e-commerce sites in existing markets in collaboration with our retail customers on their e-commerce sites. We also continue to develop and implement omnichannel concepts and compelling content to deliver an integrated consumer experience.
We anticipated that on a full year basis, future promotion and advertising expenditures will aggregate approximately 21% of net sales, which is in line with pre-COVID historical averages. Royalty expense included in selling, general and administrative expenses aggregated $87.0 million, $68.9 million and $41.1 million in 2022, 2021 and 2020, respectively.
Long term, we anticipate that on a full year basis, promotion and advertising expenditures should aggregate approximately 21% of net sales, which is in line with pre-COVID historical averages. Royalty expense included in selling, general and administrative expenses aggregated $103.8 million, $87.0 million and $68.9 million in 2023, 2022 and 2021, respectively.
Net income attributable to the noncontrolling interest is directly related to the profitability of our European operations and aggregated 27.9%, 28.0% and 28.1% of European operations net income in 2022, 2021 and 2020, respectively. Net margins attributable to Inter Parfums, Inc. aggregated 11.1%, 9.9% and 7.1% in 2022, 2022 and 2020, respectively.
Net income attributable to the noncontrolling interest is directly related to the profitability of our European based operations and aggregated 28.1%, 27.9% and 28.0% of European based operations net income in 2023, 2022 and 2021, respectively.
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.
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. Over 50% of net sales of our European based operations are denominated in U.S. dollars.
Income from Operations As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 17.9%, 16.8% and 13.1% for the years ended December 31, 2022, 2021 and 2020, respectively.
The amounts are in line with and directly related to fluctuations in sales within our U.S. distribution subsidiary. Income from Operations As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 19.1%, 17.9% and 16.8% for the years ended December 31, 2023, 2022 and 2021, respectively.
These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Ungaro brands.
United States based operations represented 35%, 32% and 25% of net sales in 2023, 2022 and 2021, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Emanual Ungaro, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta, and Roberto Cavalli brands.
Promotion and advertising are integral parts of our industry, and we continue to invest heavily in promotional spending to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have had a beneficial effect on online net sales, causing then to continue to grow strongly on a global basis.
Promotion and advertising represented 19.7%, 19.5% and 19.5% of net sales in 2023, 2022 and 2021, respectively. Promotion and advertising are integral parts of our industry, and we continue to invest heavily to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have had a beneficial effect on sales.
Gross Margins Years ended December 31, 2022 2021 2020 (in millions) European operations: Net sales $ 744.0 $ 663.2 $ 422.9 Cost of sales 236.9 221.2 152.3 Gross margin $ 507.1 $ 442.0 $ 270.6 Gross margin, as a percent of net sales 68.2 % 66.6 % 64.0 % United States operations: Net sales $ 342.7 $ 216.4 $ 116.1 Cost of sales 155.4 101.5 56.0 Gross margin $ 187.3 $ 114.9 $ 60.1 Gross margin, as a percent of net sales 54.7 % 53.1 % 51.8 % 46 For European based operations, gross profit margin as a percentage of net sales was 68.2%, 66.6% and 64.0% in 2022, 2021 and 2020, respectively.
Gross Profit Margin Years ended December 31, 2023 2022 2021 (in millions) European based operations: Net sales $ 861.9 $ 744.0 $ 663.2 Cost of sales 282.6 236.9 221.2 Gross margin $ 579.3 $ 507.1 $ 442.0 Gross margin, as a percent of net sales 67.2 % 68.2 % 66.6 % United States based operations: Net sales $ 455.8 $ 342.7 $ 216.4 Cost of sales 196.0 155.4 101.5 Gross margin $ 259.8 $ 187.3 $ 114.9 Gross margin, as a percent of net sales 57.0 % 54.7 % 53.1 % The Company’s gross margin percentage was 63.7% in 2023 as compared to 63.9% in 2022.
When exercised, Lanvin has an obligation to pay the exercise price and the Company would be required to convey the Lanvin brand names and trademarks back to Lanvin.
When exercised, Lanvin has an obligation to pay the exercise price and the Company would be required to convey the Lanvin brand names and trademarks back to Lanvin. The exercise price to be received (residual value) is well in excess of the carrying value of the Lanvin brand names and trademarks, therefore no amortization is required.
Net Income Year ended December 31, 2022 2021 2020 (In thousands) Net income attributable to European operations $ 107,292 $ 80,670 $ 41,990 Net income attributable to United States operations 43,745 29,357 7,978 Net income 151,037 110,027 49,968 Less: Net income attributable to the noncontrolling interest 30,099 22,616 11,749 Net income attributable to Inter Parfums, Inc. $ 120,938 $ 87,411 $ 38,219 Net income attributable to European operations was $107.3 million, $80.7 million and $42.0 million in 2022, 2021 and 2020, respectively, while net income attributable to United States operations was $43.7 million, $29.4 million and $8.0 million in 2022, 2021 and 2020, respectively.
Net Income Year ended December 31, 2023 2022 2021 (In thousands) Net income attributable to European based operations $ 123,994 $ 107,292 $ 80,670 Net income attributable to United States based operations 63,782 43,745 29,357 Net income 187,776 151,037 110,027 Less: Net income attributable to the noncontrolling interest 35,122 30,099 22,616 Net income attributable to Inter Parfums, Inc. $ 152,654 $ 120,938 $ 87,411 Net income attributable to Inter Parfums, Inc. was $152.7 million, $120.9 million and $87.4 million in 2023, 2022 and 2021, respectively.
Net Sales to Customers by Region Years ended December 31, 2022 2021 2020 (in millions) North America $ 431.9 $ 354.1 $ 193.5 Western Europe 259.2 202.0 147.1 Asia 152.7 128.0 79.7 Middle East 87.8 61.0 46.8 Eastern Europe 74.2 69.7 33.1 Central and South America 69.9 56.4 32.5 Other 11.0 8.4 6.3 $ 1,086.7 $ 879.6 $ 539.0 Our largest market, North America achieved sales growth of 22% in 2022 compared to 2021, while Western Europe and Asia grew sales by 28% and 19% in 2022, respectively, compared to 2021.
Net Sales to Customers by Region Years ended December 31, 2023 2022 2021 (in millions) North America $ 511.7 $ 421.0 $ 346.9 Western Europe 301.2 259.2 202.0 Asia 191.8 163.6 135.2 Middle East 107.3 87.8 61.0 Eastern Europe 103.2 74.2 69.7 Central and South America 92.7 69.9 56.4 Other 9.8 11.0 8.4 $ 1,317.7 $ 1,086.7 $ 879.6 Our largest market, North America, achieved sales growth of 22% in 2023 compared to 2022, followed by Western Europe and Asia where sales grew by 16% and 17% in 2023, respectively, compared to 2022.
Results of Operations Net Sales Years ended December 31, (in millions) 2022 % Change 2021 % Change 2020 European based product sales $ 744.0 12% $ 663.2 57% $ 422.9 United States based product sales 342.7 58% 216.4 86% 116.1 Total net sales $ 1,086.7 24% $ 879.6 63% $ 539.0 Net sales rebounded significantly in 2021, as compared to 2020 for both European and United States based operations and continued to increase in 2022.
Results of Operations Net Sales Years ended December 31, (in millions) 2023 % Change 2022 % Change 2021 European based product sales $ 861.9 16 % $ 744.0 12 % $ 663.2 United States based product sales 455.8 33 % 342.7 58 % 216.4 Total net sales $ 1,317.7 21 % $ 1,086.7 24 % $ 879.6 Net sales in 2023 increased 21% compared to 2022.
Additionally, in April 2021, we completed the acquisition of the future headquarters of Interparfums SA. The acquisition was financed by a 10-year €120 million (approximately $128 million) bank loan which bears interest at one-month Euribor plus 0.75%. Also in 2021, approximately €80 million of the variable rate debt was swapped for fixed interest rate debt.
The acquisition was financed by a 10-year approximately $132.6 million (€120 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately $88.4 million (€80 million) of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate of 2% per annum.
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.
We have not had any liquidity issues to date, and do not expect any liquidity issues relating to such cash and cash equivalents and short-term investments. As of December 31, 2023, short-term investments include approximately $12.9 million of marketable equity securities.
Liquidity and Capital Resources Our conservative financial tradition has enabled us to amass significant cash balances. As of December 31, 2022, we had $256 million in cash, cash equivalents and short-term investments, most of which are held in euro by our European operations and are readily convertible into U.S. dollars.
As of December 31, 2023, we had $182.8 million in cash and cash equivalents and short-term investments, most of which are held in euro by our European based operations and is readily convertible into U.S. dollars.
The fluctuations in net income for both European operations and United States operations are directly related to the previous discussions concerning changes in sales, gross profit margins, selling, general and administrative expenses, most of which were caused by the effects of the COVID-19 pandemic beginning in 2020 and the recovery in 2021 and 2022.
The significant fluctuations in net income for both European and United States based operations are directly related to the previous discussions relating to changes in sales, gross profit margins, selling, general and administrative expenses.
We carefully monitor movements in foreign currency exchange rates as over 50% of our European based operations net sales is denominated in U.S. dollars, while most of our costs are incurred in euro. From a margin standpoint, a strong U.S. dollar has a positive effect on our gross margin while a weak U.S. dollar has a negative effect.
For European based operations, gross profit margin as a percentage of net sales was 67.2%, 68.2% and 66.6% in 2023, 2022 and 2021, respectively. We carefully monitor movements in foreign currency exchange rates as over 50% of our European based operations net sales is denominated in U.S. dollars, while most of our costs are incurred in euro.
The Company has determined that it has no tax liability related global intangible low-taxed income (“GILTI”) as of December 31, 2022, 2021 and 2020. The Company also estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $1.5 million, $0.6 million and $0.3 million as of December 31, 2022, 2021 and 2020, respectively.
The Company also estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $2.4 million, $1.5 million and $0.6 million as of December 31, 2023, 2022 and 2021, respectively. Share-based compensation resulted in a discrete tax benefit of $1.2 million, $0.8 million and $1.3 million in 2023, 2022 and 2021, respectively.
The exercise price to be received (residual value) is well in excess of the carrying value of the Lanvin brand names and trademarks, therefore no amortization is required. 44 Quantitative Analysis During the three-year period ended December 31, 2022, we have not made any material changes in our assumptions underlying these critical accounting policies or to the related significant estimates.
Quantitative Analysis During the three-year period ended December 31, 2023, we have not made any material changes in our assumptions underlying these critical accounting policies or to the related significant estimates.
As of December 31, 2022, short-term investments include approximately $19.9 million of marketable equity securities. 49 As of December 31, 2022, working capital aggregated $443 million, and we had a working capital ratio of 2.3 to 1. Approximately 80% of the Company’s total assets are held by European operations including approximately $249 million of trademarks, licenses and other intangible assets.
As of December 31, 2023, working capital aggregated $514 million, and we had a working capital ratio of 2.6 to 1. Approximately 78% of the Company’s total assets are held by European based operations, and approximately $255 million of trademarks, licenses and other intangible assets are also held by European based operations.
Selling, General & Administrative Expenses Years ended December 31, 2022 2021 2020 (in millions) European Operations Selling, general & administrative expenses $ 358.3 $ 327.5 $ 210.6 Selling, general & administrative expenses as a percent of net sales 48.2 % 49.4 % 49.8 % United States Operations Selling, general & administrative expenses $ 134.0 $ 79.0 $ 50.1 Selling, general & administrative expenses as a percent of net sales 39.1 % 36.5 % 43.1 % For European operations, selling, general and administrative expenses increased 9% and 55% in 2022 and 2021, respectively, as compared to the corresponding prior year period, and represented 48.2%, 49.4% and 49.8% of sales in 2022, 2021 and 2020, respectively as we were able to leverage our scale.
Selling, General & Administrative Expenses Years ended December 31, 2023 2022 2021 (in millions) European based operations Selling, general & administrative expenses $ 406.6 $ 358.3 $ 327.5 Selling, general & administrative expenses as a percent of net sales 47.2 % 48.2 % 49.4 % United States based operations Selling, general & administrative expenses $ 181.1 $ 134.0 $ 79.0 Selling, general & administrative expenses as a percent of net sales 39.7 % 39.1 % 36.5 % The Company’s selling, general and administrative expenses as a percentage of nets sales were 44.6%, 45.3% and 46.2% in 2023, 2022 and 2021, respectively.
These accounting policies generally require our management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management of the Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Board of Directors.
We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations. These accounting policies generally require our management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Other Income and Expenses In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered into a $53.3 million (€50 million) four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum.
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.
We have transitioned to a new modern enterprise resource planning system (ERP) for our US operations which will enable us to operate more efficiently and offer more scale to absorb our newer brands We have a solid line-up of new product launches in the pipeline for many of our brands.
We transitioned to a new modern enterprise resource planning system (“ERP”) for our United States based operations, which has enabled us to operate more efficiently and offer more scale to absorb our newer brands. Distribution of Roberto Cavalli and Lacoste products, our newly acquired licenses, have begun in the first quarter.
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 32%, 25% and 22% of net sales in 2022, 2021 and 2020, respectively.
Dupont and Van Cleef & Arpels , whose products are distributed in over 120 countries around the world. In addition, our exclusive and worldwide license for the production and distribution of Lacoste brand perfumes and cosmetics became effective in January 2024. Through our United States based operations, we also market fragrances and fragrance related products.
Approximately €80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. Discussion of Critical Accounting Policies We make estimates and assumptions in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America.
Discussion of Critical Accounting Policies We make estimates and assumptions in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions.
There were also significant gains made by our mid-sized brands, including Van Cleef & Arpels and Karl Lagerfeld. The year-over-year gains, in both euro and dollars, are all the more impressive considering our new product pipeline was dominated by flankers and extensions.
The year-over-year gains, in both euro and dollars, are all the more impressive considering our new product pipeline was dominated by flankers and extensions. The increase was also driven by the continued success of our established lines including Jimmy Choo I Want Choo , Montblanc Legend , Coach Woman , and Coach Man .
This includes the roll out of the Moncler Collection in the first quarter and a Duo flanker in the third quarter, a launch of GUESS Uomo Acqua in the second quarter, as well as Bella Vita Paradiso in the fourth quarter.
This includes the Phase 2 distribution roll-out of Abercrombie & Fitch Fierce in the first quarter , a roll out of the Donna Karan Cashmere Collection in the first quarter, a new DKNY blockbuster in the third quarter, a launch of a new GUESS fragrance in the second quarter, as well as an Uomo flanker in the third quarter.
Long-term debt including current maturities aggregated $186.8 million, $148.8 million and $24.7 million as of December 31, 2022, 2021 and 2020, respectively.
The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%. Long-term debt including current maturities aggregated $157.5 million, $180.0 million and $148.8 million as of December 31, 2023, 2022 and 2021, respectively.
As a result of the COVID-19 pandemic, we reached agreements with most of our licensors to waive or significantly reduce minimum guaranteed royalties for 2020. Service fees, which are fees paid within our European operations to third parties relating to the activities of our distribution subsidiaries, aggregated $7.9 million, $9.4 million and $6.8 million in 2022, 2021 and 2020, respectively.
Royalty expense represented 7.9%, 8.0% and 7.8% of net sales in 2023, 2022 and 2021, respectively, due to changes in brand mix. Service fees, which are fees paid within our European based operations to third parties relating to the activities of our distribution subsidiaries, aggregated $11.0 million, $7.9 million and $9.4 million in 2023, 2022 and 2021, respectively.
Lastly, we have recently announced the license agreement with Lacoste which will offer us another sizable building block of growth in 2024. As in the past, we hope to benefit from our strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee.
In sum, 2024 has all the earmarks of another strong year as the growth catalysts, such as the rebound of the travel retail business in Asia, currently far outweigh the headwinds, most notably supply chain disruptions that have largely abated. 52 As in the past, we hope to benefit from our strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee.
Net sales of our U.S. based distribution subsidiary increased 16% in 2022, as compared to 2021, leading to favorable mix and giving rise to the increase in gross margin in 2022 over both 2021 and 2020.
Net sales of our United States based distribution subsidiary increased 14% in 2023, as compared to 2022, leading to favorable mix and helping to further offset the gross margin decline. The decline was also driven by an increase in inventory reserves made during 2023 related to certain underperforming brands.
There were also significant gains made by our mid-sized brands, especially Abercrombie & Fitch, Hollister and Oscar de la Renta. Additionally, 2022 saw the first full year of sales of Ferragamo products and in the second half of 2022, we also welcomed first time sales of our newest brands, Donna Karan/DKNY.
We also had strong sales of Ferragamo fragrances, which we have enriched with sister scents for the Signorina and Storie di Seta collections. There were also gains made by our mid-sized brands, Oscar de la Renta Abercrombie & Fitch, and Hollister.
Additionally, the US based operations increased expenses related to salaries and benefits as we build the organization and infrastructure to support our new brands and future growth. 47 Promotion and advertising included in selling, general and administrative expenses aggregated $212.4 million, $171.1 million and $91.7 million in 2022, 2021 and 2020, respectively.
As discussed in more detail below, these fluctuations, which are in line with the fluctuations in sales for United States based operations, are primarily from variations in promotion and advertising expenditures. Additionally, the United States based operations increased expenses related to salaries and benefits as we build the organization and infrastructure to support our new brands and future growth.
Our effective income tax rate for European operations was 25.2%, 30.6% and 29.7% in 2022, 2021 and 2020, respectively, as the French Prime Minister reduced the French corporate income tax rate from approximately 33% to 25% over a three-year period. Our effective income tax rate for U.S. operations was 13.8%, 15.6% and 16.7% in 2022, 2021 and 2020, respectively.
The French Government voted the reduction of the French corporate income tax rate from approximately 33% to 25% over a three-year period resulting in the decrease in rate from 2021 to 2022.
Brand extensions and flankers are in the works for MCM, Abercrombie & Fitch, Hollister, Anna Sui, and Oscar de la Renta. In sum, 2023 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds, most notably inflation and supply chain disruptions.
Extensions of Jimmy Choo I Want Choo , Montblanc Legend , and Coach Dreams, are set to debut throughout the year. Brand extensions and flankers are also in the works for Ferragamo, MCM, Abercrombie & Fitch, Hollister, Anna Sui, Emanuel Ungaro, and Oscar de la Renta.
Together, these new brands contributed to 38% growth of our US operations. 45 We are confident in our future as 2023 has many exciting developments for the Company.
In the second half of the year, we successfully completed Phase 1 of the Abercrombie & Fitch Fierce distribution roll-out. We are confident in our future as 2024 has many exciting developments for the Company.
Latin America and the Middle East also achieved top line growth of 24% and 44% in 2022, respectively compared to 2021. Eastern Europe saw only moderate top line growth of 6% as compared to 2021 largely related to the war in Ukraine.
Middle East, Eastern Europe, and Central and South America also achieved top line growth of 22%, 39% and 33% in 2023, respectively, compared to 2022. Additionally, our travel retail business is continuing to show signs of renewed life.
Removed
Impact of COVID-19 Pandemic A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic. In response, various national, state, and local governments issued decrees prohibiting certain businesses from operating and certain classes of workers from reporting to work.
Added
This diversified portfolio of top brands represented 73%, 71% and 66% of total sales in 2023, 2022, and 2021, respectively.
Removed
Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020. Business significantly improved in the second half of 2020 and continued to improve throughout 2021 and 2022, as retail stores reopened, and consumers increased online purchasing.
Added
Impact of COVID-19 Pandemic Please see our discussion of the Impact of the COVID-19 Pandemic, which is incorporated by reference to Note 2 to the Consolidated Financial Statements contained in this 2023 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.
Removed
While we expect this trend to continue, the introduction of variants of COVID-19 in various parts of the world has caused the temporary re-implementation of governmental restrictions to prevent further spread of the virus. In addition, international air travel remains curtailed in several jurisdictions due to both governmental restrictions and consumer health concerns.
Added
Recent Important Events Please see our discussion of Recent Important Events, which is incorporated by reference to Note 3 to the Consolidated Financial Statements contained in this 2023 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.
Removed
While COVID-19 had significantly restricted international travel, the travel retail business has picked up. We remain confident that travel retail will once again be a source of growth over the long-term. Lastly, the improved economy has put significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases.
Added
Management of the Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Board of Directors.
Removed
These disruptions have come at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of 2021, by ordering well in advance of need and in larger quantities.
Added
At comparable foreign currency exchange rates, net sales increased 20% in 2023, as compared to 2022, of which 5% is related to new brands. The average dollar/euro exchange rate for 2023 was 1.08 compared to 1.05 in 2022.
Removed
Since 2021, we have strived to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We do not expect the supply chain bottlenecks to begin lifting until the second half of 2023.
Added
For European based operations, our largest brands, Jimmy Choo, Montblanc, and Coach grew 2023 sales by 19%, 15% and 25%, respectively, as compared to 2022. There were also significant gains made by our mid-sized brands, including Van Cleef & Arpels, Rochas, and Karl Lagerfeld.
Removed
Therefore, despite recent business improvement, the impact of the COVID-19 pandemic might continue to have adverse effects on our results of our operations, financial position and cash flows through at least the first half of 2023.
Added
Sales by our United States based operations grew substantially in 2023, up 33%, as compared to 2022, largely from the continued success of GUESS fragrances, which performed exceedingly well during the quarters across all geographies, and was up 23% in 2023 as compared to 2022. This was driven by the continued growth in sales of the Seductive line within GUESS.
Removed
Recent Important Events Lacoste In December 2022, we closed a transaction agreement with Lacoste, whereby an exclusive and worldwide license was granted for the production and distribution of Lacoste brand perfumes and cosmetics. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+5 added−1 removed2 unchanged
Biggest changeAs of December 31, 2022, we had foreign currency contracts in the form of forward exchange contracts with notional amounts of approximately U.S. $36.5 million which all have 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.
Biggest changeAny hedge ineffectiveness is recognized in the income statement. As of December 31, 2023, we had foreign currency contracts in the form of forward exchange contracts of approximately U.S. $61.0 million and GB £2.5 million with maturities of less than one year.
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. Item 8. Financial Statements and Supplementary Data The required financial statements commence on page F-1. Item 9.
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.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Item 8. Financial Statements and Supplementary Data The required financial statements commence on page F-1. 59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Removed
Foreign Exchange Risk Management A general discussion relating to our policies on foreign exchange risk management can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 2020.
Added
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.
Added
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, 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.
Added
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.
Added
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.
Added
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.

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