UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K


(Mark
one)





xANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
fiscal year ended December 31, 2008
or





 ̈TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
transition period from _______ to _______.





Commission
file no. 0-16469





Inter Parfums,
Inc.


(Exact
name of registrant as specified in its charter)


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





551 Fifth Avenue, New York, New
      York
                
                10176(Address
      of Principal Executive Offices)
                
                (Zip
      Code)





Registrant's
telephone number, including area code: 212.983.2640.





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





Title
      of each class
                            Name
      of exchange on which registeredCommon Stock, $.001 par value per
      share
                            The
      Nasdaq Stock
Market





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





None


Title of
Class





Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes  ̈  No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.


Yes  ̈  No x





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





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation SK is not contained herein and will not be contained, to the best of
the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10K or any other amendment to
this Form 10K.    ̈








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





Large
      accelerated Filer  ̈
              Accelerated
      filer xNon-accelerated
      filer  ̈
              Smaller
      Reporting Company ̈





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





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter. $111,495,452 of voting equity and $-0- of non-voting
equity.





Indicate
the number of shares outstanding of the registrant's $.001 par value common
stock as of the close of business on the latest practicable date March 6, 2009:
30,168,939.





Documents
Incorporated By Reference: None.


ii





Table
      of ContentsPageNote
      on Forward Looking StatementsPART
      IItem
      1.
                                                              Business
                                                              1Item
      1A.
                                                              Risk
      Factors
                                                              16Item
      1B.
                                                              Unresolved
      Staff Comments
                                                              23Item
      2.
                                                              Properties
                                                              24Item
      3.
                                                              Legal
      Proceedings
                                                              25Item
      4.
                                                              Submissions
      of Matters to a Vote of Security Holders
                                                              25PART
      IIItem
      5.
                                                              Market
      for Registrant’s Common Equity and Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                              26Item
      6.
                                                              Selected
      Financial Data
                                                              29Item
      7.
                                                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                              29Item
      7A.
                                                              Quantitative
      and Qualitative Disclosures About Market Risk
                                                              43Item
      8.
                                                              Financial
      Statements and Supplementary Data
                                                              44Item
      9.
                                                              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                                                              45Item
      9A.
                                                              Controls
      and Procedures
                                                              45Item
      9AT.
                                                              Controls
      and Procedures
                                                              47Item
      9B.
                                                              Other
      Information
                                                              47PART
      IIIItem
      10.
                                                              Directors,
      Executive Officers and Corporate Governance
                                                              48Item
      11.
                                                              Executive
      Compensation
                                                              53Item
      12.
                                                              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                              65Item
      13.
                                                              Certain
      Relationships and Related Transactions, and Director
      Independence
                                                              68Item
      14.
                                                              Principal
      Accountant Fees and Services
                                                              69PART
      IVItem
      15.
                                                              Exhibits
      and Financial Statement Schedules
                                                              72FINANCIAL
      STATEMENTS
                                                              F-1SIGNATURES




iii




FORWARD
LOOKING STATEMENTS





This
report includes forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, and if incorporated by reference into a
registration statement under the Securities Act of 1933, as amended, within the
meaning of Section 27A of such act. When used in this report, the words
“anticipate,” “believe,” “estimate,” “will,” “should,” “could,” “may,” “intend,”
“expect,” “plan,” “predict,” “potential,” or “continue” or similar expressions
identify certain forward-looking statements. Although we believe that our plans,
intentions and expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved.





Actual
results, performance or achievements could differ materially from those
contemplated, expressed or implied by the forward-looking statements contained
in this report. Important factors that could cause actual results to differ
materially from our forward-looking statements are set forth in this report,
including under the heading “Risk Factors”. Such factors include: potential
reduction in sales of our fragrance and fragrance related products due to
reduced consumer confidence as the result of a prolonged economic downturn or
recession in the United States, Europe or any of the other countries in which we
do significant business; uncertainties and continued deterioration in global
credit markets could negatively impact suppliers, customers and consumers;
dependence upon Burberry for a significant portion of our sales; continuation
and renewal of existing license agreements, sales and marketing efforts of
specialty market retailers, such as The Gap, Inc.; protection of our
intellectual property rights; effectiveness of our sales and marketing efforts
and product acceptance by consumers; dependence upon third party manufacturers
and distributors; dependence upon management; competition; currency fluctuation
and international tariff and trade barriers; governmental regulation; and
possible liability for improper comparative advertising or “Trade
Dress”.





These
factors are not intended to represent a complete list of the general or specific
factors that may affect us. It should be recognized that other factors,
including general economic factors and business strategies, may be significant,
presently or in the future, and the factors set forth herein may affect us to a
greater extent than indicated. All forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements set forth in this report. Except as required by law, we
undertake no obligation to update any forward-looking statement, whether as a
result of new information, future events or otherwise.


iv


PART
I





Item
1.  Business





Introduction





We are
Inter Parfums, Inc. We operate in the fragrance business, and manufacture,
market and distribute a wide array of fragrances and fragrance related products.
Organized under the laws of the State of Delaware in May 1985 as Jean Philippe
Fragrances, Inc., we changed our name to Inter Parfums, Inc. in July 1999. We
have also retained our brand name, Jean Philippe Fragrances, for some of our
mass-market products.





Our
worldwide headquarters and the office of our three (3) wholly-owned
subsidiaries, Jean Philippe Fragrances, LLC and Inter Parfums USA, LLC, both New
York limited liability companies, and Nickel USA, Inc., a Delaware corporation,
are located at 551 Fifth Avenue, New York, New York 10176, and our telephone
number is 212.983.2640.





Our
consolidated wholly-owned subsidiary, Inter Parfums Holdings, S.A., and its
majority-owned subsidiary, Inter Parfums, S.A., maintain executive offices at 4,
Rond Point des Champs Elysees, 75008 Paris, France. Our telephone number in
Paris is 331.5377.0000. Inter Parfums S.A. is also the majority owner of four
(4) distribution subsidiaries, Inter Parfums Limited, Inter Parfums Gmbh, Inter
Parfums srl and Inter España Parfums et Cosmetiques, SL, covering
territories in The United Kingdom, Germany, Italy and Spain, respectively.
Inter Parfums, S.A. also has a 100% owned subsidiary, Inter Parfums (Suisse)
S.A.





Our
common stock is listed on The Nasdaq Global Select Market under the trading
symbol “IPAR” and we are considered a “controlled company” under the applicable
rules of The Nasdaq Stock Market. The common shares of our subsidiary, Inter
Parfums S.A., are traded on the Euronext Exchange.





We
maintain our internet website at www.interparfumsinc.com which is linked to the
SEC Edgar database. You can obtain through our website, free of charge, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange as soon as reasonably practicable after we have
electronically filed with or furnished them to the SEC.





Summary





The
following summary 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.





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. Our
prestige fragrance products are produced and marketed by our European operations
through our 75% owned subsidiary in Paris, Inter Parfums, S.A., which is also a
publicly traded company as 25% of Inter Parfums, S.A. shares trade on the
Euronext. Prestige cosmetics and prestige skin care products represent less than
3% of consolidated net sales.





1




We
produce and distribute our prestige fragrance products primarily under license
agreements with brand owners, and prestige product sales represented
approximately 87% of net sales for 2008.  We have built a portfolio of
prestige brands, which include Burberry, Lanvin, Van Cleef & Arpels, Paul
Smith, S.T. Dupont, Quiksilver/Roxy, Christian Lacroix and Nickel whose products
are distributed in over 120 countries around the world. During the first half of
2007 we began operations of our four newly established majority-owned European
distribution subsidiaries. Shipments to these subsidiaries are not recognized as
sales until that merchandise is sold by the distribution subsidiary to its
customers.





Burberry
is our most significant license, as sales of Burberry products represented 56%,
54% and 57% of net sales for the years ended December 31, 2008, 2007 and
2006, respectively. In addition, we own the Lanvin brand name for our class of
business and sales of Lanvin product represented 13%, 12% and 13% of net sales
for the years ended December 31, 2008, 2007 and 2006, respectively.





Our
prestige products focus on niche brands with a devoted following.  By
concentrating in markets where the brands are best known, we have had many
successful launches. We typically launch new fragrance families for our brands
every year or two, with some frequent “seasonal” fragrances introduced as
well.





Our
specialty retail and mass-market fragrance and fragrance related products are
marketed through our United States operations and represented 13% of sales for
the year ended December 31, 2008. These fragrance products are sold under
trademarks owned by us or pursuant to license or other agreements with the
owners of the Gap,
Banana Republic, New York
& Company, Brooks Brothers, bebeandJordache
trademarks.





The
creation and marketing of each product family is intimately linked with the
brand’s name, its past and present positioning, customer base and, more
generally, the prevailing market atmosphere. Accordingly, we generally study the
market for each proposed family of fragrance products for almost a full year
before we introduce any new product into the market. This study is intended to
define the general position of the fragrance family and more particularly its
scent, bottle, packaging and appeal to the buyer. In our opinion, the unity of
these four elements of the marketing mix makes for a successful
product.





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





2


As with
any business, many aspects of our operations are subject to influences outside
our control. These factors include the effect of the current financial crisis
and therefore the potential for further deterioration in consumer spending and
consumer debt levels as well as the continued availability of favorable credit
sources and capital market conditions in general. 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, 2008, and the reports that
we file from time to time with the Securities and Exchange
Commission.




2008
Developments





International
Distribution of Gap


and
Banana Republic Personal Care Products





In April 2008 we expanded our
relationship with Gap Inc. with the signing of a four-year licensing agreement
for international distribution of personal care products through Gap and Banana
Republic stores as well as select specialty and department stores outside the
United States, including duty-free and other travel-related retailers. The
agreement is effective as of July 1, 2007 and expires December 31,
2011.





Exclusive
Worldwide Agreement with bebe Stores, Inc.




In July
2008 we entered into an exclusive six year worldwide agreement with bebe Stores,
Inc. (NASDAQ: BEBE) of Brisbane, CA, under which we design, manufacture and
supply fragrance, bath and body products and color cosmetics for company-owned
bebe stores in the United States and Canada as well as select specialty and
department stores worldwide.





Paul
Smith License Extended





In July
2008 we extended our license for the Paul Smith brand for an additional seven
years through December 31, 2017 on comparable terms and conditions.





Our
Prestige Products





We
produce and distribute our prestige fragrance products primarily under license
agreements with brand owners, which represented approximately 87% of net sales
for 2008.  We have built a portfolio of brands, which include
Burberry, Lanvin, Van Cleef & Arpels, Paul Smith, S.T. Dupont,
Quiksilver/Roxy, Christian Lacroix and Nickel, whose products are distributed in
over 120 countries around the world. During the first half of 2007 we began
operations of our four newly established majority-owned European distribution
subsidiaries. Shipments to these subsidiaries are not recognized as sales until
that merchandise is sold by the distribution subsidiary to its
customers.





Burberry
is our most significant license, as sales of Burberry products represented 56%,
54% and 57% of net sales for the years ended December 31, 2008, 2007 and
2006, respectively. In addition, we own the Lanvin brand name for our class of
business and sales of Lanvin product represented 13%, 12% and 13% of net sales
for the years ended December 31, 2008, 2007 and 2006, respectively.




3




Under
license agreements, we obtain the right to use the brand name, create new
fragrances and packaging, determine positioning and distribution, and market and
sell the licensed products, in exchange for the payment of royalties. Our rights
under license agreements are also generally subject to certain minimum sales
requirements and advertising expenditures.





The
following is a summary of the prestige brand names owned or licensed by
us:





Brand Name
                                
                                Licensed
                                  Or Owned
                                
                                Date
                                  Acquired
                                
                                TermBurberry
                                
                                Licensed
                                
                                July
      2004
                                
                                12.5
      years and additional 5-year optional term that requires mutual
      consent.Lanvin
                                
                                Owned
                                
                                July
      2007
                                
                                N/A.
      Prior owner has the right to repurchase the brand names and trademarks in
      2025 according to a formula.Van
      Cleef & Arpels
                                
                                Licensed
                                
                                Sept.
      2006
                                
                                Through
      December 31, 2018, plus a 5-year option if certain sales targets are
      metPaul
      Smith
                                
                                Licensed
                                
                                Dec.
      1998
                                
                                Through
      December 31, 2017S.T.
      Dupont
                                
                                Licensed
                                
                                July
      1997
                                
                                Through
      June 30, 2011.Quiksilver/Roxy
                                
                                Licensed
                                
                                March
      2006
                                
                                Through
      December 31, 2017Christian
      Lacroix
                                
                                Licensed
                                
                                March
      1999
                                
                                11
      yearsNickel
                                
                                Owned
                                
                                April
      2004
                                
                                N/A





Prestige
Fragrances





BURBERRY — Burberry is our
leading prestige fragrance brand and we operate under an exclusive worldwide
license with Burberry Limited that was originally entered into in 1993 and
replaced by a new agreement in 2004.





We have
had significant success in introducing new fragrance families under the Burberry
brand name. We have introduced several fragrance families including Burberry, Burberry Week End, Burberry Touch, Burberry Brit, Burberry London and Burberry The
Beat. Successful distribution has been achieved in more than a hundred
countries around the world by differentiating the positioning and target
consumer of each of the families. Our success is evidenced by a 19% five-year
compounded annual growth rate in sales of fragrances under the Burberry brand
since 2003.





The most
recent Burberry fragrance family, Burberry The Beat, is the sixth
fragrance family for Burberry fragrances. In March 2008 we commenced the
successful world-wide launch of the women’s fragrance, Burberry The Beat, by capitalizing on
the commercial and editorial success of Burberry’s high-end fashion collections
and continuing to create a strong link to the Burberry fashion brand. Burberry The Beat was a concept that was clearly
distinct from other Burberry fragrance lines. We targeted a younger segment with
a mix of British tradition and an avant-garde positioning with the purpose of
expanding our customer base by targeting an edgier consumer. Further,
music was a major source of inspiration for the concept of this new women’s
fragrance.





4


For 2008
Burberry brand sales were strong due to the continued rollout of Burberry The Beat,as well as
the growth and staying power of Burberry Brit, which launched in 2003.
Our 2009 new product launch schedule includes the men’s version of Burberry The Beat, which has
recently previewed exclusively at Bloomingdale’s. In addition, the global
rollout of men’s version of Burberry The Beat will follow
during the first half of 2009.





LANVIN— In July 2007 we
acquired the worldwide rights to the Lanvin brand names and international
trademarks listed in Class 3 that we had licensed in June 2004. A synonym of
luxury and elegance, the Lanvin fashion house, founded in 1889 by Jeanne Lanvin,
expanded into fragrances in the 1920s. Today, Lanvin fragrances occupy important
positions in the selective distribution market in France, Europe and Asia,
particularly with the lines Arpège (created in 1927),
Lanvin L’Homme (1997)
and Eclat d’Arpège
(2002). Our first Lanvin fragrance, Arpège pour Homme, debuted in
late 2005. Arpège by
Lanvin won the honor of entering the Fragrance Hall of Fame at the 2005 FiFi
Awards, an honor given to the best fragrance sold for at least 15 years that has
been revitalized.





During
2006, we began the launch ofRumeur, our first new Lanvin fragrance for women, which was followed by a
wider geographic rollout over the early months of 2007. In addition to the debut
of Lanvin Rumeur, solid
sales gains were achieved by Éclat d’Arpège which has been
a strong seller since its introduction in 2002.  During the summer of
2008, we previewed a new Lanvin fragrance family,Jeanne Lanvin,in Paris, and
launched the global rollouts of Jeanne Lanvin and Rumeur 2 Roseduring the Fall of 2008. In addition, we have announced that we will be
unveiling during the Summer of 2009 of a new Lanvin fragrance, Lanvin L’Homme Sport, with
tennis sensation, Rafael Nadal, the Wimbledon, French Open and 2008 Olympic gold
medal winner, as our model and spokesperson.





VAN CLEEF & ARPELS—In September 2006 we
entered into an exclusive, worldwide license agreement for the creation,
development and distribution of fragrance and related bath and body products
under the Van Cleef & Arpels brand and related trademarks. The term of the
license expires on December 31, 2018. We believe this agreement with Van Cleef
& Arpels, the prestigious and legendary world-renowned jewelry designer, was
an important step in our development. We also believe its growth potential will
strengthen opportunities for expansion of our fragrance business in the high
luxury segment.





In 1976,
Van Cleef & Arpels was a pioneer among jewelers with its launch of the
fragrance, First, which
exemplified the tradition of boldness of the jewelry house.  We have built
upon this sales base by promoting the two strongest families, First and Tsar, and then creating an
entirely new line, Féerie, which we
launched in Fall 2008. We believe this new women’s fragrance is one of the
highest retail price cologne in the market, as the 100ml. size fragrance has a
suggested retail price of approximately $150. A high end limited edition
fragrance for Van Cleef & Arpels is planned for late 2009.





PAUL SMITH— We signed an
exclusive license agreement with Paul Smith in December 1998, our first designer
fragrance, for the creation, manufacture and worldwide distribution of Paul
Smith perfumes and cosmetics. In July 2008 we extended this license for the Paul
Smith brand for an additional seven years through December 31, 2017 on
comparable terms and conditions.





5


Paul
Smith is an internationally renowned British designer who creates fashion with a
clear identity. Paul Smith has a modern style which combines elegance,
inventiveness and a sense of humor and enjoys a loyal following, especially in
the UK and Japan. Fragrances include: Paul Smith, Paul Smith Extrêmeand Paul Smith
London.  In the fourth quarter of 2006 we launched the men’s
fragrance, Paul Smith
Story, and in the Fall of 2007, we launchedPaul Smith Rose, a new
women’s fragrance for Paul Smith. Our 2009 new product launch schedule for
European-based operations includes a new Paul Smith fragrance for
men.





S.T. DUPONT— In June 1997, we
signed an exclusive license agreement with S.T. Dupont which we extended in 2006
until June 30, 2011, for the creation, manufacture and worldwide distribution of
S.T. Dupont perfumes. Fragrances include: S.T. Dupont Paris, S.T. Dupont Essence Pure and
L’Eau de S.T. Dupont.
In addition, during 2006 we launched the new men’s fragrance, S.T. Dupont Noir, which was
received well in Eastern Europe and the Middle East. During 2007 we launched
S.T. Dupont Blanc, a
new women’s fragrance for S.T. Dupont. Finally, we launched S.T. Dupont Passenger, a new scent for
men and women, during the third quarter of 2008.





QUIKSILVER/ROXY—In March 2006 we
signed an exclusive worldwide license agreement for the creation, development
and distribution of fragrance, suncare, skincare and related products under the
Roxy brand and suncare and related products under the Quiksilver brand. The term
of the license expires in December 2017.





We have
developed entirely new product categories for each of the two brands, which are
important brands for the global youth market and synonymous with the heritage
and culture of surfing, skateboarding and snowboarding. Quiksilver Inc.’s
apparel and footwear brands represent a casual lifestyle for young-minded people
that connect with its board riding culture and heritage.





In late
2007 we launched Roxy,the first fragrance line for women, and in 2008 we launched Roxy Love,another women's
fragrance. Also during 2008, we brought to market the Quiksilver suncare line,
Sun Energy. For 2009,
we plan to launch the Quiksilver signature fragrance for men.





CHRISTIAN LACROIX— In March
1999, we entered into an exclusive license agreement with the Christian Lacroix
Company for the worldwide development, manufacture and distribution of perfumes.
Our Christian Lacroix fragrances families for both men and women include: Eau Florale,Bazar, Tumulte and C'est la fête.





Prestige
Skin Care





NICKEL—  In April
2004 Inter Parfums, S.A. acquired a 67.6% interest in Nickel S.A., and in June
2007, the minority shareholders of Nickel S.A., exercised their rights to sell
their remaining 32.4% interest in Nickel S.A. to us for approximately $4.7
million in cash.




6


Established
in 1996, Nickel has developed two innovative concepts in the world of cosmetics:
spas exclusively for male customers and skin care products for men. The Nickel
skin care products for the face and body are sold through prestige department
and specialty stores primarily in France, the balance of Western Europe and in
the United States, as well as through our men’s spas in Paris and New York and
our licensed spas in San Francisco and London.





As the
result of disappointing sales of the Eau Maximumfragrance line, we
discontinued that line which contributed to the downturn in sales for this brand
in 2007. In 2008, we focused more on skin care products and launched several new
skin care products under the brand name, Silicon Valley,in order to
grow Nickel sales. However, sales to date have still not met our expectations.
We intend to continue to develop new and innovative skincare products under the
Nickel brand in an attempt to grow sales.





Specialty
Retail and Mass Market Products





Specialty
retail has become an increasingly important part of our overall business, and we
are continuing to expand the global distribution of the specialty retail brands
with which we have partnered. In addition, we have been approached by other
specialty retailers to determine if there is interest in establishing a
relationship whereby we would design, produce and manufacture fragrance and
fragrance related products similar to our existing relationships with specialty
retailers. However, we cannot assure you that we will be able to enter into any
similar future arrangements, or if we do, that any such arrangement would be on
terms favorable to us or would be successful.





Gap and Banana
Republic





In July 2005, we entered into an
exclusive agreement with The Gap, Inc. to develop, produce, manufacture and
distribute fragrance, personal care and home fragrance products for Gap and
Banana Republic brand names to be sold in Gap and Banana Republic retail stores
in the United States and Canada. In March 2006, the agreement was amended to
include fragrance, personal care and home fragrance products for Gap Outlet and
Banana Republic Factory Stores in the United States and Canada.





In September 2006, we launched the
Banana Republic Discover Collection, a family of five fragrances, we developed
and supply to Banana Republic’s North American stores. The collection consists
of three scents for women and two for men, each named after a luxurious, natural
material that is both emotional and authentic.





During 2007, we had a staged rollout of
new products to additional Gap stores, as well as new product launches for both
Banana Republic and Gap stores.  For Banana Republic, two new
fragrances were added to the Discover Collection, and companion products such as
body wash, body cream and shower gel were also introduced.





In addition, beginning in the third
quarter 2007, a higher end collection of fragrances for men and women as well as
a men’s fragrance and grooming collection, began being rolled-out to Gap’s North
American stores.




7


In April 2008 we expanded our current
relationship with Gap Inc. to include a licensing agreement for international
distribution of personal care products through Gap and Banana Republic stores as
well as select specialty and department stores outside the United States,
including duty-free and other travel related retailers.  The agreement
is effective as of July 1, 2007 and expires December 31, 2011.





We entered into this license agreement
to capitalize on cross-border brand awareness of Gap’s iconic American style and
Banana Republic’s affordable luxury, which we have interpreted into a
brand-specific assortment of fragrance, home fragrance, bath and body, and
grooming products. In addition, our long-established relationships with
distributors in over one hundred countries, and our current infrastructure
enabled us to rollout Gap and Banana Republic products to select department
stores, perfumeries, travel retailers, military bases and other appropriate
retail outlets around the world.





In the
spring of 2009, Close, a new Gap fragrance will be launched at approximately 550
Gap stores and roughly 175 Gap Body stores nationwide, followed by international
distribution expected to reach 5,000 doors in the second half of 2009. In August
2009, new fragrances for men and women will be launched at Banana Republic
stores in North America with international distribution following shortly
thereafter.





Brooks
Brothers





In November 2007, we entered into an
exclusive agreement with Retail Brand Alliance, Inc. covering the design,
manufacture and supply of personal care products for men and women to be sold at
Brooks Brothers locations in the United States as well as a licensing agreement
covering Brooks Brothers stores and specialty and department stores outside the
United States and duty free and other travel-related retailers.  In
addition to new product development, we have assumed responsibility for the
production and supply of existing Brooks Brothers fragrance and related personal
care products. In the United States, we are responsible for product development,
formula creation, packaging design and manufacturing while Brooks Brothers is
responsible for marketing, advertising and in-store sales.





The initial term of the agreement expires on December 31, 2013.  We have
the right to extend the term of the agreement for five (5) years, until December
31, 2018, subject to certain minimum sales and other requirements. Further, if
our agreement has been extended, then both parties have agreed to negotiate in
good faith the terms of a second five (5) year optional extension term not less
than six (6) months prior to December 31, 2018.





In November 2008, we shipped Brooks
Brothers New York for
men and women to Brooks Brothers U.S. stores, and international distribution,
including duty free and other travel-related retailers, is scheduled for
2009.





8


New
York & Company





In April 2007 we signed an exclusive
agreement with New York & Company, Inc. under which we design and
manufacture a personal care products sold at the New York & Company retail
locations and on their website. Pursuant to the agreement, we are responsible
for product development, formula creation, packaging and manufacturing while New
York & Company is responsible for marketing and selling in its
stores.





New York & Company has achieved by
building its brand and loyal customer base around clothing and accessories that
are ‘trendy, affordable, comfortable and sexy for real women and with real
lives’. The bath and body products that we developed are designed for the target
New York & Company customer, the fashion-conscious, value-sensitive women
between the ages of 25 and 45. In November 2007 we launched the initial bath and
body collections and holiday gift sets that were developed for New York &
Company’s more than 560 stores.





bebe





In July 2008 we entered into an
exclusive six year worldwide agreement with bebe Stores, Inc., under which we
design, manufacture and supply fragrance, bath and body products and color
cosmetics for company-owned bebe stores in the United States and Canada, as well
as select specialty and department stores worldwide. We intend to incorporate
bebe’s signature look into fragrance and cosmetics for the brand’s strong, hip,
sexy, and sophisticated clientele.





The color
cosmetics we developed and produced for bebe stores are now in their U.S. stores
and, the launch of our signature bebe fragrance will be unveiled at in bebe
Stores in the U.S. in August followed by worldwide distribution in the third
quarter of 2009.





Mass
Market





Our mass market products are comprised
of fragrances and fragrance related products. We produce a variety of
alternative designer fragrances and personal care products that sell at a
substantial discount from their brand name counterparts. Our alternative
designer fragrances are similar in scent to highly advertised designer
fragrances that are marketed at a higher retail price. Our mass market fragrance
brands include several proprietary brand names as well as a license for the
Jordache brand. We also market our Aziza line of low priced eye shadow kits,
mascara, and pencils, focusing on the young teen market and a line of health and
beauty aids under our Intimate and Johnson Parker brands, including shampoo,
conditioner, hand lotion and baby oil. All of these products are distributed to
the same mass market retailers and discount chains.





Business
Strategy





Focus on prestige beauty
brands.  Prestige beauty brands contribute significantly to our
growth. Over the past few years, prestige brands have accounted for a larger
portion of our business — 87% of total business in 2008 up from 76% in 2003. We
focus on developing and launching quality fragrances utilizing internationally
renowned brand names. 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. Certain fashion designers and other licensors choose
Inter Parfums as a partner because our company’s size enables us to work more
closely with them in the product development process as well as because of our
successful track record.




9




Grow portfolio brands through new
product development and marketing.  We grow through the
creation of fragrance family extensions within the existing brands in our
portfolio. Every year or two we create a new family of fragrances for each brand
in our portfolio. We frequently introduce “seasonal” fragrances as well. 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 flanker brands) within our brand
franchises.  Furthermore, we promote the smooth and consistent
performance of our prestige perfume operations through knowledge of the market,
detailed analysis of the image and potential of each brand name, a “good dose”
of creativity and a highly professional approach to international distribution
channels.





Continue to add new brands to our
portfolio, through new licenses or acquisitions.  Prestige
brands are the core of our business — we intend to add new prestige beauty
brands to our portfolio. Over the past decade, we have built our portfolio of
well-known prestige brands through acquisitions and new license agreements. We
intend to further build on our success in prestige fragrances and pursue new
licenses and acquire new brands to strengthen our position in the prestige
beauty market. We identify prestige brands that can be developed and marketed
into a full and varied product families and, with our technical knowledge and
practical experience gained over time, take licensed brand names through all
phases of concept development, manufacturing, and marketing.





Expand existing portfolio into new
categories.  We plan to broaden our product offering beyond the
fragrance category and offer other personal care products such as skin care,
cosmetics and hair care under some of our existing brands. We believe such
product offerings meet customer needs and further strengthen customer
loyalty.  We also plan to draw upon the skin care product expertise
that the Nickel team brings, as we explore other opportunities in the treatment
side of the beauty business beyond the Nickel brand.





Continue to build global distribution
footprint.  Our business is a global business and we intend to
continue to build our global distribution footprint. In order to adapt to
changes in the environment and our business, we have modified our distribution
model and have formed joint ventures in the major markets of the United Kingdom,
Italy, Spain and Germany for distribution of prestige
fragrances.  Further, we may enter into future joint ventures
arrangements or acquire distribution companies within other key markets to
distribute certain of our licensed prestige brands. However, we cannot assure
you that we will be able to enter into any future joint venture arrangements or
acquire distribution companies, or if we do, that any such transaction will be
successful. We believe that in certain markets vertical integration of our
distribution network is key to the future growth of our company, and ownership
of such distribution should enable us to better serve our customers’ needs in
local markets and adapt more quickly as situations may determine.





Build specialty retail
business.  We believe the beauty industry has experienced a
significant growth in specialty retail, and we now have agreements in place for
with Gap and Banana Republic brands, New York & Company brand, Brooks
Brothers brand and bebe brand. We are responsible for product development,
formula creation, packaging and manufacturing under all of those brands. Gap, a
leading international specialty retailer offering clothing, accessories and
personal care products for men, women, children and babies, New York &
Company, Retail Brand Alliance (for Brooks Brothers) and bebe Stores, Inc. are
each responsible for marketing and selling the newly launched fragrance and
fragrance related products in their stores.





10


In
addition, we have been approached by other specialty retailers to determine if
there is interest in establishing a relationship whereby we would design,
produce and manufacture fragrance and fragrance related products similar to our
existing relationships with specialty retailers. However, we cannot assure you
that we will be able to enter into any similar future arrangements, or if we do,
that any such arrangement will be successful.





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
      our suppliers;





·
            Schedule
      production and packaging;





·
            Issue
      component purchase orders;





·
            Follow
      quality control procedures for incoming components;
  and





·
            Follow
      packaging and inventory control
procedures.





Suppliers
who assist us with product development include:





·
            Independent
      perfumery design companies (Federico Restrepo, Fabien Baron, Aesthete,
      Ateliers Dinand);





·
            Perfumers
      (IFF, Firmenich, Robertet, Givaudan, Wessel Fragrances) which create a
      fragrance consistent with our expectations and, that of the fragrance
      designers and creators;




11




·
            Contract
      manufacturers of components such as glassware (Saint Gobain, Saverglass,
      Pochet, Nouvelles Verreries de Momignie), caps (MT Packaging, Codiplas,
      Risdon, Newburgh) or boxes (Printor Packaging, Draeger, Dannex
      Manufacturing);





·
            Production
      specialists who carry out packaging (MF Production, Brand, CCI, IKI
      Manufacturing) or logistics (SAGA for storage, order preparation and
      shipment).





For our
prestige products, approximately 80% of component and production needs are
purchased from approximately 50 suppliers out of a total of over 160 active
suppliers. The suppliers' accounts for our European operations are primarily
settled in Euros and for our United States operations, suppliers' accounts are
primarily settled in U.S. dollars.





Marketing
and Distribution





Prestige Products





For the
majority of our international distribution of prestige products, we contract
with independent distribution companies specializing in luxury goods. In each
country, we designate anywhere from one to three distributors with the status of
“exclusive representative” for one or more of our name brands. We also
distribute our prestige products through a variety of duty-free operators, such
as airports and airlines and select vacation destinations.





As our business is a global business and we
intend to continue to build our global distribution footprint. In order to adapt
to changes in the environment and our business, we have modified our
distribution model, and have formed majority owned distribution subsidiaries in
the major markets of the United Kingdom, Italy, Spain and Germany for
distribution of prestige fragrances. Further, we may enter into future joint
ventures arrangements or acquire distribution companies within other key markets
to distribute certain of our licensed prestige brands. However, we cannot assure
you that we will be able to enter into any future joint venture arrangements or
acquire distribution companies, or if we do, that any such transaction will be
successful. We believe that in certain markets vertical integration of our
distribution network is key to the future growth of our company, and ownership
of such distribution should enable us to better serve our customers’ needs in
local markets and adapt more quickly as situations may
determine.




Our third
party distributors vary in size depending on the number of competing brands they
represent. This extensive and diverse network together with our own distribution
subsidiaries provides us with a significant presence in over 120 countries
around the world. Sales to one distributor represented 12%, 13% and 15% of
consolidated net sales in 2008, 2007 and 2006, respectively.




Approximately
34% of our prestige fragrance net sales are denominated in U.S. dollars. In an
effort to reduce our exposure to foreign currency exchange fluctuations, we
engage in a program of cautious hedging of foreign currencies to minimize the
risk arising from operations.





12


The
business or our European operations has become increasingly seasonal due to the
timing of shipments by our majority-owned distribution subsidiaries to their
customers, which are weighted to the second half of the year.





Distribution
in France of our prestige products is carried out by a sales team who oversee
some 1,200 points of sale including, retail perfumers (chain stores) such
as





·          Sephora


·          Marionnaud


·          Nocibé


·          Galeries
Lafayette


·          Printemps





or
specialized independent points of sale. Approximately 90% of prestige product
sales in France are made to approximately 20 customers out of a total of over
1,200 active accounts.





Specialty Retail and Mass Market
Products





We do not presently market and
distribute Gap, Banana Republic, New York & Company or Brooks Brothers
specialty retail products to third parties in the United States. Marketing and
distribution for such brands are the responsibility of the brand owners which
market and sell the products we produce in their own retail locations. However,
with respect to our license agreement with bebe Stores, Inc., we distribute or
plan to distribute product to their stores, and distribute or plan to distribute
product as well as to other retailer outlets and department stores within the
United States.





In
addition, the business of our United States operations has become increasingly
seasonal as shipments to our specialty retail customers are weighted toward the
second half of the year.





Further, with respect to Gap, Banana
Republic, Brooks Brothers and bebe brands, we distribute or plan to distribute
product to specialty retailers and department stores outside the United States
including duty free and other travel-related retailers. We utilize our in house
sales team to reach our distributors and customers outside the United
States.





Mass merchandisers are the target
customers for our mass market products. In addition, our mass market products
are sold to wholesale distributors, specialty store chains, and to multiple
locations of accessory, jewelry and clothing outlets. These products are sold
through a highly efficient and dedicated in-house sales team and reach
approximately 12,000 retail outlets throughout the United States and
abroad.





Our 140,000 square foot distribution
center has provided us with the opportunity and resources to meet our customers'
requirements.





13





Geographic Areas





Export sales from United States
operations were approximately $22.5, $9.5 million and $7.2 million in 2008, 2007
and 2006, respectively.




Consolidated net sales to customers by
region is as follows (in thousands):




Year Ended December 312008
                        
                        
                        2007
                        
                        
                        2006North
      America
                        
                        $
                        108,600
                        
                        
                        $
                        115,400
                        
                        
                        $
                        107,400Europe
                        
                        
                        204,100
                        
                        
                        
                        173,200
                        
                        
                        
                        128,300Central
      and South America
                        
                        
                        38,000
                        
                        
                        
                        28,200
                        
                        
                        
                        24,500Middle
      East
                        
                        
                        39,200
                        
                        
                        
                        26,100
                        
                        
                        
                        21,900Asia
                        
                        
                        53,000
                        
                        
                        
                        43,900
                        
                        
                        
                        37,700Other
                        
                        
                        3,200
                        
                        
                        
                        2,800
                        
                        
                        
                        1,300$
                        446,100
                        
                        
                        $
                        389,600
                        
                        
                        $
                        321,100





Consolidated net sales to customers in
major countries is as follows(in
thousands):





Year Ended December 312008
                      
                      
                      2007
                      
                      
                      2006United
      States
                      
                      $
                      101,000
                      
                      
                      $
                      113,000
                      
                      
                      $
                      104,000United
      Kingdom
                      
                      
                      25,000
                      
                      
                      
                      28,000
                      
                      
                      
                      28,000France
                      
                      
                      38,000
                      
                      
                      
                      30,000
                      
                      
                      
                      21,000





Competition





The
market for fragrances and fragrance related products is highly competitive and
sensitive to changing preferences and demands. The prestige fragrance industry
is highly concentrated around certain major players with resources far greater
than ours. We compete with an original strategy— regular and methodical
development of quality fragrances for a growing portfolio of internationally
renowned brand names.





In the
specialty retail market, we are primarily sell products directly to Gap and
Banana Republic stores, New York & Company stores, Brooks Brother stores and
bebe stores, so we do not have any direct competition. However, such special
retail stores compete directly with other specialty retail stores such as
Abercrombie & Fitch and Victoria Secret, which thereby indirectly compete
with us.





We
compete in the mass market for fragrances, color cosmetics health and beauty
aids primarily on the basis of price. At the present time, we are aware of
approximately four established companies which market alternative designer
fragrances similar to ours. Many of our competitors of both mass market color
cosmetics (such as L’Oreal and Revlon) and health and beauty aids (such as
Proctor and Gamble) have substantial financial resources as well as national and
international marketing campaigns. However, we believe that consumer recognition
of our two brands, Aziza for mass market color cosmetics, and Intimate for
health and beauty aids, together with competitive pricing of our products, helps
us compete in those markets.




14




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 generally deliver product to
customers within 72 hours of the receipt of their orders.





Product
Liability





We
maintain product liability coverage in an amount of $5,000,000. 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. We have never been the
subject of any material product liability claims.





Government
Regulation





A
fragrance is defined as a “cosmetic” under the Federal Food, Drug and Cosmetics
Act.  A fragrance must comply with the labeling requirements of this
FDC Act as well as the Fair Packaging and Labeling Act and its regulations. Some
of our color cosmetic products may contain menthol and are also classified as a
“drug”. Under U.S. law, a product may be classified as both a cosmetic and a
drug. Additional regulatory requirements for products which are “drugs” include
additional labeling requirements, registration of the manufacturer and the
semi-annual update of a drug list.





Our
fragrances are subject to the approval of the Bureau of Alcohol, Tobacco and
Firearms as a result of the use of specially denatured alcohol.  So
far we have not experienced any difficulties in obtaining the required
approvals.





Our
fragrances that are manufactured in France are subject to certain regulatory
requirements of the European Union, but as of the date of this report, we have
not experienced any material difficulties in complying with such
requirements.




Trademarks





The
market for our products depends to a significant extent upon the value
associated with our trademarks and brand names. We own, or have licenses or
other rights to use, the material trademark and brand name rights used in
connection with the packaging, marketing and distribution of our major products
both in the United States and in other countries where such products are
principally sold. Therefore, trademark and brand name protection is important to
our business.  Although most of our brand names are registered in the
United States and in certain foreign countries in which we operate, we may not
be successful in asserting trademark or brand name protection. 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.





15


Under
various license and other agreements we have the right to use certain registered
trademarks throughout the world (except as otherwise noted).  These
registered trademarks include:





·
            Burberry


·
            Van
      Cleef & Arpels


·
            Gap


·
            Banana
      Republic


·
            New
      York & Company (U.S. only)


·
            Brooks
      Brothers


·
            bebe


·
            S.T.
      Dupont


·
            Paul
      Smith


·
            Christian
      Lacroix


·
            Quiksilver
      and Roxy


·
            Jordache





In
addition, we are the registered trademark owner of many trademarks,
including:





·
            Lanvin


·
            Intimate


·
            Aziza


·
            Nickel


·
            Regal
      Collections, Royal Selections, Euro Collections and
  Apple





Employees





As of
March 1, 2009 we had 245 full-time employees world-wide. Of these, 152 are
full-time employees in Paris, with 47 employees engaged in sales activities and
105 in administrative, production and marketing activities. In the United
States, 93 employees work full-time, and of these, 41 were engaged in sales
activities and 52 in administrative, production and marketing activities. We
believe that our relationship with our employees is good.





Item
1A.  Risk Factors.





You
should carefully consider these risk factors, together with all of the other
information contained or incorporated by reference in this report, before you
decide to purchase or sell shares of our common stock. These factors could cause
our future results to differ materially from those expressed or implied in
forward-looking statements made by us. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also harm our
business. The trading price of our common stock could decline due to any of
these risks, and you may lose all or part of your investment.





16





Our
business could be adversely affected by a prolonged downturn or recession in the
United States, Europe or other countries in which we conduct
business.





A prolonged economic downturn or
recession in the United States, Europe or any of the other countries in which we
do significant business could materially and adversely affect our business,
financial condition and results of operations. In particular, such a downturn or
recession could adversely impact (i) the level of spending by our ultimate
consumers, (ii) our ability to collect accounts receivable on a timely
basis from certain customers, (iii) our ability of certain suppliers to
fill our orders for raw materials, packaging or co-packed finished goods on a
timely basis, and (iv) the mix of our product sales.





Consumers
may reduce discretionary purchases of our products as a result of a general
economic downturn.





We
believe that the high degree of global economic uncertainty is expected to
continue to have a negative effect on consumer confidence, demand and
spending.  In addition, we believe that consumer spending on beauty
products is influenced by general economic conditions and the availability of
discretionary income. Accordingly, we may experience sustained periods of
declines in sales during periods of economic downturn as it may affect
customers’ purchasing patterns. In addition, a general economic downturn may
result in reduced traffic in our customers’ stores which may, in turn, result in
reduced net sales to our customers. Any resulting material reduction in our
sales could have a material adverse effect on our business, financial condition
and operating results.





Uncertainties
and continued deterioration in global credit markets could negatively impact
suppliers, customers and consumers, which could have an adverse impact on our
business as a whole.





Uncertainties and continued
deteriorationin
the global credit markets could negatively impact our suppliers, customers and
consumers which, in turn, could have an adverse impact on our business. While,
thus far, uncertainties in global credit markets have not significantly affected
our access to credit due to our strong credit rating, a further deterioration in
global financial markets could make future financing difficult or more
expensive. Such lack of credit or lack of credit on favorable terms could have a
material adverse effect on our business, financial condition and operating
results.




If
our intangible assets, such as trademarks and goodwill, become impaired we may
be required to record a significant non-cash charge to earnings which would
negatively impact our results of operations.




Under
United States generally accepted accounting principles, we review our intangible
assets, including our trademarks licenses and goodwill, for impairment annually
in the fourth quarter of each fiscal year, or more frequently if events or
changes in circumstances indicate the carrying value of our intangible assets
may not be fully recoverable. The carrying value of our intangible assets may
not be recoverable due to factors such as reduced estimates of future cash
flows, including those associated with the specific brands to which intangibles
relate, or slower growth rates in our industry. Estimates of future cash flows
are based on a long-term financial outlook of our operations and the specific
brands to which the intangible assets relate. However, actual performance in the
near-term or long-term could be materially different from these forecasts, which
could impact future estimates and the recorded value of the intangibles. 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.




17





We
are dependent upon Burberry for a significant portion of our sales, and the loss
of this license will have a material adverse effect on us.





Burberry
is our most significant license, as sales of Burberry products represented 56%,
54% and 57% of net sales for the years ended December 31, 2008, 2007 and
2006, respectively.





In
October 2004 our Paris-based subsidiary, Inter Parfums, S.A., entered into a
12.5-year, exclusive world-wide fragrance license with Burberry Limited,
effective as of July 1, 2004, which replaced the original 1993 license. This
license includes an additional five-year optional term that requires the consent
of both Burberry and Inter Parfums, S.A., and must be exercised, if at all,
prior to December 31, 2014. In addition, Burberry has the right on December 31,
2011 to buy back the license at its then fair market value. Further, this
license provides for termination on a change in control of either, Inter
Parfums, S.A., the licensee, or Inter Parfums, Inc., the guarantor.





This
license is subject to Inter Parfums, S.A. making required royalty payments
(which are subject to certain minimums), minimum advertising and promotional
expenditures and meeting minimum sales requirements. The loss of this license
will have a material adverse effect on us.





We
are dependent upon the continuation and renewal of various licenses and other
agreements for a significant portion of our sales, and the loss of one or more
licenses or agreements could have a material adverse effect on us.





All of
our rights relating to prestige fragrance brands, other than Lanvin, as well as
all of our specialty retail brands, are derived from licenses or other
agreements from unaffiliated third parties and our business is dependent upon
the continuation and renewal of such licenses and other agreements on terms
favorable to us. Each license or agreement is for a specific term and may have
additional optional terms. In addition, each license is subject to us making
required royalty payments (which are subject to certain minimums), minimum
advertising and promotional expenditures and meeting minimum sales requirements.
Other agreements are generally subject to meeting minimum sales requirements.
Just as the loss of a license or other significant agreement may have a material
adverse effect on us, a renewal on less favorable terms may also negatively
impact us.





18


If
we are unable to protect our intellectual property rights, specifically
trademarks and brand names, our ability to compete could be negatively
impacted.





The
market for our products depends to a significant extent upon the value
associated with trademarks and brand names that we license, use or own. We own,
or have licenses or other rights to use, the material trademark and brand name
rights used in connection with the packaging, marketing and distribution of our
major products both in the United States and in other countries where such
products are principally sold. Therefore, trademark and brand name protection is
important to our business.  Although most of our brand names are
registered in the United States and in certain foreign countries in which we
operate, we may not be successful in asserting trademark or brand name
protection. 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.





The
success of our products is dependent on public taste.





Our
revenues are substantially dependent on the success of our products, which
depends upon, among other matters, pronounced and rapidly changing public
tastes, factors which are difficult to predict and over which we have little, if
any, control. In addition, we have to develop successful marketing, promotional
and sales programs in order to sell our fragrances and fragrance related
products. If we are not able to develop successful marketing, promotional and
sales programs, then such failure will have a material adverse effect on our
business, financial condition and operating results.





We
are subject to extreme competition in the fragrance industry.





The
market for fragrances and fragrance related products is highly competitive and
sensitive to changing market preferences and demands. Many of our competitors in
this market (particularly in the prestige fragrance industry) are larger than we
are and have greater financial resources than are available to us, potentially
allowing them greater operational flexibility. Our success in the prestige
fragrance industry is dependent upon our ability to continue to generate
original strategies and develop quality products that are in accord with ongoing
changes in the market.





In the
specialty retail market we primarily sell products directly to Gap and Banana
Republic stores, New York & Company stores, Brooks Brother stores and bebe
stores, so we do not have any direct competition. However, such special retail
stores compete directly with other specialty retail stores such as Abercrombie
& Fitch and Victoria Secret, which thereby indirectly compete with
us.





Our
success with mass market fragrance and fragrance related products is dependent
upon our ability to competitively price quality products and to quickly and
efficiently develop and distribute new products.





If there
is insufficient demand for our existing fragrances and fragrance related
products, or if we do not develop future strategies and products that withstand
competition or we are unsuccessful in competing on price terms, then we could
experience a material adverse effect on our business, financial condition and
operating results.





19





We
are dependent upon specialty retailers to sell products that we develop for
their retail stores.





We have
agreements in place for Gap and Banana Republic brands, New York & Company
brand, Brooks Brothers brand and bebe brand. We are responsible for product
development, formula creation, packaging and manufacturing under all of those
brands. Gap, a leading international specialty retailer offering clothing,
accessories and personal care products for men, women, children and babies, New
York & Company, Retail Brand Alliance (for Brooks Brothers) and bebe Stores,
Inc., for bebe brand, are each responsible for marketing and selling the newly
launched fragrance and fragrance related products in their stores.





If the
sales and marketing efforts of those specialty retailers are not successful for
the products that we have developed, then our future growth potential could be
negatively impacted.





If
we are unable to acquire or license additional brands, or obtain the required
financing for these agreements and arrangements, then the growth of our business
could be impaired.





Our
future expansion through acquisitions or new product distribution arrangements,
if any, will depend upon the capital resources and working capital available to
us. Further, in view of the global banking crisis, we may be unable to obtain
financing or credit that we may require for additional licenses, acquisitions or
other transactions. We may be unsuccessful in identifying, negotiating,
financing and consummating such acquisitions or arrangements on terms acceptable
to us, or at all, which could hinder our ability to increase revenues and build
our business.





We
may engage in future acquisitions that we may not be able to successfully
integrate or manage. These acquisitions may dilute our stockholders and cause us
to incur debt and assume contingent liabilities.





We
continuously review acquisition prospects that would complement our current
product offerings, increase our size and geographic scope of operations or
otherwise offer growth and operating efficiency opportunities. The financing, if
available, for any of these acquisitions could significantly dilute our
stockholders and/or result in an increase in our indebtedness. 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;


·
            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











20
 
  ·
                incurrence
      of significant immediate
write-offs.


Our
failure to successfully complete the integration of any acquired business could
have a material adverse effect on our business, financial condition and
operating results.





We
are dependent upon Messrs. Jean Madar and Philippe Benacin, and the loss of
their services could harm our business.





Jean
Madar, our Chief Executive Officer, and Philippe Benacin, our President and
Chief Executive Officer of Inter Parfums, S.A., are responsible for day-to-day
operations as well as major decisions. Termination of their relationships with
us, whether through death, incapacity or otherwise, could have a material
adverse effect on our operations, and we cannot assure you that qualified
replacements can be found. We maintain key man insurance on the life of Mr.
Benacin ($3.6 million) and are seeking to acquire a nominal amount of key man
insurance on the life of Mr. Madar.  However, we cannot assure you
that we would be able to retain suitable replacements for either Mr. Madar or
Mr. Benacin.





Our
reliance on third party manufacturers could have a material adverse effect on
us.





We rely
on outside sources to manufacture our fragrances and cosmetics. The failure of
such third party manufacturers to deliver either components or finished goods on
a timely basis could have a material adverse effect on our business. Although we
believe there are alternate manufacturers available to supply our requirements,
we cannot assure you that current or alternative sources will be able to supply
all of our demands on a timely basis. We do not intend to develop our own
manufacturing capacity.  As these are third parties over which 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.





We sell a
substantial percentage of our prestige fragrances through independent
distributors specializing in luxury goods. Given the growing importance of
distribution, we have begun to modify our distribution model by the formation of
joint ventures or company owned subsidiaries within key markets. We have little
or no control over third party distributors and the failure of such third
parties to provide services on a timely basis could have a material adverse
effect on our business, financial condition and operating results.  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.





21


The
loss of or disruption in our distribution facilities could have a material
adverse effect on our business, financial condition and operating
results.





We
currently have one distribution facility in Paris and one in New Jersey.
 The loss of one or both of those facilities, as well as the inventory
stored in those facilities, would require us to find replacement facilities and
assets. In addition, terrorist attacks, or weather conditions, such as natural
disasters, could disrupt our distribution operations. If we cannot replace our
distribution capacity and inventory in a timely, cost-efficient manner, it could
have a material adverse effect on our business, financial condition and
operating results.





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 portion
of our European operations’ net sales (approximately 34% in 2008) are sold in
U.S. dollars. In an effort to reduce our exposure to foreign currency exchange
fluctuations, we engage in a program of cautious hedging of foreign currencies
to minimize the risk arising from operations. Despite such actions, fluctuations
in foreign currency exchange rates for the U.S. dollar, particularly with
respect to the Euro, could have a material adverse effect on our operating
results. Possible import, export, tariff and other trade barriers, which could
be imposed by the United States, other countries or the European Union might
also have a material adverse effect on our business.





Our
business is subject to governmental regulation, which could impact our
operations.





Fragrances
and fragrance related products must comply with the labeling requirements of the
Federal Food, Drug and Cosmetics Act as well as the Fair Packaging and Labeling
Act and their regulations. Some of our color cosmetic products may also be
classified as a “drug”. Additional regulatory requirements for products which
are “drugs” include additional labeling requirements, registration of the
manufacturer and the semi-annual update of a drug list.





Our
fragrances are subject to the approval of the Bureau of Alcohol, Tobacco and
Firearms as a result of the use of specially denatured alcohol.  So
far we have not experienced any difficulties in obtaining the required
approvals.





Our
fragrances and fragrance related products that are manufactured in France are
subject to certain regulatory requirements of the European Union, but as of the
date of this report, we have not experienced any material difficulties in
complying with such requirements.





However,
we cannot assure you that, should we develop or market fragrances and fragrance
related products with different ingredients, or should existing regulations or
requirements be revised, we would not in the future experience difficulty in
complying with such requirements, which could have a material adverse effect on
our results of operations.





We
may become subject to possible liability for improper comparative advertising or
“Trade Dress.”





Brand
name manufacturers and sellers of brand name products may make claims of
improper comparative advertising or trade dress (packaging) with respect to the
likelihood of confusion between some of our mass market products and those of
brand name manufacturers and sellers. They may seek damages for loss of business
or injunctive relief to seek to have the use of the improper comparative
advertising or trade dress halted.  However, we believe that our
displays and packaging constitute fair competitive advertising and are not
likely to cause confusion between our products and others. Further, we have not
experienced to any material degree, any of such problems to date.





22




Item
1B.  Unresolved Staff Comments.





None.


23


Item
2.  Properties





United States OperationsUse
                                    
                                    Location
                                    
                                    
                                    Approximate
                                      Size
                                    
                                    Term Expires
                                    
                                    Other
                                      InformationOffice
      Space-corporate headquarters and United States operations
                                    
                                    551
      Fifth Avenue, New York, NY.
                                    
                                    
                                    11,000
      square feet
                                    
                                    February
      28, 2013Distribution
      center
                                    
                                    60
      Stults Road
                                      Dayton,
      NJ
                                    
                                    
                                    140,000
      square feet
                                    
                                    October
      31, 2010Men’s
      Spa
                                    
                                    Unit
      C2, 300 West 14th Street, New York, N.Y.
                                    
                                    
                                    4,500
      square feet
                                    
                                    October
      31, 2009
                                    
                                    Option
      exercised for 5 year
term





European OperationsUse
                                                
                                                Location
                                                
                                                Approximate
                                                  Size
                                                
                                                Term Expires
                                                
                                                Other
                                                  InformationOffice
      Space-Paris corporate headquarters and European operations
                                                
                                                4 Rond
      Point Des Champs Elysees
                                                  Ground
      and 1st Fl. Paris, France
                                                
                                                571
      square meters
                                                
                                                March
      2013
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    noticeOffice
      Space-Paris corporate headquarters and European operations
                                                
                                                4 Rond
      Point Des Champs Elysees
                                                  4th
      Fl.
                                                  Paris,
      France
                                                
                                                540
      square meters
                                                
                                                June
      2014
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    noticeOffice
      Space-Paris corporate headquarters and European operations
                                                
                                                4 Rond
      Point Des Champs Elysees
                                                  5th
      Fl- left
                                                  Paris,
      France
                                                
                                                155
      square meters
                                                
                                                March
      2013
                                                
                                                Lessee
      has early termination right on 3 months noticeOffice
      Space-Paris corporate headquarters and European operations
                                                
                                                4 Rond
      Point Des Champs Elysees
                                                  6th
      Fl-Right
                                                  Paris,
      France
                                                
                                                157
      square meters
                                                
                                                March
      2013
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    noticeOffice
      Space-Paris corporate headquarters and European operations
                                                
                                                4 Rond
      Point Des Champs Elysees
                                                  2nd
      Fl
                                                  Paris,
      France
                                                
                                                544
      square meters
                                                
                                                September
      2017
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    noticeOffice
      Space-Paris corporate headquarters and European operations
                                                
                                                4 Rond
      Point Des Champs Elysees
                                                  6th
      Fl
                                                  Paris,
      France
                                                
                                                60
      square meters
                                                
                                                September
      2017
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    noticeOffice
      Space-
                                                  Paris
      Accounting and Legal
                                                
                                                39
      avenue Franklin Roosevelt,
                                                  2nd
      Floor
                                                  Paris,
      France
                                                
                                                360
      square meters
                                                
                                                December
      2014
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    noticeMen’s
      Spa
                                                
                                                48
      Rue des Francs Bourgeois,
                                                  Paris,
      France
                                                
                                                116
      square meters
                                                
                                                June
      2011
                                                
                                                Lessee
      has early termination right every 3 years on 6 months
    notice





24


Inter
Parfums, S.A. has an agreement with Sagatrans, S.A. for warehousing and
distribution services through September 2011. Fees are calculated based upon a
percentage of sales, which are customary in the industry.  Minimum
future lease payments range from 2.8 million euro in 2008 increasing to 3.0
million euro in 2011.





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.  Submissions Of Matters To A Vote Of Security Holders





Not  applicable.


25


PART
II





Item 5.  Market For
Registrant's Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity
Securities





The
Market for Our Common Stock





Our company's common stock, $.001 par
value per share, is traded on The Nasdaq Global Select Market under the symbol
“IPAR”.  The following table sets forth in dollars, the range of high
and low closing prices for the past two fiscal years for our common
stock.





Fiscal 2008
                  
                  High Closing Price
                  
                  
                  Low Closing PriceFourth
      Quarter
                  
                  
                  13.88
                  
                  
                  
                  5.04Third
      Quarter
                  
                  
                  17.08
                  
                  
                  
                  12.12Second
      Quarter
                  
                  
                  19.96
                  
                  
                  
                  14.00First
      Quarter
                  
                  
                  14.92
                  
                  
                  
                  9.03





Fiscal 2007
                  
                  High Closing Price
                  
                  
                  Low Closing PriceFourth
      Quarter
                  
                  
                  14.19
                  
                  
                  
                  11.83Third
      Quarter
                  
                  
                  19.45
                  
                  
                  
                  13.63Second
      Quarter
                  
                  
                  18.21
                  
                  
                  
                  13.42First
      Quarter
                  
                  
                  17.64
                  
                  
                  
                  10.95





As of
February 24, 2009 the number of record holders, which include brokers and
broker's nominees, etc., of our common stock was
57.  We believe there are in excess of approximately 3400 beneficial
owners of our common stock.





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 and the average performance of a group of
the company’s peer corporations consisting of: Alberto-Culver, Avon Products
Inc., Bare Escentuals, Inc., Blyth Inc., CCA Industries, Inc., Colgate-Palmolive
Co., Elizabeth Arden, Inc., Estee Lauder Cosmetics, Inc., Inter Parfums, Inc.,
Kimberly Clark Corp., Natural Health Trends, Parlux Fragrances Inc., Physicians
Formula Holdings, Procter & Gamble, Revlon, Inc., Spectrum Brands, Inc.,
Stephan Company, Summer Infant, Inc., and United Guardian, Inc. 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.


26








Below is the list of the data points
for each year that corresponds to the lines on the above
graph.





12/03
                
                
                
                12/04
                
                
                
                12/05
                
                
                
                12/06
                
                
                
                12/07
                
                
                
                12/08Inter
      Parfums, Inc.
                
                
                100.00
                
                
                
                70.88
                
                
                
                80.80
                
                
                
                87.06
                
                
                
                82.27
                
                
                
                53.38NASDAQ
      Composite
                
                
                100.00
                
                
                
                110.08
                
                
                
                112.88
                
                
                
                126.51
                
                
                
                138.13
                
                
                
                80.47Peer
      Group
                
                
                100.00
                
                
                
                112.32
                
                
                
                114.06
                
                
                
                130.59
                
                
                
                150.80
                
                
                
                126.46




27


Dividends





In December 2006, our board of
directors increased our cash dividend from $.107 to $.133 per share per annum,
payable $.033 on a quarterly basis. In December 2007 and again in December 2008,
our board of directors authorized the continuation of our cash dividend of $.133
per share per annum, payable $.033 on a quarterly basis. The first cash dividend
for 2009 of $.033 per share is payable on April 15, 2009 to shareholders of
record on March 31, 2009.





Our
Certificate of Incorporation provides for the requirement of unanimous approval
of the members of our board of directors for the declaration or payment of
dividends, if the aggregate amount of dividends to be paid by us and our
subsidiaries in any fiscal year is more than thirty percent (30%) of our annual
net income for the last completed fiscal year, as indicated by our consolidated
financial statements.





Sales
of Unregistered Securities





The
following sets forth certain information as to the sales of unregistered
securities, including options granted to purchase our common stock during the
last quarter of the last fiscal year and through the date of this report, which
were not registered under the Securities Act. In each of the transactions, we
granted options to our non-employee directors, who are all deemed our
affiliates. The transactions were exempt from the registration requirements of
Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities
Act. Each option holder agreed that, if the option is exercised, the option
holder would purchase his common stock for investment and not for resale to the
public. Also, we provide all option holders with all reports we file with the
SEC and press releases issued by us.





On February 2, 2009, we granted options
to purchase an aggregate of 4,000 shares for a five-year period at the exercise
price of $6.148 per share, the fair market value on the date of grant, to 5
directors under our 2004 Non-Employee Director Stock Option Plan. Such options
vest 25% each year over a 4 year period on a cumulative basis.





Repurchases of Our Common
Stock





For each of the three (3) months during
the fourth quarter of 2008, we repurchased the following shares of our common
stock:





Month
                  
                  Number of SharesOctober
      2008
                  
                  
                  0November
      2008
                  
                  
                  0December
      2008
                  
                  
                  468,137




28


Item
6.  Selected Financial Data





The
following selected financial data have been derived from our financial
statements, and should be read in conjunction with those financial statements,
including the related footnotes.





Years Ended December 31,(In thousands except per share data)
                        
                        2008
                        
                        
                        2007
                        
                        
                        2006
                        
                        
                        2005
                        
                        
                        2004Income
      Statement Data:Net
      Sales
                        
                        $
                        446,124
                        
                        
                        $
                        389,560
                        
                        
                        $
                        321,054
                        
                        
                        $
                        273,533
                        
                        
                        $
                        236,047Cost
      of
      Sales
                        
                        
                        191,915
                        
                        
                        
                        160,137
                        
                        
                        
                        143,855
                        
                        
                        
                        115,827
                        
                        
                        
                        113,988Selling,
      General and Administrative
                        
                        
                        202,264
                        
                        
                        
                        181,224
                        
                        
                        
                        141,074
                        
                        
                        
                        126,353
                        
                        
                        
                        89,516Operating
      Income
                        
                        
                        51,009
                        
                        
                        
                        47,331
                        
                        
                        
                        36,125
                        
                        
                        
                        31,353
                        
                        
                        
                        32,543Income
      Before Taxes and Minority Interest
                        
                        
                        46,434
                        
                        
                        
                        47,276
                        
                        
                        
                        37,135
                        
                        
                        
                        31,724
                        
                        
                        
                        31,638Net
      Income
                        
                        
                        23,765
                        
                        
                        
                        23,817
                        
                        
                        
                        17,742
                        
                        
                        
                        15,263
                        
                        
                        
                        15,703Net
      Income per Share:Basic
                        
                        $
                        .
      78
                        
                        
                        $
                        .78
                        
                        
                        $
                        .58
                        
                        
                        $
                        .51
                        
                        
                        $
                        .55Diluted
                        
                        $
                        .77
                        
                        
                        $
                        .76
                        
                        
                        $
                        .58
                        
                        
                        $
                        .50
                        
                        
                        $
                        .51Average
      Common Shares Outstanding:Basic
                        
                        
                        30,621
                        
                        
                        
                        30,666
                        
                        
                        
                        30,486
                        
                        
                        
                        30,117
                        
                        
                        
                        28,808Diluted
                        
                        
                        30,778
                        
                        
                        
                        31,004
                        
                        
                        
                        30,853
                        
                        
                        
                        30,731
                        
                        
                        
                        30,741Depreciation
      and Amortization
                        
                        $
                        9,925
                        
                        
                        $
                        8,031
                        
                        
                        $
                        5,347
                        
                        
                        $
                        4,513
                        
                        
                        $
                        3,988





As at December 31,(In thousands except per share data)
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006
                      
                      
                      2005
                      
                      
                      2004Balance
      Sheet And Other Data:Cash
      and Cash Equivalents and Short-Term Investments
                      
                      $
                      42,404
                      
                      
                      $
                      90,034
                      
                      
                      $
                      71,047
                      
                      
                      $
                      59,532
                      
                      
                      $
                      40,972Working
      Capital
                      
                      
                      174,126
                      
                      
                      
                      178,560
                      
                      
                      
                      138,547
                      
                      
                      
                      131,084
                      
                      
                      
                      129,866Total
      Assets
                      
                      
                      425,137
                      
                      
                      
                      446,052
                      
                      
                      
                      333,045
                      
                      
                      
                      240,910
                      
                      
                      
                      230,485Short-Term
      Bank Debt
                      
                      
                      13,981
                      
                      
                      
                      7,217
                      
                      
                      
                      6,033
                      
                      
                      
                      989
                      
                      
                      
                      748Long-Term
      Debt (including current portion)
                      
                      
                      41,043
                      
                      
                      
                      59,733
                      
                      
                      
                      10,769
                      
                      
                      
                      13,212
                      
                      
                      
                      19,617Stockholders’
      Equity
                      
                      
                      204,201
                      
                      
                      
                      192,660
                      
                      
                      
                      155,272
                      
                      
                      
                      127,727
                      
                      
                      
                      126,509Dividends
      per Share
                      
                      $
                      0.133
                      
                      
                      $
                      0.133
                      
                      
                      $
                      0.107
                      
                      
                      $
                      0.107
                      
                      
                      $
                      0.08





Item
7.  Management's Discussion And Analysis Of Financial Condition And
Results Of Operation





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. Our
prestige fragrance products are produced and marketed by our European operations
through our 75% owned subsidiary in Paris, Inter Parfums, S.A., which is also a
publicly traded company as 25% of Inter Parfums, S.A. shares trade on the
Euronext. Prestige cosmetics and prestige skin care products represent less than
3% of consolidated net sales.


29





We
produce and distribute our prestige products primarily under license agreements
with brand owners and prestige product sales represented approximately 87% of
net sales in 2008.  We have built a portfolio of brands, which include
Burberry, Lanvin, Van Cleef & Arpels, Paul Smith, S.T. Dupont, Christian
Lacroix, Quiksilver/Roxy and Nickel whose products are distributed in over 120
countries around the world. Burberry is our most significant license, as sales
of Burberry products represented 56%, 54% and 57% of net sales for the years
ended December 31, 2008, 2007 and 2006, respectively. In addition, sales of
our Lanvin brand products represented 13%, 12% and 13% of net sales for the
years ended December 31, 2008, 2007 and 2006, respectively.





Our
specialty retail and mass-market fragrance and fragrance related products are
marketed through our United States operations and represented 13% of sales in
2008. These products are sold under trademarks owned by us or pursuant to
license or other agreements with the owners of the Gap, Banana Republic, New York &
Company, Brooks Brothers, bebeandJordache
trademarks.





Historically,
seasonality has not been a major factor for our company. However, with the
commencement of operations in 2007 of our four majority-owned European
distribution subsidiaries and our growing specialty retail product lines, sales
are more concentrated in the second half of the year.





We grow
our business in two distinct ways. First, we grow by adding new brands to our
portfolio, either through new licenses or out-right acquisitions of brands.
Second, we grow through the introduction of new products and supporting new and
established products through advertising, merchandising and sampling as well as
phasing out existing products that no longer meet the needs of our
consumers. The economics of developing, producing, launching and supporting
products influence our sales and operating performance each year.  Our
introduction of new products may have some cannibalizing effect on sales of
existing products, which we take into account in our business
planning.




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





As with
any business, many aspects of our operations are subject to influences outside
our control. These factors include the effect of the current financial
crisis and therefore the potential for further deterioration in consumer
spending and consumer debt levels, as well as the continued availability of
favorable credit sources and capital market conditions in general. The recent
economic challenges and uncertainties in a number of countries where we do
business, including the United States, has begun to impact on our
business. This financial crisis is global in scale and has negatively
affected consumer demand, which is having an adverse impact on our distributors
and our retail customers. These events have led distributors and retailers to
carry less inventory than usual and have resulted in changes in their ordering
patterns for the products that we sell.  Although the impact of this
financial crisis did not have a material impact in 2008, its effect in 2009 is
expected to be challenging for us.


30


We are
reviewing our plans and taking actions to mitigate the impact of these
conditions. Advertising and promotional budgets are being adjusted to align
our spending with anticipated sales. In addition, we are implementing cost
saving initiatives to right size our staff and maintain long-term profitable
growth. As part of our strategy, we plan to continue to make investments
behind fast-growing markets and channels to grow market share. While our
business strategies are designed to strengthen our company over the long-term,
we believe the uncertainty about future market conditions, consumer spending
patterns and the financial strength of some of our customers, combined with the
fact that distributors and retailers are carrying less inventory, will
negatively affect our net sales and operating results.





In
addition to the ongoing global financial crisis, our reported net sales have
been negatively impacted by changes in foreign currency exchange rates caused by
the dramatic strengthening of the U.S. dollar during the fourth quarter of
2008. If the current exchange rates persist or the U.S. dollar continues to
strengthen, there will be a continuing adverse impact on our net sales in 2009.
However, earnings are less affected by a strengthening dollar because over 30
percent of net sales of our European operations are denominated in U.S dollars,
while all costs of our European operations are incurred in euro. Our company
addresses certain financial exposures through a controlled program of risk
management that includes the use of derivative financial instruments.  We
primarily enter into foreign currency forward exchange contracts to reduce the
effects of fluctuating foreign currency exchange rates. As a result of the
dramatic strengthening of the U.S. dollar during the fourth quarter of 2008, we
entered into $90 million of foreign currency forward exchange contracts to hedge
approximately 80% of our 2009 sales expected to be invoiced in U.S.
dollars.





Recent
Important Events





bebe
Stores, Inc.





In July
2008, we entered into an exclusive six year worldwide agreement with bebe
Stores, Inc. under which we will design, manufacture and supply fragrance, bath
and body products and color cosmetics for company-owned bebe stores in the
United States and Canada as well as select specialty and department stores
worldwide.





Gap
and Banana Republic International





In April
2008, we expanded our current relationship with Gap Inc. with the signing of a
licensing agreement for international distribution of personal care products
through Gap and Banana Republic stores as well as select specialty and
department stores outside the United States, including duty-free and other
travel related retailers. The agreement is effective through December 31,
2011.


31





Brooks
Brothers





In November 2007, we entered into
exclusive agreements with Retail Brand Alliance, Inc., d/b/a/ Brooks Brothers
(“Brooks Brothers”) under which we design, manufacture and supply personal care
products for men and women sold at Brooks Brothers locations in the United
States as well as a licensing agreement covering Brooks Brothers stores and
specialty retail and department stores outside the United States, including duty
free and other travel-related retailers.





Lanvin





In July 2007, we acquired the worldwide
rights to the Lanvin brand names and international trademarks listed in Class 3
from Jeanne Lanvin, S.A. (“Lanvin”).  Among other items, Class 3 of
the international classification of trademarks goods and services include:
soaps, perfumery, essential oils, cosmetics and hair lotions. We paid €22
million (approximately $29.7 million) in cash for the brand names and trademarks
and simultaneously terminated our existing license agreement. In addition,
Lanvin has the right to repurchase the brand names and trademarks in 2025 for
the greater of €70 million or one times the average of the annual sales for the
years ending December 31, 2023 and 2024.





Prior to this acquisition, the amount
paid to secure the license agreement with Lanvin was being amortized over the
life of the license agreement. At June 30, 2007, that intangible asset, net of
accumulated amortization aggregated €13.2 million. The €22 million paid in July
2007 for the brand names and trademarks together with the carrying value related
to the license agreement represents the total cost of acquiring the brand names
and trademarks.





New York & Company





In April 2007, we entered into an
exclusive agreement with New York & Company, Inc. under which we design and
manufacture personal care products sold at the New York & Company retail
locations and on their website. We are responsible for product development,
formula creation, packaging and manufacturing while New York & Company is
responsible for marketing and selling in its stores.





Van Cleef & Arpels





In
September 2006, we entered into an exclusive, worldwide license agreement with
Van Cleef & Arpels Logistics SA, for the creation, development and
distribution of fragrance and related bath and body products under the Van Cleef
& Arpels brand and related trademarks.  The agreement runs through
December 31, 2018. As an inducement to enter into this license agreement we
paid, in January 2007,  €18 million (approximately $23.4 million) to
Van Cleef & Arpels Logistics S.A., and we agreed to purchase existing
inventory held by YSL Beauté, the former licensee. The license agreement became
effective on January 1, 2007.


32


Quiksilver





In March
2006, we entered into an exclusive worldwide license agreement with Quiksilver,
Inc. for the creation, development and distribution of fragrance, suncare,
skincare and related products under the Roxy and Quiksilver brands. The
agreement runs through 2017.





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. 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.





The
judgments used by management in applying critical accounting policies could
be affected by a further and prolonged general deterioration in the economic
environment, which could negatively influence future financial results and
availability of continued financing. Specifically, subsequent evaluations of our
accounts receivables, inventories, and deferred tax assets in light of the
factors then prevailing, could result in significant changes in our allowance
and reserve accounts in future periods which in turn could generate significant
additional charges. Similarly, the valuation of certain intangible assets could
be negatively impacted by prolonged and severely depressed market conditions
thus leading to the recognition of impairment losses. The following is a brief
discussion of the more critical accounting policies that we employ.





Revenue
Recognition





We sell
our products to department stores, perfumeries, specialty retailers, mass-market
retailers, supermarkets and domestic and international wholesalers and
distributors. Sales of such products by our domestic subsidiaries are
denominated in U.S. dollars and sales of such products by our foreign
subsidiaries are primarily denominated in either Euros or U.S. dollars. Accounts
receivable reflect the granting of credit to these customers. We generally grant
credit based upon our analysis of the customer’s financial position as well as
previously established buying patterns. We recognize revenues when merchandise
is shipped and the risk of loss passes to the customer. Net sales are comprised
of gross revenues less returns, trade discounts and allowances.





Sales
Returns





Generally,
we do not permit customers to return their unsold products. However, on a
case-by-case basis we occasionally allow customer returns. We regularly review
and revise, as deemed necessary, our estimate of reserves for future sales
returns based primarily upon historic trends and relevant current data. We
record estimated reserves for sales returns as a reduction of sales, cost of
sales and accounts receivable. Returned products are recorded as inventories and
are valued based upon estimated realizable value. The physical condition and
marketability of returned products are the major factors we consider in
estimating realizable value. Actual returns, as well as estimated realizable
values of returned products, may differ significantly, either favorably or
unfavorably, from our estimates, if factors such as economic conditions,
inventory levels or competitive conditions differ from our
expectations.


33





Promotional
Allowances





We have
various performance-based arrangements with certain retailers. These
arrangements primarily allow customers to take deductions against amounts owed
to us for product purchases. The costs that our company incurs for performance
based arrangements, shelf replacement costs and slotting fees are netted against
revenues on our company’s consolidated statement of income. Estimated accruals
for promotions and advertising programs are recorded in the period in which the
related revenue is recognized. We review and revise the estimated accruals for
the projected costs for these promotions. Actual costs incurred may differ
significantly, either favorably or unfavorably, from estimates if factors such
as the level and success of the retailers’ programs or other conditions differ
from our expectations.





Inventories





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





Equipment
and Other Long-Lived Assets





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





Long-lived
assets, including trademarks, licenses, goodwill and other rights, are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of any such asset may not be recoverable. For intangible assets
with finite lives, if the sum of the undiscounted cash flows (excluding
interest) is less than the carrying value, then we recognize an impairment loss,
measured as the amount by which the carrying value exceeds the fair value of the
asset. The estimate of undiscounted cash flows is based upon, among other
things, certain assumptions about expected future operating performance. Our
estimates of undiscounted cash flows may differ from actual cash flows due to,
among other things, economic conditions, changes to our business model or
changes in consumer acceptance of our products. In those cases where we
determine that the useful life of long-lived assets should be shortened, we
would depreciate the net book value in excess of the salvage value (after
testing for impairment as described above), over the revised remaining useful
life of such asset thereby increasing amortization expense.


34





Derivatives





We
account for derivative financial instruments in accordance with SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as
amended, which establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities.  This statement also requires the
recognition of all derivative instruments as either assets or liabilities on the
balance sheet and that they be measured at fair value.




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





Income
Taxes





Deferred
income taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory tax rates applicable to future years to the
difference between the financial statement carrying amounts and the tax bases of
existing assets and liabilities. Tax benefits recognized are reduced by a
valuation allowance where it is more likely than not that the benefits may not
be realized.





Results
of Operations





Net
Sales


Years ended December 31,2008
                
                
                % Change
                
                
                2007
                
                
                % Change
                
                
                2006(in
      millions)European
      based product sales
                
                $
                386.4
                
                
                
                17
                %
                
                $
                330.8
                
                
                
                22
                %
                
                $
                270.1United
      States based product sales
                
                
                59.7
                
                
                
                1
                %
                
                
                58.8
                
                
                
                15
                %
                
                
                51.0Total
      net sales
                
                $
                446.1
                
                
                
                15
                %
                
                $
                389.6
                
                
                
                21
                %
                
                $
                321.1




Net sales
for the year ended December 31, 2008 increased 15% to $446.1 million. For the
year ended December 31, 2007, net sales were up 21%. At comparable foreign
currency exchange rates, net sales rose 12% and 15% for 2008 and 2007,
respectively. The weakness of the US dollar relative to the euro gave rise to
the difference between constant dollar and reported net sales in 2008 and
2007.


35





European
based prestige product sales, which were up 22% in 2007, grew an additional 17%
in 2008. Burberry fragrances continued to drive sales growth with an increase of
18% (14% in local currency) aggregating $248 million for the year ended December
31, 2008, respectively, as compared to $210 million for the corresponding period
of the prior year. In 2008, the increase in Burberry fragrance sales was the
result of the successful launch of Burberry The Beat. With no major
Burberry launches in 2007 other than seasonal additions, Burberry fragrance also
performed well and sales reached $210 million, up 10% in local
currency.





Two
additional major product launches, Van Cleef & Arpels Feerie and Jeanne Lanvin, contributed to
top line growth in 2008. We began operations pursuant to our exclusive,
worldwide license with Van Cleef & Arpels in January 2007. Sales of products
under the Van Cleef & Arpels brand aggregated $30.9 million in 2008 as
compared to $16.3 million in 2007. With respect to Lanvin, after significant
growth in 2006 and no major new product launches in 2007, sales of Lanvin
fragrances reached $46 million in 2007. In 2008, aided by the launch of the new
Jeanne Lanvin
fragrance, Lanvin fragrance sales increased 25% to $57 million, as compared to
2007.





With no new product launches in 2008,
Paul Smith fragrance sales were disappointing, registering a decline of 20% as
compared to 2007. Paul Smith is a regional brand with a high concentration of
sales in Western Europe, especially the United Kingdom. We believe that the
difficult economic situation in that region, combined with no new product
launches, contributed to the sales decline. In 2007, Paul Smith fragrance sales
were basically unchanged from 2006 levels.





Despite
the challenging economic environment, European based prestige product sales,
which increased slightly in North America, showed strong growth in Eastern
Europe (up 28%), Middle East (up 30%), South America (up 23%) and Asia (up 11%)
in local currency for the year ended December 31, 2008, as compared to the prior
year.





We are
preparing for a very active 2009 new product launch schedule for European-based
operations which began in January with the global rollout of the men’s version
of Burberry The Beat.
We also have a new Paul Smith fragrance for men, and a Lanvin L’Homme Sport line, with
tennis star, Rafael Nadel as its spokesperson. The Quiksilver signature
fragrance for men is also in our rollout schedule, as is a limited edition,
high-end women’s fragrance for the Van Cleef & Arpels brand.





With
respect to our United States specialty retail and mass market products, net
sales were up an additional 1% in 2008 after rising 15% in 2007 and 49% in 2006.
After launching products for Banana Republic’s North American stores in 2006, in
May 2007, over 150 Gap Body stores in the United States and Canada unveiled more
than 70 new bath and body products we created for them. The bath and body line
was followed in August 2007 by new Gap eau de toilette products and men’s
fragrance and grooming products. All product lines were rolled out to
approximately 200 Gap stores in August 2007 and approximately 300 additional Gap
stores in October 2007.





In
addition to continuing to sell in 2008 products initially rolled out in 2007,
United States based product sales in 2008 also reflects international
distribution of Gap and Banana Republic products. In 2008, we expanded our
relationship with Gap Inc. with the signing of a licensing agreement for
international distribution of personal care products through Gap and Banana
Republic stores as well as select specialty and department stores outside the
United States, including duty-free and other travel related retailers. The
agreement is effective through December 31, 2011.


36





Through
the first nine months of 2008 United States specialty retail and mass-market
product net sales were up 18%, as compared to the corresponding period in 2007,
as a steady domestic business combined with a new and vibrant international
business to drive increased sales. However, for the three months ended December
31, 2008 United States specialty retail and mass-market product net sales
declined 24%, as compared to the corresponding period of the prior year. The
2007 fourth quarter launch of a complete line of bath and beauty products to
over 500 New York & Company stores generated pipeline sales of approximately
$3.7 million creating a very difficult comparison for the fourth quarter of
2008. In addition, a portion of sales by our United States operations are direct
to retailer and it was our level of sales to these customers where we first saw
the effect of the global financial crisis as discussed above. The recent
economic challenges and uncertainties in the United States, has begun to impact
our business. This financial crisis has negatively affected consumer
demand, which is having an adverse impact on our retail customers. These events
have led retailers to carry less inventory than usual and has resulted in
changes in their ordering patterns for the products that we
sell.





In the
spring of 2009, Close, a new Gap fragrance will be launched at approximately 550
Gap stores and roughly 175 Gap Body stores nationwide, followed by international
distribution expected to reach 5,000 doors in the second half of 2009. In August
2009, new fragrances for men and women will be launched at Banana Republic
stores in North America with international distribution following shortly
thereafter.





New
product introductions are also in the works for our other specialty retail
partners. In November 2008, we shipped the Brooks Brothers New York collection for men
and women to Brooks Brothers U.S. stores and international distribution is
scheduled for 2009. In addition, a new fragrance introduction for the spring of
2009, called Black
Fleece is in the works, In July 2008, we entered into an exclusive six
year worldwide agreement with bebe Stores, Inc. under which we will design,
manufacture and supply fragrance, bath and body products and color cosmetics for
company-owned bebe stores in the United States and Canada as well as select
specialty and department stores worldwide. Our signature bebe fragrance will be
unveiled at bebe stores in the U.S. in August followed by worldwide distribution
in the third quarter of 2009. While we have discontinued the bath and body
program for New York & Company stores, we plan to introduce a new fragrance
for New York & Company in the second half of 2009.





Sales of
mass market fragrance products have been in a decline for several years. We have
no plans to discontinue sales to this market which aggregated approximately $21
million and $24 million in 2008 and 2007, respectively, and contributes
significantly to our United States based operations. We have and will however,
continue to consolidate our product offerings.





In
addition, we are actively pursuing other new business opportunities. However, we
cannot assure you that any new licenses, acquisitions or specialty retail
agreements will be consummated.


37


Gross
Profit Margins





Years ended December 31,2008
                
                
                2007
                
                
                2006(in
      millions)Net
      sales
                
                $
                446.1
                
                
                $
                389.6
                
                
                $
                321.1Cost
      of
      sales
                
                
                191.9
                
                
                
                160.2
                
                
                
                143.9Gross
      margin
                
                $
                254.2
                
                
                $
                229.4
                
                
                $
                177.2Gross
      margin as a  percent of net sales
                
                
                57
                %
                
                
                59
                %
                
                
                55
                %





Gross
profit margins were 57% in 2008, 59% in 2007 and 55% in 2006. The decline is
primarily the effect the decline of the US dollar against the euro has on our
European based product sales to United States customers. Sales to these
customers are denominated in dollars while our costs are incurred in
euro.





Although
gross margins from individual product families have remained relatively
consistent, sales of products from our European based prestige fragrances have
always generated significantly higher gross profit margins than sales of our
United States based specialty retail and mass market products. Fluctuations in
sales product mix between our European operations and our United States
operations had a small mitigating effect on the 2008 decline in gross margin.
Sales from United States operations grew 1% while sales from European operations
grew 17% in 2008, as compared to 2007.





For
2007, approximately 75% of the gross profit margin as a percentage of sales
increase, as compared to 2006, is the result of the commencement of operations
of our newly established majority-owned European distribution subsidiaries. The
balance of the increase is a result of product sales mix within our United
States based operations, as specialty retail product sales generate a higher
gross margin than mass market product sales.





Generally,
we do not bill customers for shipping and handling costs and such costs, which
aggregated $6.2 million in both 2008 and 2007 and $5.5 million in 2006 are
included in selling, general and administrative expense in the consolidated
statements of income. As such, our company’s gross profit may not be comparable
to other companies which may include these expenses as a component of cost of
goods sold.





Selling,
General & Administrative Expense





Years ended December 31,2008
                
                
                2007
                
                
                2006(in
      millions)Selling,
      general & administrative
                
                $
                202.3
                
                
                $
                181.2
                
                
                $
                141.1Selling,
      general & administrative as a percent of net sales
                
                
                45
                %
                
                
                47
                %
                
                
                44
                %




Selling,
general and administrative expense increased 12% for the year ended
December 31, 2008, as compared to 2007 and 28% for the year ended December
31, 2007, as compared to 2006. As a percentage of sales selling, general and
administrative expense was 45%, 47% and 44% for the years ended December 31,
2008, 2007 and 2006, respectively.


38


Two major
components of selling, general and administrative expense are promotion and
advertising expenditures and royalty expense. Promotion and advertising
aggregated $65.8 million, $58.5 million and $46.5 million for the years ended
December 31, 2008, 2007 and 2006, respectively. Royalty expense aggregated $37.3
million, $35.6 million and $31.4 million for the years ended December 31, 2008,
2007 and 2006, respectively.





Selling,
general and administrative expenses for 2008 and 2007 also includes
approximately $13 million and $12 million, respectively, in servicing fees
related to the operations of our majority-owned European distribution
subsidiaries which commenced operations in 2007.





We review
goodwill and trademarks with indefinite lives for impairment at least annually,
and whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. The goodwill relates to our Nickel skin care
business which is primarily a component of our European based operations. In
performing our annual review of the recoverability of the carrying amount of
goodwill, we determined that Nickel product sales, although up slightly in 2008
as compared to 2007, continue to be lower than we originally anticipated.
Therefore, the carrying amount of the goodwill exceeded fair value determined by
comparison to prices of comparable businesses resulting in impairment losses of
$0.9 million in both 2008 and 2007.





Income
from operations increased 8% to $51.0 million in 2008, as compared to $47.3
million in 2007. In 2007, income from operations increased 31% to $47.3 million,
as compared to $36.1 million in 2006. Operating margins aggregated 11.4%, 12.1%
and 11.3% for the years ended December 31, 2008, 2007 and 2006,
respectively.





Interest
expense aggregated $4.9 million, $3.7 million and $1.8 million for the years
ended December 31, 2008, 2007 and 2006, respectively. We use the credit lines
available to us, as needed, to finance our working capital needs as well as our
financing needs for acquisitions. We entered into an €18 million and a €22
million long-term credit facility in January and September 2007, respectively,
to finance payments required for the Van Cleef & Arpels license agreement
and the acquisition of the Lanvin trademarks. In connection with certain debt
facilities, we entered into swap transactions. These derivative instruments are
recorded at fair value and changes in fair value are reflected in the
consolidated statements of income. As a result of the steep decline in interest
rates during the fourth quarter of 2008, we recorded a charge to interest
expense of $0.8 million relating to the change in the fair value of interest
rate swaps.





Foreign
currency gains or (losses) aggregated ($1.4) million, ($0.2) million and $0.2
million for the years ended December 31, 2008, 2007 and 2006, respectively. We
enter into foreign currency forward exchange contracts to manage exposure
related to certain foreign currency commitments. As a result of the dramatic
strengthening of the U.S. dollar during our fourth quarter ended December 31,
2008, we entered into $90 million of foreign currency forward exchange contracts
to hedge approximately 80% of our 2009 sales expected to be invoiced in U.S.
dollars. Hedge effectiveness excludes the portion of the fair value of the
foreign currency forward exchange contract attributable to the change in
spot-forward difference which is reported in current period earnings. As of
December 31, 2008, the Company recorded a charge of $0.8 million relating to the
change in spot-forward difference.


39





Our
effective income tax rate was 35.1%, 35.5% and 35.6% for the years ended
December 31, 2008, 2007 and 2006, respectively. Our effective tax rates differ
from statutory rates due to the effect of state and local taxes and tax rates in
foreign jurisdictions which are slightly higher than those in the United States.
In 2008, 2007 and 2006, valuation allowances of $0.8 million, $0.2 million and
$0.8 million have been provided against certain foreign net operating loss
carryforwards, as future profitable operations from certain foreign subsidiaries
might not be sufficient to realize the full amount of net operating loss
carryforwards recognized. In 2008, one of those foreign subsidiaries, Nickel
S.A. was merged into Inter Parfums, S.A. As a result of the merger we recognized
the utilization of certain foreign operating loss carryforwards for which
valuation allowances had previously been recorded. As a result, the 2008 tax
provision has been reduced by a benefit of approximately $0.7
million.





We did
not experience anysignificant
changes in tax rates, and none were expected in jurisdictions where we
operate.





Net
Income and Earnings per Share





Years ended December 31,2008
                                          
                                          
                                          2007
                                          
                                          
                                          2006(In thousands except per share data)Net
      income
                                          
                                          $
                                          23,765
                                          
                                          
                                          $
                                          23,817
                                          
                                          
                                          $
                                          17,742Net
      income per share:Basic
                                          
                                          $
                                          0.78
                                          
                                          
                                          $
                                          0.78
                                          
                                          
                                          $
                                          0.58Diluted
                                          
                                          $
                                          0.77
                                          
                                          
                                          $
                                          0.76
                                          
                                          
                                          $
                                          0.58Weighted
      average number of shares outstanding:Basic
                                          
                                          
                                          30,621
                                          
                                          
                                          
                                          30,666
                                          
                                          
                                          
                                          30,486Diluted
                                          
                                          
                                          30,778
                                          
                                          
                                          
                                          31,004
                                          
                                          
                                          
                                          30,853





Net
income was unchanged and aggregated $23.8 million in both 2008 and 2007. In 2007
net income increased 16% to $23.8 million, as compared to $17.7 million in 2006.
Net margins aggregated 5.4%, 6.1% and 5.5% for the years ended December 31,
2008, 2007 and 2006, respectively.





Diluted
earnings per share aggregated $0.77, $0.76 and $0.58 in 2008, 2007 and 2006,
respectively. Weighted average shares outstanding aggregated 30.6 million, 30.7
million and 30.5 million for the years ended December 31, 2008, 2007 and 2006,
respectively. On a diluted basis, average shares outstanding were 30.8 million,
31.0 million and 30.9 million for the years ended December 31, 2008, 2007 and
2006, respectively.





Liquidity
and Capital Resources





Our
financial position remains strong. At December 31, 2008, working capital
aggregated $174 million and we had a working capital ratio of 2.3 to 1. Cash and
cash equivalents aggregated $42 million.


40





Our
short-term financing requirements are expected to be met by available cash on
hand at December 31, 2008, cash generated by operations and short-term credit
lines provided by domestic and foreign banks. The principal credit facilities
for 2009 consist of a $15.0 million unsecured revolving line of credit provided
by a domestic commercial bank and approximately $45.0 million in credit lines
provided by a consortium of international financial institutions. As of December
31, 2008, short-term borrowings aggregated $14.0 million.





In 2007,
we financed the acquisition of the worldwide rights to the Lanvin brand names
and international trademarks and the license for the Van Cleef & Arpels
brand and related trademarks by entering into five-year credit agreements. The
long-term credit facilities provides for principal and interest to be repaid in
20 quarterly installments. As of December 31, 2008, total long-term debt
including current maturities aggregated $41.0 million.





In
December 2007, we acquired an additional 1.2% interest in IPSA, our majority
owned French subsidiary, from its minority shareholders for approximately $6.3
million in cash. An additional 3.6% interest was acquired in 2008 for
approximately $18.5 million in cash. The acquisition was accounted for under the
purchase method and brings our ownership interest in Inter Parfums, S.A. to
approximately 75%.





Cash
provided by (used-in) operating activities aggregated ($6.4) million, $38.5
million and $13.4 million for the years ended December 31, 2008, 2007 and 2006,
respectively. Inventories increased 22% and accounts receivables increased 7% in
2008 as compared to 2007, while sales for the same period increased 15%.
Inventories are built to support projected sales including new product launches.
The significant decline in accounts payable and accrued expenses reflects a
portion of the 2007 inventory buildup which was paid for in 2008.





The 2007
significant inventory build up was required to support the debut of the newest
Burberry fragrance family, Burberry Beat, which we began
shipping to customers in the first quarter of 2008. The effect on cash flow from
operations in 2007 was minimal as this increase was offset by an increase in
accounts payable and accrued expenses. Overall, changes in working capital items
had a minimal effect on 2007 cash flow from operations. Net income as adjusted
for non cash items, including depreciation and amortization and minority
interest in net income of consolidated subsidiary, resulted in substantial
positive operating cash flow for the year.





In
addition to the acquisition of minority interests mentioned above, cash flows
used in investing activities in 2008 also reflects payments of approximately
$3.8 million for capital items. Our business is not capital intensive as we do
not own any manufacturing facilities. We typically spend between $2.0 and $3.0
million per year on tools and molds, depending on our new product development
calendar. The balance of capital expenditures is for office fixtures, computer
equipment and industrial equipment needed at our distribution
centers.  Capital expenditures in 2009 are expected to be in the range
of $3.0 million to $4.0 million, considering our 2009 launch
schedule.





Cash
flows used in investing activities in 2007 reflects $58.7 million in payments
required in connection with our acquisition of the Van Cleef & Arpels
license agreement, the Lanvin trademarks and other intangible assets. The
proceeds from long-term debt facilities entered into in connection with these
acquisitions are reflected in financing activities. In 2007 we also received net
proceeds of approximately $13 million from the sale of short-term investments
which was used to finance our working capital needs and approximately $2.4
million was spent for capital items.


41





In
February 2008, the board of directors of the Company authorized a stock
repurchase program whereby the Company is authorized to repurchase a maximum of
500,000 shares of its common stock in the open market. In February 2008, 194,286
shares of the Company’s common stock were repurchased at an average price of
$11.30 per common share. In June 2008, the board of directors authorized a reset
of the stock repurchase program whereby the Company was authorized to repurchase
a maximum of 500,000 shares of its common stock in the open market. In December
468,137 shares of the Company’s common stock was repurchased at an average price
of $5.92 per common share and the board of directors authorized an additional 1
million to be potentially purchased pursuant to the stock repurchase program.
Under the current program, as of December 31, 2008 the Company is
authorized to repurchase up to 1,031,863 additional shares of the Company’s
common stock.





In
December 2008, our board of directors authorized a continuation of our cash
dividend of $0.133 per share, aggregating approximately $4.0 million per annum,
payable $.033 per share on a quarterly basis. Our next cash dividend of $.033
per share is to be paid on April 15, 2009 to shareholders of record on March 31,
2009. Dividends paid, including dividends paid once per year to minority
stockholders of Inter Parfums, S.A., aggregated $5.8 million, $5.5 million and
$4.5 million for the years ended December 31, 2008, 2007 and 2006, respectively.
The cash dividends paid in 2008 represented a small part of our cash position
and the dividends for 2009 are not expected to have any significant impact on
our financial position.





We
believe that funds generated from operations, supplemented by our present cash
position and available credit facilities, will provide us with sufficient
resources to meet all present and reasonably foreseeable future operating
needs.





Inflation
rates in the U.S. and foreign countries in which we operate did not have a
significant impact on operating results for the year ended December 31,
2008.


42


Contractual
Obligations





The following table sets for a schedule
of our contractual obligations over the periods indicated in the table, as well
as our total contractual obligations ($ in thousands).





Contractual Obligations
                                          
                                          Payments due by periodTotal
                                          
                                          
                                          Less than
                                            1 year
                                          
                                          
                                          Years
                                            2-3
                                          
                                          
                                          Years
                                            4-5
                                          
                                          
                                          More than
                                            5 yearsLong-Term
      Debt
                                          
                                          $
                                          41,000
                                          
                                          
                                          $
                                          13,400
                                          
                                          
                                          $
                                          23,000
                                          
                                          
                                          $
                                          4,600Capital
      Lease ObligationsOperating
      Leases
                                          
                                          $
                                          27,100
                                          
                                          
                                          $
                                          7,100
                                          
                                          
                                          $
                                          13,000
                                          
                                          
                                          $
                                          4,300
                                          
                                          
                                          $
                                          2,700Purchase
      obligations(1)
                                          
                                          $
                                          1,306,500
                                          
                                          
                                          $
                                          137,700
                                          
                                          
                                          $
                                          293,400
                                          
                                          
                                          $
                                          313,900
                                          
                                          
                                          $
                                          561,500Other
      Long-Term Liabilities Reflected on the Registrant's Balance Sheet under
      GAAPTotal
                                          
                                          $
                                          1,374,600
                                          
                                          
                                          $
                                          158,200
                                          
                                          
                                          $
                                          329,400
                                          
                                          
                                          $
                                          322,800
                                          
                                          
                                          $
                                          564,200





(1)
              Consists of purchase commitments
      for advertising and promotional items, minimum royalty guarantees,
      including fixed or minimum obligations, and estimates of such obligations
      subject to variable price provisions. Future advertising commitments were
      estimated based on planned future sales for the license terms that were in
      effect at December 31, 2008, without consideration for potential renewal
      periods and do not reflect the fact that our distributors share our
      advertising
obligations.





Item
7A. Quantitative and Qualitative Disclosures About Market Risk.





General





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





Foreign
Exchange Risk Management





We
periodically enter into foreign currency forward exchange contracts to hedge
exposure related to receivables denominated in a foreign currency and to manage
risks related to future sales expected to be denominated in a foreign currency.
We enter into these exchange contracts for periods consistent with our
identified exposures. The purpose of the hedging activities is to minimize the
effect of foreign exchange rate movements on the receivables and cash flows of
Inter Parfums, S.A., our French subsidiary, whose functional currency is the
Euro. All foreign currency contracts are denominated in currencies of majorindustrialcountriesand are with largefinancial institutions,
which are ratedasstronginvestmentgrade.





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


43


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





As a
result of the dramatic strengthening of the U.S. dollar during our fourth
quarter ended December 31, 2008, we entered into $90 million of foreign currency
forward exchange contracts to hedge approximately 80% of our 2009 sales expected
to be invoiced in U.S. dollars. Hedge effectiveness excludes the portion of the
fair value of the foreign currency forward exchange contract attributable to the
change in spot-forward difference which is reported in current period earnings.
As of December 31, 2008, the Company recorded a charge of $0.8 million relating
to the change in spot-forward difference. At December 31, 2008, we had
foreign currency contracts in the form of forward exchange contracts in the
amount of approximately U.S. $128 million, GB pounds 3.7 million, and
Japanese yen 95.8 million which have varying maturities of less than a year
except for U.S. $21 million which have maturities of 13 to 16 months. 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 continually monitoring interest rates, and then
determining whether fixed interest rates should be swapped for floating rate
debt, or if floating rate debt should be swapped for fixed rate debt. We have
entered into two (2) interest rate swaps to reduce exposure to rising variable
interest rates. The first swap, entered into in 2004, effectively exchanged the
variable interest rate of 0.6% above the three month EURIBOR to a variable rate
based on the 12 month EURIBOR rate with a floor of 3.25% and a ceiling of 3.85%.
The remaining balance owed pursuant to this facility is €4.8 million. The second
swap entered into in September 2007 on €22 million of debt, effectively
exchanged the variable interest rate of 0.6% above the three month EURIBOR to a
fixed rate of 4.42%. These derivative instruments are recorded at fair value and
changes in fair value are reflected in the accompanying consolidated statements
of income.





Item
8.  Financial Statements and Supplementary Data





The
required financial statements commence on page F-1.


44





Supplementary
Data


Quarterly
Data (Unaudited)


For
the Year Ended December 31, 2008


(In
Thousands Except Per Share Data)


1st Quarter
                        
                        
                        2nd Quarter
                        
                        
                        3rd Quarter
                        
                        
                        4th Quarter
                        
                        
                        Full YearNet
      Sales
                        
                        $
                        123,163
                        
                        
                        $
                        99,078
                        
                        
                        $
                        123,531
                        
                        
                        $
                        100,352
                        
                        
                        $
                        446,124Gross
      Profit
                        
                        
                        74,088
                        
                        
                        
                        55,974
                        
                        
                        
                        67,325
                        
                        
                        
                        56,822
                        
                        
                        
                        254,209Net
      Income
                        
                        
                        8,708
                        
                        
                        
                        3,772
                        
                        
                        
                        6,188
                        
                        
                        
                        5,097
                        
                        
                        
                        23,765Net
      Income per Share:Basic
                        
                        $
                        .28
                        
                        
                        $
                        .12
                        
                        
                        $
                        .20
                        
                        
                        $
                        .17
                        
                        
                        $
                        .78Diluted
                        
                        $
                        .28
                        
                        
                        $
                        .12
                        
                        
                        $
                        .20
                        
                        
                        $
                        .17
                        
                        
                        $
                        .77Average
      Common SharesOutstanding:Basic
                        
                        
                        30,722
                        
                        
                        
                        30,627
                        
                        
                        
                        30,632
                        
                        
                        
                        30,504
                        
                        
                        
                        30,621Diluted
                        
                        
                        30,809
                        
                        
                        
                        30,914
                        
                        
                        
                        30,886
                        
                        
                        
                        30,504
                        
                        
                        
                        30,778
 
 Quarterly
Data (Unaudited)
 For
the Year Ended December 31, 2007
 (In
Thousands Except Per Share Data)
  1st Quarter
                          
                          
                          2nd Quarter
                          
                          
                          3rd Quarter
                          
                          
                          4th Quarter
                          
                          
                          Full YearNet
      Sales
                          
                          $
                          85,120
                          
                          
                          $
                          82,764
                          
                          
                          $
                          102,320
                          
                          
                          $
                          119,356
                          
                          
                          $
                          389,560Gross
      Profit
                          
                          
                          51,933
                          
                          
                          
                          48,149
                          
                          
                          
                          60,066
                          
                          
                          
                          69,275
                          
                          
                          
                          229,423Net
      Income
                          
                          
                          5,793
                          
                          
                          
                          3,749
                          
                          
                          
                          5,660
                          
                          
                          
                          8,615
                          
                          
                          
                          23,817Net
      Income per Share:Basic
                          
                          $
                          .19
                          
                          
                          $
                          .12
                          
                          
                          $
                          .18
                          
                          
                          $
                          .28
                          
                          
                          $
                          .78Diluted
                          
                          $
                          .19
                          
                          
                          $
                          .12
                          
                          
                          $
                          .18
                          
                          
                          $
                          .27
                          
                          
                          $
                          .76Average
      Common SharesOutstanding:Basic
                          
                          
                          30,654
                          
                          
                          
                          30,656
                          
                          
                          
                          30,656
                          
                          
                          
                          30,647
                          
                          
                          
                          30,666Diluted
                          
                          
                          30,930
                          
                          
                          
                          31,087
                          
                          
                          
                          31,018
                          
                          
                          
                          30,932
                          
                          
                          
                          31,004


Item
9.  Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure





Not
applicable.





Item
9A. Controls and Procedures.





Evaluation
of Disclosure Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer have reviewed and evaluated the
effectiveness of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rule 13a-15(e)) as of the end of the period
covered by this annual report on Form 10-K (the “Evaluation
Date”).  Based on their review and evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of the Evaluation
Date, our disclosure controls and procedures were adequate and effective to
ensure that material information relating to our Company and its consolidated
subsidiaries would be made known to them by others within those entities, so
that such material information is recorded, processed and reported in a timely
manner, particularly during the period in which this annual report on Form 10-K
was being prepared, and that no changes were required at this
time.


45





Management’s
Annual Report on Internal Control over Financial Reporting





The
management of Inter Parfums, Inc. is responsible for establishing and
maintaining adequate internal control over financial reporting for the company.
With the participation of the Chief Executive Officer and the Chief Financial
Officer, our management conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework and criteria
established in Internal
Control – Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, our
management has concluded that our internal control over financial reporting was
effective as of December 31, 2008.





Our
independent auditor, Mazars LLP, a registered public accounting firm, has issued
its report on its audit of our internal control over financial reporting. This
report appears below.





Report of Independent
Registered Public Accounting Firm on Internal Control Over Financial
Reporting





Board of
Directors and Shareholders


Inter
Parfums, Inc.





We have
audited Inter Parfums, Inc.’s internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  Inter Parfums, Inc.’s management is
responsible for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Annual Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on
the company’s internal control over financial reporting based on our
audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances.  We believe that our audit provides a
reasonable basis for our opinion.


46





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of the changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





In our
opinion, Inter Parfums, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).





We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Inter
Parfums, Inc. as of December 31, 2008 and 2007 and the related consolidated
statements of income, changes in shareholders’ equity and comprehensive income,
and cash flows for each of the years in the three-year period ended December 31,
2008 and our report dated March 11, 2009 expressed an unqualified opinion
thereon.





Mazars
LLP





New York,
New York


March 11,
2009





Item
9A(T). Controls and Procedures.





Not
Applicable.





Item 9B. Other
Information.





None.


47


PART
III





Item
10.  Directors and Executive Officers Of the Registrant





Executive
Officers and Directors





As of the
date of this report, our executive officers and directors were as
follows:





Name
                
                PositionJean
      Madar
                
                Chairman
      of the Board, Chief Executive Officer of Inter Parfums, Inc.
      and
                  Director
      General of Inter Parfums, S.A.Philippe
      Benacin
                
                Vice
      Chairman of the Board, President of Inter Parfums, Inc. and
                  Chief
      Executive Officer of Inter Parfums, S.A.Russell
      Greenberg
                
                Director,
      Executive Vice President and Chief Financial OfficerPhilippe
      Santi
                
                Director,
      Executive Vice President and Director General Delegué, Inter Parfums,
      S.A.Francois
      Heilbronn
                
                DirectorJean
      Levy
                
                DirectorRobert
      Bensoussan-Torres
                
                DirectorSerge
      Rosinoer
                
                DirectorPatrick
      Choël
                
                DirectorHugues
      de la Chevasnerie
                
                Director
      of Burberry Fragrances, Inter Parfums, S.A.Frederic
      Garcia-Pelayo
                
                Director
      of the Luxury and Fashion division of Inter Parfums,
      S.A.Axel
      Marot
                
                Director
      of Production & Logistics, Inter Parfums, S.A.Henry
      B. (“Andy”) Clarke
                
                President
      of Specialty Retail Division, Inter Parfums USA,
  LLC





Our directors will serve until the next
annual meeting of stockholders and thereafter until their successors shall have
been elected and qualified. Messrs. Jean Madar and Philippe Benacin have a
verbal agreement or understanding to vote their shares in a like manner. As
Messrs. Madar and Benacin beneficially own more than 50% of the outstanding
shares of the Inter Parfums’ common stock, Inter Parfums is considered a
“controlled company” under the applicable rules of The Nasdaq Stock
Market.





With the
exception of Mr. Benacin, the officers are elected annually by the
directors and serve at the discretion of the board of
directors.  There are no family relationships between executive
officers or directors of our Company.





Board
of Directors





Our board
of directors has the responsibility for establishing broad corporate policies
and for the overall performance of our Company. Although certain directors are
not involved in day-to-day operating details, members of the board of directors
are kept informed of our business by various reports and documents made
available to them. Our board of directors held 19 meetings (or executed consents
in lieu thereof), including meetings of committees of the full board of
directors during 2008, and all of the directors attended at least 75% of the
meetings (or executed consents in lieu thereof) of the full board of directors
and committees of which they were a member.


48





During
2008 our board of directors initially consisted of eleven (11) directors. During
October 2008 Mr. Jean Cailliau stepped down from our board for personal reasons,
and during January 2009 Mr. Joseph A. Caccamo stepped down from our board for
personal reasons. Neither director had any disputes or disagreements with our
company. Our board of directors presently consists of nine (9) directors, with a
majority of independent directors.





We have
adopted a Code of Business Conduct, and we agree to provide to any person
without charge, upon request, a copy of our Code of Business Conduct. Any person
who requests a copy of our Code of Business Conduct should provide their name
and address in writing to: Inter Parfums, Inc., 551 Fifth Avenue, New York, NY
10176, Att.: Shareholder Relations. In addition, our Code of Conduct is also
maintained on our website, at www.interparfumsinc.com.





During
2008 our board of directors had the following standing committees:





·
            Audit
      Committee – The Audit Committee has the sole authority and is directly
      responsible for, the appointment, compensation and oversight of the work
      of the independent accountants employed by our company which prepare or
      issue an audit report for our company. During 2008, the Audit Committee
      consisted of Messrs. Heilbronn, Levy and
Choël.





The Audit
Committee does not have a member who is an “Audit Committee Financial Expert” as
such term is defined under the applicable rules and regulations. However, as the
result of the background, education and experience of the members of the Audit
Committee, our board of directors believes that such committee members are fully
qualified to fulfill their obligations as members of the Audit
Committee.





·
            Executive
      Compensation and Stock Option Committee – The Executive Compensation and
      Stock Option Committee oversees the compensation of our company’s
      executives and administers our company’s stock option plans. During 2008,
      the members of such committee consisted of Messrs. Heilbronn, Levy and
      Choël. We presently do not have a separate charter for our Executive
      Compensation and Stock Option
Committee.





Our board
of directors does not maintain a standing nominating committee or a committee
performing similar functions. In view of the agreement and understanding of
Messrs. Jean Madar and Philippe Benacin who beneficially own more than 50% of
the outstanding shares of the Inter Parfums’ common stock and have agreed to
vote their shares in a like manner, our board of directors does not believe it
necessary forour
company to have such a committee. Also as a “controlled company” under the
applicable rules of The Nasdaq Stock Market, we are exempt from the nominating
committee requirements. During 2008, our board of directors as a group agreed to
nominate the same members of the board who had served the prior
year.





Business
Experience





The
following sets forth biographical information as to the business experience of
each executive officer and director of our company for at least the past five
years.


49





Jean
Madar





Jean
Madar, age 48, a Director, has been the Chairman of the Board since our
company’s inception, and is a co-founder of our company with Mr. Philippe
Benacin. From inception until December 1993 he was the President of our company;
in January 1994 he became Director General of Inter Parfums, S.A., our company’s
subsidiary; and in January 1997 he became Chief Executive Officer of our
company. Mr. Madar was previously the managing director of Inter Parfums, S.A.,
from September 1983 until June 1985. At such subsidiary, he had the
responsibility of overseeing the marketing operations of its foreign
distribution, including market research analysis and actual marketing campaigns.
Mr. Madar graduated from The French University for Economic and Commercial
Sciences (ESSEC) in 1983.





Philippe
Benacin





Mr.
Benacin, age 50, a Director, has been the Vice Chairman of the Board since
September 1991, and is a co-founder of our company with Mr. Madar. He was
elected the Executive Vice President in September 1991, Senior Vice President in
April 1993, and President of the Company in January 1994.  In
addition, he has been the President of Inter Parfums, S.A. for more than the
past five years.  Mr. Benacin graduated from The French University for
Economic and Commercial Sciences (ESSEC) in 1983.





Russell
Greenberg





Mr.
Greenberg, age 52, the Chief Financial Officer, was Vice-President, Finance when
he joined the Company in June 1992; became Executive Vice President in April
1993; and was appointed to our board of directors in February 1995. He is a
certified public accountant licensed in the State of New York, and is a member
of the American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants. After graduating from The Ohio State
University in 1980, he was employed in public accounting until he joined our
company in June 1992.





Philippe
Santi





Philippe
Santi, age 47 and a Director since December 1999, is the Director General
Delegué – Executive Vice President of Inter Parfums, S.A. Mr. Santi, who is a is
a Certified Accountant and Statutory Auditor in France, has been the Chief
Financial Officer of Inter Parfums, S.A. since February 1995. Prior to February
1995, Mr. Santi was the Chief Financial Officer for Stryker France and an Audit
Manager for Ernst and Young.





Francois
Heilbronn





Mr.
Heilbronn, age 48, a Director since 1988, an independent director and a member
of the Audit Committee and the Executive Compensation and Stock Option
Committee, is a graduate of Harvard Business School with a Master of Business
Administration degree and is currently the managing partner of the consulting
firm of M.M. Friedrich, Heilbronn & Fiszer. He was formerly employed by The
Boston Consulting Group, Inc. from 1988 through 1992 as a manager. Mr. Heilbronn
graduated from Institut D' Etudes Politiques De Paris in June 1983. From 1984 to
1986, he worked as a financial analyst for Lazard Freres &
Co.


50





Jean
Levy





Jean
Levy, age 76, a Director since August 1996, an independent director and a member
of the Audit Committee and the Executive Compensation and Stock Option
Committee, worked for twenty-seven years at L'Oreal, and was the President and
Chief Executive Officer of Cosmair, the exclusive United States licensee of
L'Oreal, from 1983 through June 1987. In addition, he is the former President
and Chief Executive Officer of Sanofi Beaute (France). For the more than the
past five years, Mr. Levy has been an independent advisor as well as a
consultant for economic development to local governments in France. A graduate
of l'Institut d'Etudes Politiques de Paris, he also attended Yale Graduate
School and was a recipient of a Fulbright Scholarship.  He was also a
Professor at l'Institut d'Etudes Politiques de Paris. He was formerly a director
of  Zannier Group  and Escada Beaute Worldwide and Rallye,
S.A. In addition, Mr. Levy was also a director (Chairman of the Board until
October 2001) of Financière d'Or, and its subsidiary, Histoire d'Or which is in
the retail jewelry business. Mr. Levy was formerly a consultant to Ernst &
Young, Paris through 2004. He is currently a board member of Price Minister, an
internet based retailer located in Paris.





Robert
Bensoussan-Torres





Robert
Bensoussan-Torres, age 51, has been a Director since March 1997, and also is an
independent director. Mr. Bensoussan is the co-founder of Sirius Equity, a
retail and branded luxury goods investment company. In November 2001, he became
the Chief Executive Officer of Jimmy Choo Ltd., a luxury shoe and ready to wear
accessory company. In 2007 Jimmy Choo Ltd. was sold to a private equity firm.
From 1999 to December 2000, he was the Managing Director of Gianfranco Ferre
fashion group, based in Milano, Italy. Previously Mr. Bensoussan-Torres was a
Director of Towers Consulting Europe, Ltd. Towers Consulting Europe, Ltd. is a
consulting company based in London, which specializes in strategic advise in
connection with mergers and acquisitions in the luxury goods business. Mr.
Bensoussan-Torres was the Chief Executive Officer of Christian Lacroix, Paris, a
subsidiary of LVMH Group, from February 1993 until May 1998. Christian Lacroix
is a French Haute Couture House and has activities in the field of apparel,
accessories and fragrances. From December 1990 through January 1993 he was based
in Munich, Germany, as the International Sales Director of The Escada
Group.





Serge
Rosinoer





Mr. Rosinoer, age 78, was appointed to
our board of directors in December 2000, as an independent director. Mr.
Rosinoer has devoted most of his career to the personal care, cosmetics and
fragrance industry.  Mr. Serge Rosinoer is presently the Chairman of
the Supervisory Board of Clarins SA.  In 1978, Mr. Rosinoer joined the
Clarins Group as Vice President and Chief Operating Officer where he was largely
responsible for its rapid international expansion.  As COO, then CEO
since 1978, Mr. Rosinoer oversaw the transformation of Clarins into a major
force in cosmetics, skin care and fragrance, with annual sales of approximately
600 million Euro and more than 4,000 employees.  He retired from
active duty in June of 2000, but continues to serve on the board of directors of
Clarins.  Earlier in his career he was President of Parfums
Corday.  He also held senior level executive positions at Max Factor,
where he had full supervision of that cosmetics company’s European production
and sales. Mr. Rosinoer has served several terms as President of the French
Prestige Cosmetics Association and currently serves as Conseiller du Commerce
Extérieur de la France.


51





Patrick
Choël





Mr. Choël, age 65, was appointed to the
board of directors in June 2006 as an independent director, and is a member of
both the Audit Committee and the Executive Compensation and Stock Option
Committee. Mr. Choël is the manager of Université 82, a business consultant and
advisor. For approximately 10 years, through March 2004, Mr. Choël worked as the
President and CEO of two divisions of LVMH, first the LVMH Perfumes and
Cosmetics Division, which included such well known brands as Parfums Christian
Dior, Guerlain, and Parfums Givenchy, among others, and later, Parfums Christian
Dior, a leading world-wide prestige beauty/fragrances business. Prior to such
time, for approximately 30 years, he work at various executive positions at
Unilever, including President and CEO of Elida Fabergé France and President and
CEO of Chesebrough Pond’s USA.





Hugues de la
Chevasnerie





Hugues de la Chevasnerie, age 40,
became the Director of Burberry Fragrances in December 2006. Prior to joining
Burberry Fragrances, Mr. Chevasnerie was from February 2002 the Vice President
of International Marketing, Davidoff & Chloé, at Coty Inc. From 1994 to
2002, he held various positions at LVMH- Parfums Christian Dior, including Group
Head for Men’s Perfumes from 1999 to 2002.





Frederic
Garcia-Pelayo





Frederic
Garcia-Pelayo, age 50, became the Director of the Luxury and Fashion division of
Inter Parfums, S.A. in March 2005. He was previously the Director of Marketing
and Distribution for Perfume and Cosmetics for Inter Parfums, S.A. and was named
Executive Vice President in 2004. Previously Mr. Garcia-Pelayo was the Director
of Export Sales of Inter Parfums, S.A. from September 1994. Prior to September
1994, Mr. Garcia-Pelayo was the Export Manager for Benetton Perfumes for seven
(7) years.





Axel
Marot





Axel
Marot, age 35, was the Supply Chain Manager when he joined Inter Parfums, S.A.
in 2003 and has been the Director of Operations for Inter Parfums, S.A. since
January 2005. Prior to joining Inter Parfums, S.A., Mr. Marot was a Supply Chain
Manager for Nestlé.


52


Andy
Clarke





Henry B. “Andy” Clarke, age 48, was
appointed as President of Inter Parfums USA, LLC – Specialty Retail Division in
January 2008, which presently encompasses fragrance and personal care products
produced for Gap, Banana Republic, New York & Company, Brooks Brothers and
bebe.  Mr. Clarke has been employed by our company since 2001. Prior
to joining the Company Mr. Clarke had spent seventeen years in the beauty
business in various capacities.




Section
16(a) Beneficial Ownership Reporting Compliance





Based solely upon a review of Forms 3,
4 and 5 and any amendments to such forms furnished to us, and written
representations from various reporting persons furnished to us, we are not aware
of any reporting person who has failed to file the reports required to be filed
under Section 16(a) of the Securities Exchange Act of 1934 on a timely basis,
except for each of Messrs. Benacin and Madar, who each filed one Form 4, 15 days
late in October 2008 reporting one sale of 61 shares.





Item
11.  Executive Compensation





The
following table sets forth a summary of all compensation awarded to, earned by
or paid to, our Chief Executive Officer, our Chief Financial Officer, and each
of the 3 most highly compensated executive officers of our Company whose
compensation exceeded $100,000 per annum for services rendered in all capacities
to our Company and its subsidiaries during fiscal years ended December 31, 2008,
December 31, 2007 and December 31, 2006. For all compensation related matters
disclosed in this Item 11, all amounts paid in euro have been converted to US
dollars at the average rate of exchange in each year.


53





SUMMARY
COMPENSATION TABLE





Name and Principal Position
                                                                      
                                                                      Year
                                                                      
                                                                      Salary ($)
                                                                      
                                                                      
                                                                      Bonus ($)
                                                                      
                                                                      
                                                                      Stock
                                                                        Awards ($)
                                                                      
                                                                      
                                                                      Option
                                                                        Awards
                                                                        ($)
                                                                      
                                                                      
                                                                      Non-Equity
                                                                        Incentive Plan
                                                                        Compensation
                                                                        ($)
                                                                      
                                                                      
                                                                      Change in Pension
                                                                        Value and
                                                                        Nonqualified
                                                                        Deferred
                                                                        Compensation
                                                                        Earnings ($)
                                                                      
                                                                      
                                                                      All Other
                                                                        Compensation ($)
                                                                      
                                                                      
                                                                      Total ($)Jean
      Madar,
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      400,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      98,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      498,000Chief
      Executive Officer
                                                                      
                                                                      2007
                                                                      
                                                                      
                                                                      400,000
                                                                      
                                                                      
                                                                      
                                                                      100,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      124,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      429,750
                                                                      1
                                                                      
                                                                      
                                                                      1,053,7502006
                                                                      
                                                                      
                                                                      400,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      252,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      2,974,944
                                                                      2
                                                                      
                                                                      
                                                                      3,626,944Russell
      Greenberg, Chief
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      435,000
                                                                      
                                                                      
                                                                      
                                                                      35,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      37,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      48,214
                                                                      3
                                                                      
                                                                      
                                                                      555,214Financial
      Officer
                                                                      
                                                                      2007
                                                                      
                                                                      
                                                                      405,000
                                                                      
                                                                      
                                                                      
                                                                      43,100
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      98,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      246,590
                                                                      4
                                                                      
                                                                      
                                                                      792,6902006
                                                                      
                                                                      
                                                                      375,000
                                                                      
                                                                      
                                                                      
                                                                      30,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      167,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      304,214
                                                                      5
                                                                      
                                                                      
                                                                      876,214Philippe
      Benacin, President of
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      324,489
                                                                      
                                                                      
                                                                      
                                                                      229,258
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      98,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      11,757
                                                                      
                                                                      
                                                                      
                                                                      227,485
                                                                      6
                                                                      
                                                                      
                                                                      890,989Inter
      Parfums, Inc. and Chief
                                                                      
                                                                      2007
                                                                      
                                                                      
                                                                      263,750
                                                                      
                                                                      
                                                                      
                                                                      170,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      124,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      10,610
                                                                      
                                                                      
                                                                      
                                                                      523,299
                                                                      7
                                                                      
                                                                      
                                                                      1,091,659Executive
      Officer of Inter Parfums, S.A.
                                                                      
                                                                      2006
                                                                      
                                                                      
                                                                      226,206
                                                                      
                                                                      
                                                                      
                                                                      153,174
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      252,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      8,800
                                                                      
                                                                      
                                                                      
                                                                      1,298,801
                                                                      8
                                                                      
                                                                      
                                                                      1,938,981Philippe
      Santi,
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      324,489
                                                                      
                                                                      
                                                                      
                                                                      229,258
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      49,000
                                                                      
                                                                      
                                                                      
                                                                      22,632
                                                                      
                                                                      
                                                                      
                                                                      11,757
                                                                      
                                                                      
                                                                      
                                                                      154,308
                                                                      9
                                                                      
                                                                      
                                                                      791,444Executive
      Vice President and
                                                                      
                                                                      2007
                                                                      
                                                                      
                                                                      263,750
                                                                      
                                                                      
                                                                      
                                                                      216,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      27,474
                                                                      
                                                                      
                                                                      
                                                                      10,610
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      10
                                                                      
                                                                      
                                                                      517,834Director
      General Delegue, Inter
                                                                      
                                                                      2006
                                                                      
                                                                      
                                                                      226,206
                                                                      
                                                                      
                                                                      
                                                                      197,302
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      105,000
                                                                      
                                                                      
                                                                      
                                                                      22,621
                                                                      
                                                                      
                                                                      
                                                                      8,800
                                                                      
                                                                      
                                                                      
                                                                      405,801
                                                                      11
                                                                      
                                                                      
                                                                      965,730Parfums,
      S.A.Frédéric
      Garcia-Pelayo,
                                                                      
                                                                      2008
                                                                      
                                                                      
                                                                      324,489
                                                                      
                                                                      
                                                                      
                                                                      229,258
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      49,000
                                                                      
                                                                      
                                                                      
                                                                      22,632
                                                                      
                                                                      
                                                                      
                                                                      11,757
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      12
                                                                      
                                                                      
                                                                      637,136Director
      Export Sales,
                                                                      
                                                                      2007
                                                                      
                                                                      
                                                                      263,750
                                                                      
                                                                      
                                                                      
                                                                      216,000
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      27,474
                                                                      
                                                                      
                                                                      
                                                                      10,610
                                                                      
                                                                      
                                                                      
                                                                      211,225
                                                                      13
                                                                      
                                                                      
                                                                      729,059Inter
      Parfums, S.A.
                                                                      
                                                                      2006
                                                                      
                                                                      
                                                                      226,206
                                                                      
                                                                      
                                                                      
                                                                      197,302
                                                                      
                                                                      
                                                                      
                                                                      -0-
                                                                      
                                                                      
                                                                      
                                                                      166,000
                                                                      
                                                                      
                                                                      
                                                                      22,621
                                                                      
                                                                      
                                                                      
                                                                      8,800
                                                                      
                                                                      
                                                                      
                                                                      259,956
                                                                      14
                                                                      
                                                                      
                                                                      880,885




54










1
            Consists
      of $429,750 realized upon the exercise of
  options.


2
            Consists
      of $654,500 realized upon the exercise of options, and $2,320,444 realized
      on the exercise of options of Inter Parfums,
  S.A.





3
            Consists
      of $2,214 for automobile expenses and $46,000 realized on the exercise of
      options of Inter Parfums, S.A.


4
            Consists
      of $2,214 for automobile expenses and $166,590 realized upon exercise of
      options and $80,000 realized on the exercise of options of Inter Parfums,
      S.A.


5
            Consists
      of $2,214 for automobile expenses and $235,000 realized upon exercise of
      options and $67,000 realized on the exercise of options of Inter Parfums,
      S.A.





6
            Consists
      of lodging expenses of $88,167, $15,872 for automobile expenses, and
      $123,446 realized upon the exercise of options of Inter Parfums,
      S.A.


7
            Consists
      of lodging expenses of $82,422, $11,127 for automobile expenses, and
      $429,750 realized upon the exercise of
options.


8
            Consists
      of lodging expenses of $75,402, $8,797 for automobile expenses, $654,500
      realized upon the exercise of options, and $560,102 realized on the
      exercise of options of Inter Parfums,
S.A.





9
            Consists
      of $153,308 realized on the exercise of options of Inter Parfums,
      S.A.


10
            Consists
      of $0 realized on the exercise of options of Inter Parfums,
      S.A.


11
              Consists
      of $405,801 realized on the exercise of options of Inter Parfums,
      S.A.





12
            Consists
      of $0 realized on the exercise of options of Inter Parfums,
      S.A.


13
            Consists
      of $211,225 realized on the exercise of options of Inter Parfums,
      S.A.


14
            Consists
      of $259,956 realized on the exercise of options of Inter Parfums,
      S.A.





Compensation
Committee Report





General





The
Executive Compensation and Stock Option Committee oversees the compensation of
our company’s executives and administers our company’s stock option plans. The
members of such committee are Messrs. Heilbronn, Levy and Choël.





During
2008, the Executive Compensation and Stock Option Committee took action 3 times
by the execution of written consents in lieu of meetings.





Compensation
Committee Interlocks and Insider Participation





In
addition to the members of the Executive Compensation Committee, the following
persons participated in discussions concerning executive compensation during
2008: Jean Madar, the Chairman of the Board and Chief Executive Officer;
Philippe Benacin, a Director, President, and Chief Executive Officer of Inter
Parfums, S.A., our company’s indirect French operating subsidiary; Russell
Greenberg, an Executive Vice President, Chief Financial Officer and a Director;
Philippe Santi, the Chief Financial Officer of Inter Parfums, S.A. Generally,
Mr. Madar, the Chairman and Chief Executive Officer, takes the initiative and
recommends executive compensation levels for executives in the United States,
and Mr. Benacin, the Chief Executive Officer of Inter Parfums, S.A., takes the
initiative and recommends for executive compensation levels for executives in
Paris.


55


Objectives





The
objectives of our compensation program are designed to strike a balance between
offering sufficient compensation to either retain existing or attract new
executives on the one hand, and keeping compensation at reasonable levels on the
other hand. Although our business has grown over the past several years as
evidenced by our increased sales and growing portfolio of brand names, we do not
have the resources comparable to the cosmetic giants in our industry, and
accordingly cannot afford to pay excessive executive compensation. In
furtherance of these objectives, our executive compensation packages generally
include a base salary, as well as annual incentives tied to individual
performance and long-term incentives tied to our operating
performance.  Further, Messrs. Madar and Benacin, in addition to being
executive officers and directors, are our largest shareholders’, which aligns
their interests with our shareholder base in keeping executive compensation at a
reasonable level.





Discussion





The
following sets forth information regarding compensation and benefits provided to
our Chief Executive Officer, Chief Financial Officer, each of the 3 most highly
compensated executive officers other than our Chief Executive Officer and Chief
Financial Officer, whose total compensation exceeded $100,000. The executive
officers being discussed for 2008 are: Jean Madar (the Chief Executive Officer),
Russell Greenberg (the Chief Financial Officer), and Philippe Benacin, Philippe
Santi and Frederic Garcia-Pelayo (the three highly compensated officers).
Further, all cash compensation for each of Messrs. Benacin, Santi and
Garcia-Pelayo’s are paid to them in euros by our French operating subsidiary,
and all cash compensation for each of Messrs. Madar and Greenberg are paid from
United States Operations.





Base
Salary





Base
salaries for executive officers are initially determined by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive market place for executive talent. Base salaries
for executive officers are reviewed on an annual basis, and adjustments are
determined by evaluating our operating performance, the performance of each
executive officer, as well as whether the nature of the responsibilities of the
executive has changed.





As stated
above, Mr. Madar, the Chairman and Chief Executive Officer, takes the initiative
and recommends executive compensation levels for executives in the United
States, and Mr. Benacin, the President of Inter Parfums, S.A., takes the
initiative and recommends for executive compensation levels for executives in
Paris.





Mr.
Madar, the Chief Executive Officer, did not receive an increase in his base
salary, which has been maintained at the same level of $400,000 for the past
several years.





Upon
recommendation of our Chairman and Chief Executive Officer, the Executive
Compensation and Stock Option Committee determined to increase the base salary
of Mr. Greenberg, the Chief Financial Officer, by $30,000 from $405,000 to
$435,000, a 7.4%   increase. Mr. Greenberg has received the same
salary increase of $30,000 for the past four years.


56





Upon the
recommendation of Mr. Benacin, the base salaries of Mr. Philippe Santi, the
Chief Financial Officer of Inter Parfums, S.A., and Mr. Frederic Garcia-Pelayo,
were each increased from 192,000 euros in 2007 to 220,800 euros in 2008, a 15%
increase. Likewise, Mr. Benacin’s base compensation was increased from 192,000
euros in 2007 to 220,800 euros in 2008. In 2007 Mr. Hugues de la Chevasnerie
became the Director, Burberry Fragrances. His base salary for 2007 was set at
150,000 euros, which was increased to 163,200 euros in 2008, an increase of
8.8%.





After a
thorough review, the Chairman and Chief Executive Officer determined that the
base salaries paid to such executives were fair in the view of their
responsibilities, length of service with us, performance and compensation levels
to peers, as to which the Executive Compensation and Stock Option Committee
concurs.





Bonus
Compensation/ Annual Incentives





As the result of their efforts in
increasing the profitability of our company, bonuses were awarded as follows.
For European operations, each of Messrs. Benacin, Santi and Garcia-Pelayo
received a cash bonus of $229,258 (156,000 euros). These cash bonuses were
comparable with the bonuses paid during 2007, as each of Messrs. Santi and
Garcia-Pelayo received a cash bonus of $216,000 (157,000 euros) and Mr. Benacin
received a cash bonus of $170,000 (124,000 euros).





For United States operations, Mr.
Greenberg received a cash bonus of $35,000 for 2008 as compared to a cash bonus
of $43,100 for 2007. In order for Mr. Madar to receive a cash bonus, United
States operations has to achieve after tax profit target. In 2008, based upon
such targets, our Chief Executive Officer did not earn any cash bonus. In 2007,
based upon such targets, our Chief Executive Officer earned a $100,000 cash
bonus. The Executive Compensation Committee has determined to use the same after
tax profit target for our company’s United States operations to calculate Mr.
Madar’s bonus for 2009.





Long
Term Incentives





We link
long-term incentives with corporate performance through the grant of stock
options. All options are granted with an exercise price equal to the fair market
value of the underlying shares of our common stock on the date of grant, and
terminate on or shortly after severance of the executive’s relationship with us.
Unless the market price of our common stock increases, corporate executives will
have no tangible benefit. Thus, they are provided with the additional incentive
to increase individual performance with the ultimate goal of increased our
overall performance. In addition, Inter Parfums, S.A. maintains a profit sharing
plan for its employees. We believe that enhanced executive incentives which
result in increased corporate performance tend to build company loyalty. As a
general rule, the number of options granted is determined by several factors,
but most importantly, both individual and company operating results for the past
year, as well as past option grants to such executives.


57


In December 2008, upon the
recommendation of the company’s Chief Executive Officer, the Executive
Compensation and Stock Option Committee granted options to purchase a total of
19,000 shares of our common stock to each of Jean Madar and Philippe
Benacin, and 15,000 shares to Mr. Greenberg, all at the fair market value on the
date of grant.





During
2007 and in early 2008, upon the recommendation of the company’s Chief Executive
Officer, the Executive Compensation and Stock Option Committee granted options
to purchase a total of 42,375 shares of our common stock to each of Jean Madar
and Philippe Benacin, 22,500 shares to Mr. Greenberg, and 12,750 to each of
Messrs. Santi and Garcia-Pelayo, all at the fair market value on the date of
grant.





Option
grants made in 2008 and 2007 were reduced from the option grants made during
2006, when Messrs. Madar and Benacin received options to purchase 60,000 shares,
and Mr. Greenberg received options to purchase 37,500 shares. However, option
grants were increased for Messrs. Santi and Garcia-Pelayo who each received
options to purchase 7,500 shares as they no longer receive option grants from
Inter Parfums, S.A.





For
executive officers of United States operations and Mr. Benacin, we typically
grant nonqualified stock options with a term of 6 years that vest ratably of a
5-year period on a cumulative basis, so that the option will become fully
exercisable at the beginning of the sixth year from the date of grant. In
addition, we have discontinued all option grants to purchase shares of our
majority-owned, French subsidiary, Inter Parfums, S.A. to avoid diluting our
ownership interest in Inter Parfums, S.A., and we intend to continue this
practice in the future to avoid further dilution. In lieu of option grants to
purchase shares of our majority-owned, French subsidiary, we have granted
options to our French executive officers and employees under the French Addendum
to our stock option plan, which have a term of 6 years and vest 4 years after
the date of grant.





We
believe that the vesting period of these options serves a dual purpose: 1.
executives will not receive any benefit if they leave prior to such portion of
the option vesting; and 2. having a vesting period matches the service period
with the potential benefits of the option. Further, under our stock option plan,
non-qualified stock options granted to executives terminate immediately upon the
executive’s termination of association with our company. This termination
provision coupled with vesting may reduce certain benefits afforded to an
executive when an executive officer leaves our employ.





Previously,
over the past few years as our company has grown and the market price or our
common stock has increased, Messrs. Madar and Benacin have realized substantial
compensation as the result of the exercise of their options. As the two
executives most responsible for continued growth and success of our company, the
Committee believes the granting of options is an appropriate tool to tie a
substantial portion of their compensation to the success of our company and is
completely warranted.


58


Unfortunately, with the global economic
downturn commencing in the fourth quarter of 2008, the market price of our
common stock as reported by The Nasdaq Stock Market has decreased substantially.
As the result of such price decline, all outstanding options, other than the
option grants made on December 31, 2008, have exercise prices which are in
excess of the market price, thus rendering such option potentially worthless. It
is the hope of the Executive Compensation and Stock Option Committee that the
most recent option grant with a lower exercise price based upon the market price
at the time, as compared to prior years, will still act as a sufficient
additional incentive for increased individual executive performance. In
addition, Inter Parfums, SA maintains its own profit sharing plan and a
relatively small pension plan, which provide long term benefits to the executive
officers of our European operations.





Conclusion





The
actual compensation realized as the result of the exercise of options in the
past, as well as the future potential of such rewards, are powerful incentives
for increased individual performance and ultimately increased company
performance. In view of the fact that the executive officers named above
contribute significantly to our profitable operations, the Executive
Compensation and Stock Option Committee believes the option grants are valid
incentives for these executive officers and are fair to our
shareholders.





The
Executive Compensation and Stock Option Committee believes that its present
policies to date, with its emphasis on rewarding performance, has served to
focus the efforts of our executives to achieve a high rate of growth and
profitability, which management believes will result in a substantial increase
in value to our shareholders.





Francois Heilbronn


Jean Levy and


Patrick Choël





Plan
Based Awards





The
following table sets certain information relating to each grant of an award made
to the executive officers of our company listed in the Summary Compensation
Table during the past fiscal year.





Grants
of Plan-Based Awards




Estimated Future Payouts
                                                      Under Non-Equity Incentive
                                                      Plan Awards
                                                    
                                                    
                                                    Estimated Future Payouts
                                                      Under Equity Incentive Plan
                                                      Awards
                                                    
                                                    
                                                    All
                                                      Other
                                                      Stock
                                                      Awards:
                                                      Number
                                                      Of
                                                      Shares
                                                      of Stock
                                                    
                                                    
                                                    All Other
                                                      Option
                                                      Awards:
                                                      Number of
                                                      Securities
                                                      Underlying
                                                    
                                                    
                                                    Exercise
                                                      Or
                                                      Base
                                                      Price of
                                                      OptionName
                                                    
                                                    Grant
                                                      Date
                                                    
                                                    Threshold
                                                      ($)
                                                    
                                                    
                                                    Target
                                                      ($)
                                                    
                                                    
                                                    Maximum
                                                      ($)
                                                    
                                                    
                                                    Threshold
                                                      ($)
                                                    
                                                    
                                                    Target
                                                      ($)
                                                    
                                                    
                                                    Maximum
                                                      ($)
                                                    
                                                    
                                                    or Units
                                                      (#)
                                                    
                                                    
                                                    Options
                                                      (#)
                                                    
                                                    
                                                    Awards
                                                      ($/Sh)Jean
      Madar
                                                    
                                                    12/31/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    19,000
                                                    
                                                    
                                                    
                                                    6.925Jean
      Madar
                                                    
                                                    2/14/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    13,875
                                                    
                                                    
                                                    
                                                    11.297Russell
      Greenberg
                                                    
                                                    12/31/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    15,000
                                                    
                                                    
                                                    
                                                    6.925Philippe
      Benacin
                                                    
                                                    12/31/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    19,000
                                                    
                                                    
                                                    
                                                    6.925Philippe
      Benacin
                                                    
                                                    2/14/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    13,875
                                                    
                                                    
                                                    
                                                    11.297Philippe
      Santi
                                                    
                                                    2/14/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    12,750
                                                    
                                                    
                                                    
                                                    11.297Frédéric
      Garcia-Pelayo
                                                    
                                                    2/14/08
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    12,750
                                                    
                                                    
                                                    
                                                    11.297


59


As
discussed above, we typically grant nonqualified stock options with a term of 6
years that vest ratably of a 5-year period on a cumulative basis, so that the
option will become fully exercisable at the beginning of the sixth year from the
date of grant. Further, as reported above, options granted to French employees
under the French Addendum to our stock option plan, have a term of 6 years, and
vest 4 years after the date of grant.





We
believe that the vesting period of these options serves a dual purpose: 1.
executives will not receive any benefit if they leave prior to such portion of
the option vesting; and 2. having a vesting period matches the service period
with the potential benefits of the option.





Options were granted in February 2008
after the technical amendments to our stock option plan to comply with certain
provisions of French law.





Outstanding
Equity Awards At Fiscal Year-End





The
following table sets certain information relating to outstanding equity awards
in our company held by the executive officers of our company listed in the
Summary Compensation Table as of the end of the past fiscal year.





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END





Option AwardsName
                                                                                  
                                                                                  Number of
                                                                                    Securities
                                                                                    Underlying
                                                                                    Unexercised
                                                                                    Options (#)
                                                                                    Exercisable
                                                                                  
                                                                                  
                                                                                  Number of
                                                                                    Securities
                                                                                    Underlying
                                                                                    Unexercised
                                                                                    Options (#)
                                                                                    Unexercisable
                                                                                  
                                                                                  
                                                                                  Equity Incentive Plan
                                                                                    Awards: Number of
                                                                                    Securities Underlying
                                                                                    Unexercised Unearned
                                                                                    Options (#)
                                                                                  
                                                                                  
                                                                                  Option
                                                                                    Exercise
                                                                                    Price
                                                                                    ($)
                                                                                  
                                                                                  Option
                                                                                    Expiration
                                                                                    DateJean
      Madar
                                                                                  
                                                                                  
                                                                                  75,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  10.260
                                                                                  
                                                                                  12/09/0975,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  9.967
                                                                                  
                                                                                  04/19/1024,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/1236,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/125,700
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  12.577
                                                                                  
                                                                                  12/26/1322,800
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  12.577
                                                                                  
                                                                                  12/26/132,775
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  11.297
                                                                                  
                                                                                  2/13/1411,100
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  11.297
                                                                                  
                                                                                  2/13/1419,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  6.925
                                                                                  
                                                                                  12/30/14Russell
      Greenberg
                                                                                  
                                                                                  
                                                                                  37,500
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  10.260
                                                                                  
                                                                                  12/09/0937,500
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  9.967
                                                                                  
                                                                                  04/19/1015,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/1222,500
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/124,500
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  12.577
                                                                                  
                                                                                  12/26/1318,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  12.577
                                                                                  
                                                                                  12/26/1315,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  6.925
                                                                                  
                                                                                  12/30/14Philippe
      Benacin
                                                                                  
                                                                                  
                                                                                  75,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  10.260
                                                                                  
                                                                                  12/09/0975,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  9.967
                                                                                  
                                                                                  04/19/1024,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/1236,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/125,700
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  12.577
                                                                                  
                                                                                  12/26/1322,800
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  12.577
                                                                                  
                                                                                  12/26/132,775
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  11.297
                                                                                  
                                                                                  2/13/1411,100
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  11.297
                                                                                  
                                                                                  2/13/1419,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  6.925
                                                                                  
                                                                                  12/30/14Philippe
      Santi
                                                                                  
                                                                                  
                                                                                  15,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  16.827
                                                                                  
                                                                                  02/12/0911,250
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  10.260
                                                                                  
                                                                                  12/09/0911,250
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  9.967
                                                                                  
                                                                                  04/19/103,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/124,500
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/1212,750
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  11.297
                                                                                  
                                                                                  2/13/14Frédéric
      Garcia-Pelayo
                                                                                  
                                                                                  
                                                                                  3,000
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/124,500
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  13.103
                                                                                  
                                                                                  12/14/1212,750
                                                                                  
                                                                                  
                                                                                  
                                                                                  -0-
                                                                                  
                                                                                  
                                                                                  
                                                                                  11.297
                                                                                  
                                                                                  2/13/14


60





As
discussed above, we typically grant nonqualified stock options with a term of 6
years that vest ratably of a 5-year period on a cumulative basis, so that the
option will become fully exercisable at the beginning of the sixth year from the
date of grant. Further, as reported above, options granted to French employees
under the recent technical amendment to our stock option plan, have a term of 6
years, and vest 4 years after the date of grant.





We
believe that the vesting period of these options serves a dual purpose: 1.
executives will not receive any benefit if they leave prior to such portion of
the option vesting; and 2. having a vesting period matches the service period
with the potential benefits of the option.





Options were granted in February 2008
after the technical amendments to our 2004 Stock Option Plan to comply with
certain provisions of French law.





The
following table sets certain information relating to outstanding equity awards
granted by Inter Parfums, S.A. held by the executive officers of our company
listed in the Summary Compensation Table as of the end of the past fiscal
year.





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END


OF
INTER PARFUMS, S.A.





Option AwardsName
                                                                          
                                                                          Number of Securities
                                                                            Underlying
                                                                            Unexercised Options
                                                                            (#) Exercisable
                                                                          
                                                                          
                                                                          Number of Securities
                                                                            Underlying
                                                                            Unexercised Options
                                                                            (#) Unexercisable
                                                                          
                                                                          
                                                                          Option
                                                                            Exercise Price
                                                                            (euros)
                                                                          
                                                                          Option Expiration
                                                                            DateJean
      Madar
                                                                          
                                                                          
                                                                          14,641
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          15.10
                                                                          
                                                                          08/26/0920,498
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          22.10
                                                                          
                                                                          03/25/1014,641
                                                                          
                                                                          
                                                                          
                                                                          20.60
                                                                          
                                                                          05/26/1113,310
                                                                          
                                                                          
                                                                          
                                                                          26.30
                                                                          
                                                                          06/01/12Russell
      Greenberg
                                                                          
                                                                          
                                                                          3,222
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          9.20
                                                                          
                                                                          08/26/091,318
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          15.10
                                                                          
                                                                          08/26/091,172
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          22.10
                                                                          
                                                                          03/25/101,464
                                                                          
                                                                          
                                                                          
                                                                          20.60
                                                                          
                                                                          05/26/111,065
                                                                          
                                                                          
                                                                          
                                                                          26.30
                                                                          
                                                                          06/01/12Philippe
      Benacin
                                                                          
                                                                          
                                                                          14,641
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          15.10
                                                                          
                                                                          08/26/0920,497
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          22.10
                                                                          
                                                                          03/25/1014,641
                                                                          
                                                                          
                                                                          
                                                                          20.60
                                                                          
                                                                          05/26/1113,310
                                                                          
                                                                          
                                                                          
                                                                          26.30
                                                                          
                                                                          06/01/12Philippe
      Santi
                                                                          
                                                                          
                                                                          7,321
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          15.10
                                                                          
                                                                          08/26/0910,542
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          22.10
                                                                          
                                                                          03/25/108,785
                                                                          
                                                                          
                                                                          
                                                                          20.60
                                                                          
                                                                          05/26/117,986
                                                                          
                                                                          
                                                                          
                                                                          26.30
                                                                          
                                                                          06/01/12Frédéric
      Garcia-Pelayo
                                                                          
                                                                          
                                                                          7,331
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          9.20
                                                                          
                                                                          08/26/097,321
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          15.10
                                                                          
                                                                          08/26/0910,542
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          22.10
                                                                          
                                                                          03/25/108,785
                                                                          
                                                                          
                                                                          
                                                                          20.60
                                                                          
                                                                          05/26/117,986
                                                                          
                                                                          
                                                                          
                                                                          26.30
                                                                          
                                                                          06/01/12


61





Option
Exercises and Stock Vested





The
following table sets forth certain information relating to each option exercise
effected during the past fiscal year, and each vesting of stock, including
restricted stock, restricted stock units and similar instruments of our company
during the past fiscal year, for the executive officers of our company listed in
the Summary Compensation Table.





OPTION
EXERCISES AND STOCK VESTED





Option Awards
                  
                  
                  Stock AwardsName
                  
                  Number of
                    Shares Acquired
                    on Exercise
                    (#)
                  
                  
                  Value Realized on
                    Exercise
                    ($)1
                  
                  
                  Number of Shares
                    Acquired on
                    Vesting
                    (#)
                  
                  
                  Value Realized
                    On Vesting
                    ($)Jean
      Madar
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-Russell
      Greenberg
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-Philippe
      Benacin
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-Philippe
      Santi
                  
                  
                  11,250
                  
                  
                  $
                  58,275
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-Frédéric
      Garcia-Pelayo
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-




[Footnotes from
table above]





1
            Total
      value realized on exercise of options in dollars is based upon the
      difference between the fair market value of the common stock on the date
      of exercise, and the exercise price of the
  option.





The
following table sets forth certain information relating to each option exercise
effected during the past fiscal year, and each vesting of stock, including
restricted stock, restricted stock units and similar instruments during the past
fiscal year, of Inter Parfums, S.A., for the executive officers of our company
listed in the Summary Compensation Table.


62





OPTION
EXERCISES AND STOCK VESTED





Option Awards
                      
                      
                      Stock AwardsName
                      
                      Number of
                        Shares Acquired
                        on Exercise
                        (#)
                      
                      
                      Value Realized on
                        Exercise
                        ($)1
                      
                      
                      Number of Shares
                        Acquired on
                        Vesting
                        (#)
                      
                      
                      Value Realized
                        On Vesting
                        ($)Jean
      Madar
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Philippe
      Benacin
                      
                      
                      6,067
                      
                      
                      
                      123,446
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Russell
      Greenberg
                      
                      
                      3,627
                      
                      
                      
                      46,000
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Philippe
      Santi
                      
                      
                      10,631
                      
                      
                      
                      154,308
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Frédéric
      Garcia-Pelayo
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-




[Footnotes from
table above]





1
            Total
      value realized on exercise of options in dollars is based upon the
      difference between the fair market value of the common stock on the date
      of exercise, and the exercise price of the
  option.





Pension
Benefits





The
following table sets forth certain information relating to payment of benefits
following or in connection with retirement during the past fiscal year, for the
executive officers of our company listed in the Summary Compensation
Table.





PENSION
BENEFITS





Name
                                  
                                  Plan Name
                                  
                                  Number of Years
                                    Credited Service
                                    (#)
                                  
                                  Present Value of
                                    Accumulated
                                    Benefit
                                    ($)
                                  
                                  
                                  Payments During
                                    Last Fiscal Year
                                    ($)Jean
      Madar
                                  
                                  NA
                                  
                                  NA
                                  
                                  
                                  -0-
                                  
                                  
                                  
                                  -0-Russell
      Greenberg
                                  
                                  NA
                                  
                                  NA
                                  
                                  
                                  -0-
                                  
                                  
                                  
                                  -0-Philippe
      Benacin
                                  
                                  Inter
      Parfums SA
                                    Pension
      Plan
                                  
                                  NA
                                  
                                  
                                  106,000
                                  
                                  
                                  
                                  11,757Philippe
      Santi
                                  
                                  Inter
      Parfums SA
                                    Pension
      Plan
                                  
                                  NA
                                  
                                  
                                  106,000
                                  
                                  
                                  
                                  11,757Frédéric
      Garcia-Pelayo
                                  
                                  Inter
      Parfums SA
                                    Pension
      Plan
                                  
                                  NA
                                  
                                  
                                  106,000
                                  
                                  
                                  
                                  11,757


63


Nonqualified
Deferred Compensation





We do not maintain any nonqualified
deferred compensation plans.





Employment
Agreements





As part
of our acquisition in 1991 of the controlling interest in Inter Parfums, S.A.,
now a subsidiary, we entered into an employment agreement with Philippe Benacin.
The agreement provides that Mr. Benacin will be employed as Vice Chairman of the
Board and President and Chief Executive Officer of Inter Parfums Holdings and
its subsidiary, Inter Parfums. The initial term expired on September 2, 1992,
and has subsequently been automatically renewed for additional annual periods.
The agreement provides for automatic annual renewal terms, unless either party
terminates the agreement upon 120 days notice. For 2009 Mr. Benacin presently
receives an annual salary of €229,600 (approximately $298,480, plus annual
lodging expenses of €60,000 (approximately $78,000) and automobile expenses of
€10,800 (approximately $14,040), which are subject to increase in the discretion
of the board of directors. The agreement also provides for indemnification and a
covenant not to compete for one year after termination of
employment.





Compensation
of Directors





The following table sets forth certain
information relating to the compensation for each of our directors who is not an
executive officer of our Company named in the Summary Compensation Table for the
past fiscal year.





DIRECTOR
COMPENSATION





Name
                  
                  Fees
                    Earned
                    or Paid
                    in Cash
                    ($)
                  
                  
                  Stock
                    Awards
                    ($)
                  
                  
                  Option
                    Awards
                    ($)
                  
                  
                  Non-Equity
                    Incentive Plan
                    Compensation
                    ($)
                  
                  
                  Change in
                    Pension
                    Value and
                    Nonqualified
                    Deferred
                    Compensation
                    Earnings
                  
                  
                  All Other
                    Compensation
                    ($)9
                  
                  
                  Total ($)Francois
      Heilbronn1
                  
                  
                  12,000
                  
                  
                  
                  -0-
                  
                  
                  
                  5,175
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  17,175Joseph
      A. Caccamo 2
                  
                  
                  8,000
                  
                  
                  
                  -0-
                  
                  
                  
                  5,175
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  13,125
                  10Jean
      Levy3
                  
                  
                  12,000
                  
                  
                  
                  -0-
                  
                  
                  
                  5,175
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  7,530
                  
                  
                  
                  24,705Robert
      Bensoussan-Torres4
                  
                  
                  4,000
                  
                  
                  
                  -0-
                  
                  
                  
                  5,175
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  10,620
                  
                  
                  
                  19,795Jean
      Cailliau5
                  
                  
                  4,000
                  
                  
                  
                  -0-
                  
                  
                  
                  5,175
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  9,175Serge
      Rosinoer6
                  
                  
                  4,000
                  
                  
                  
                  -0-
                  
                  
                  
                  2,588
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  7,530
                  
                  
                  
                  14,118Patrick
      Choël7
                  
                  
                  12,000
                  
                  
                  
                  -0-
                  
                  
                  
                  5,175
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  -0-
                  
                  
                  
                  17,175







1.
            As
      of the end of the last fiscal year, Mr. Heilbronn held options to purchase
      an aggregate of 7,500 shares of our common
  stock.


2.
            Mr.
      Caccamo stepped down from the board of directors in January 2009. As of
      the end of the last fiscal year, Mr. Caccamo held options to purchase an
      aggregate of 19,500 shares of our common stock, 7,500 of which are held as
      nominee for his present firm and 12,000 of which are held as nominee for
      his former employer. Mr. Caccamo disclaims beneficial ownership of such
      options. In accordance with the terms of our 2004 Nonemployee Director
      Stock Option Plan, all of such options expire 90 days after Mr. Caccamo
      ceased to be a director.


3.
            As
      of the end of the last fiscal year, Mr. Levy held options to purchase an
      aggregate of 7,500 shares of our common
stock.


64


4.
            As
      of the end of the last fiscal year, Mr. Bensoussan-Torres held options to
      purchase an aggregate of 7,500 shares of our common
  stock.


5.
            Mr.
      Cailliau stepped down from the board of directors in October 2008. As of
      the end of the last fiscal year, Mr. Cailliau held options to purchase an
      aggregate of 4,000 shares of our common stock. . In accordance with the
      terms of our 2004 Nonemployee Director Stock Option Plan, all of such
      options expired 90 days after Mr. Cailliau ceased to be a
      director.


6.
            As
      of the end of the last fiscal year, Mr. Rosinoer held options to purchase
      an aggregate of 6,004 shares of our common
  stock.


7.
            As
      of the end of the last fiscal year, Mr. Choël held options to purchase an
      aggregate of 6,000 shares of our common
stock.


9.
            Represents
      the difference between the exercise price of the option and the fair
      market value of the underlying common stock on the date of
      exercise.


10.
            Does
      not include $223,000 paid for legal fees and expenses to Mr. Caccamo’s law
      firm.





For 2008
all nonemployee directors received $2,000 for each board meeting at which they
participate. Mr. Caccamo’s board fees were paid to his law firm.  In
addition, all members of the Audit Committee receive an additional annual fee of
$4,000 on January 1 of each year in which they serve on the Audit
Committee.





We
maintain stock option plans for our nonemployee directors. The purpose of these
plans is to assist us in attracting and retaining key directors who are
responsible for continuing the growth and success of our company. Under such
plans, options to purchase 1,000 shares are granted on each February 1st to all
nonemployee directors for as long as each is a nonemployee director on such
date. However, if a nonemployee director does not attend certain of the board
meetings, then such option grants are reduced according to a schedule. In
addition, options to purchase 2,000 shares are granted to each nonemployee
director upon his initial election or appointment to our board.





On February 1, 2009, options to
purchase 1,000 shares were granted to each of Francois Heilbronn, Jean Levy,
Robert Bensoussan-Torres and Patrick Choël, and an option to purchase 500 shares
was granted to Serge Rosinoer, all at the exercise price of $6.148 per share
under the 2004 plan. Such options vest ratably over a 4 year
period.





Item
12.  Security Ownership Of Certain Beneficial Owners And Management
and Related Stockholder Matters





The
following table sets forth information, as of March 6, 2009 with respect to the
beneficial ownership of our common stock by (a) each person we know to be the
beneficial owner of more than 5% of our outstanding common stock, (b) our
executive officers and directors and (c) all of our directors and officers
as a group. As of March 6, 2009 we had 30,168,939 shares of common stock
outstanding.


65





Name and Address
                                    of Beneficial Owner
                                  
                                  Amount of Beneficial Ownership1
                                  
                                  
                                  Approximate Percent of ClassJean
      Madar
                                    c/o
      Inter Parfums, S.A.
                                    4,
      Rond Point Des Champs Elysees
                                    75008
      Paris, France
                                  
                                  
                                  8,101,9652
                                  
                                  
                                  
                                  26.7
                                  %Philippe
      Benacin
                                    c/o
      Inter Parfums, S.A.
                                    4,
      Rond Point Des Champs Elysees
                                    75008
      Paris, France
                                  
                                  
                                  8,017,9993
                                  
                                  
                                  
                                  26.4
                                  %Russell
      Greenberg
                                    c/o
      Inter Parfums, Inc.
                                    551
      Fifth Avenue
                                    New
      York, NY 10176
                                  
                                  
                                  121,5004
                                  
                                  
                                  Less
      than 1
                                  %Philippe
      Santi
                                    Inter
      Parfums, S.A.
                                    4,
      Rond Point Des Champs Elysees
                                    75008,
      Paris France
                                  
                                  
                                  40,5005
                                  
                                  
                                  Less
      than 1
                                  %Francois
      Heilbronn
                                    60
      Avenue de  Breteuil
                                    75007
      Paris, France
                                  
                                  
                                  73,6886
                                  
                                  
                                  Less
      than 1
                                  %Jean
      Levy
                                    Chez
      Axcess Groupe
                                    8
      rue de Berri
                                    75008
      Paris, France
                                  
                                  
                                  7,1257
                                  
                                  
                                  Less
      than 1
                                  %







1.  1All shares of
common stock are directly held with sole voting power and sole power to dispose,
unless otherwise stated. Options which are exercisable within 60 days are
included in beneficial ownership calculations. Jean Madar, the Chairman of the
Board and Chief Executive Officer of Inter Parfums and Philippe Benacin, the
Vice Chairman of the Board and President of Inter Parfums, have a verbal
agreement or understanding to vote their shares in a like manner. As Messrs.
Madar and Benacin  beneficially own more than 50% of the outstanding
shares of the Inter Parfums’ common stock, Inter Parfums is considered a
“controlled company” under the applicable rules of The Nasdaq Stock
Market.


2 Consists
of 3,403,424 shares held directly, 4,516,066 shares held indirectly through Jean
Madar Holding SAS, a personal holding company, and options to purchase 182,475
shares. Includes 1,400,000 shares pledged as collateral for personal loans/lines
of credit.


3Consists of 4,719,460 shares held
directly, 2,891,064 shares held indirectly through Philippe Benacin Holding SAS, a personal holding
company, 225,000 shares for which proxies are held, and options to purchase
182,475 shares.


4  Consists
of 27,000 shares held directly and options to purchase 94,500 shares.


5  Consists
of shares of common stock underlying options.


6
Consists of 45,563 shares held directly, 22,500 shares held indirectly by his
children and options to purchase 5,625 shares.


7  Consists
of 1,500 shares held directly and options to purchase 5,625
shares.


66





Name and Address
                                          of Beneficial Owner
                                        
                                        Amount of Beneficial Ownership1
                                        
                                        
                                        Approximate Percent of ClassRobert
      Bensoussan-Torres
                                          c/o
      Sirius Equity LLP
                                          52
      Brook Street
                                          W1K
      5DS London
                                        
                                        
                                        13,1258
                                        
                                        
                                        Less
      than 1
                                        %Serge
      Rosinoer
                                          14
      rue LeSueur
                                          75116
      Paris, France
                                        
                                        
                                        15,1149
                                        
                                        
                                        Less
      than 1
                                        %Patrick
      Choël
                                          Universite
      -82
                                          7
      rue de Talleyrand
                                          75007,
      Paris, France
                                        
                                        
                                        4,12510
                                        
                                        
                                        Less
      than 1
                                        %Frederic
      Garcia-Pelayo
                                          Inter
      Parfums, S.A.
                                          4,
      Rond Point Des Champs Elysees
                                          75008,
      Paris France
                                        
                                        
                                        3,00011
                                        
                                        
                                        Less
      than 1
                                        %Axel
      Marot
                                          Inter
      Parfums, S.A.
                                          4,
      Rond Point Des Champs Elysees
                                          75008,
      Paris France
                                        
                                        
                                        -0-
                                        
                                        
                                        NAHugues
      de la Chevasnerie
                                          Inter
      Parfums, S.A.
                                          4,
      Rond Point Des Champs Elysees
                                          75008,
      Paris France
                                        
                                        
                                        -0-
                                        
                                        
                                        NAHenry
      B. (Andy) Clarke
                                          c/o
      Inter Parfums, Inc.
                                          551
      Fifth Avenue
                                          New
      York, NY 10176
                                        
                                        
                                        20,67512
                                        
                                        
                                        Less
      than 1
                                        %Royce
      & Associates, LLC
                                          1414
      Avenue of the Americas
                                          New
      York, NY 10019
                                        
                                        
                                        3,828,88313
                                        
                                        
                                        
                                        12.5
                                        %All
      Directors and Officers
                                          As
      a Group 16 Persons)
                                        
                                        
                                        16,416,81614
                                        
                                        
                                        
                                        53.5
                                        %







8  Consists
of 7,500 shares held directly and options to purchase 5,625 shares.


9  Consists
of 10,050 shares held directly and options to purchase 5,064 shares.


10
Consists of 1,500 shares held directly and options to purchase 2,625
shares.


11
Consists of shares of common stock underlying options.


12
Consists of 5,675 shares held directly and options to purchase 15,000
shares.


13
Information derived from an Amendment to Schedule 13G dated January 26,
2009.


14
Consists of 15,649,302 shares held directly or indirectly, options to purchase
542,514 shares and proxies to vote 225,000 shares.


67


The following table sets forth certain
information as of the end of our last fiscal year regarding all equity
compensation plans that provide for the award of equity securities or the grant
of options, warrants or rights to purchase our equity securities.





Equity
Compensation Plan Information





Plan category
                          
                          Number of
                            securities to
                            be issued
                            upon
                            exercise of
                            outstanding
                            options,
                            warrants and
                            rights
                            (a)
                          
                          
                          Weighted-average
                            exercise price of
                            outstanding
                            options, warrants
                            and rights
                            (b)
                          
                          
                          Number of securities
                            remaining
                            available for
                            future issuance
                            under equity
                            compensation
                            plans
                            (excluding
                            securities
                            reflected in
                            column (a))
                            (c)Equity
      compensation plans approved by security holders
                          
                          
                          1,138,375
                          
                          
                          
                          11.23
                          
                          
                          
                          1,213,369Equity
      compensation plans not approved by security holders
                          
                          
                          -0-
                          
                          
                          
                          N/A
                          
                          
                          
                          -0-Total
                          
                          
                          1,138,375
                          
                          
                          
                          11.23
                          
                          
                          
                          1,213,369





Item
13.  Certain Relationships And Related Transactions





Transactions
with French Subsidiaries





In
connection with the acquisitions by our subsidiary, Inter Parfums, S.A., of the
world-wide rights under the Burberry license agreement and the Paul Smith
license agreement, we guaranteed the obligations of Inter Parfums, S.A. under
the Burberry and Paul Smith license agreements. In addition, Inter Parfums, S.A.
has agreed to reimburse us for the compensation expense attributed to a former
French executive officer, and vested options which are granted to French
employees under the recent amendment to our stock option plan.





Remuneration
of Counsel





Joseph A. Caccamo, a former director,
is a shareholder of the law firm of GrayRobinson, P.A., our general counsel.
During 2008, we paid GrayRobinson, P.A. $223,000 for their services and
reimbursement of disbursements incurred on our behalf.





Procedures
for Approval of Related Person Transactions





Transactions between related persons,
such as between an executive officer or director and our company, or any company
or person controlled by such officer or director, are required to be approved by
our Audit Committee of our board of directors. Our Audit Committee Charter
contains such explicit authority, as required by the applicable rules of The
Nasdaq Stock Market.


68





Director
Independence





The following are our directors who are
“independent directors” within the applicable rules of The Nasdaq Stock
Market:





Francois
Heilbronn


Jean
Levy


Robert
Bensoussan-Torres


Serge
Rosinoer


Patrick
Choël





We follow and comply with the
independent director definitions as provided by The Nasdaq Stock Market rules in
determining the independence of our directors, which are posted on our company’s
website. In addition, such rules are also available on The Nasdaq Stock Market’s
website.





However, as stated above, Messrs. Jean
Madar and Philippe Benacin have a verbal agreement or understanding to vote
their shares in a like manner. As Messrs. Madar and Benacin beneficially own
more than 50% of the outstanding shares of the Inter Parfums’ common stock,
Inter Parfums is considered a “controlled company” under the applicable rules of
The Nasdaq Stock Market. As a controlled company, we are exempt for certain of
the corporate governance rules of The Nasdaq Stock Market, such as the
requirement of a nominating committee of the board.





In addition, The Nasdaq Stock Market
maintains more stringent rules relating to director independence for the members
of our Audit Committee, and the members of our Audit Committee, Messrs.
Heilbronn, Levy and Choël, are independent within the meaning of those rules. We
are not exempt from the more stringent rules relating to director independence
for the members of our Audit Committee by virtue of the controlled company
exception.





Item
14.  Principal Accountant Fees and Services





General





On October 15, 2004 Mazars LLP was
engaged as the principal accountants to audit the financial statements
of Inter Parfums, Inc. The decision to engage Mazars LLP was approved by
our audit committee.





Fees





The following sets forth the fees
billed to us by Mazars LLP, as well as discusses the services provided for the
past two fiscal years, fiscal years ended December 31, 2008 and December 31,
2007.


69


Audit Fees





During 2008 the fees billed by Mazars
LLP and its affiliate, Mazars S.A. for audit services and review of the
financial statements contained in our Quarterly Reports on Form 10-Q were
$849,000. During 2007 the fees billed by Mazars LLP and its affiliate, Mazars
S.A. for audit services and review of the financial statements contained in our
Quarterly Reports on Form 10-Q were $667,000.





Audit-Related Fees





Mazars billed us $11,000 and $25,000
for audit related fees during 2008 and 2007, respectively.





Tax Fees





Mazars LLP did not bill us for tax
services during 2008 or 2007.





All Other Fees





Mazars LLP did not bill us for any
other services during 2008 or 2007.





Audit Committee Pre Approval Policies
and Procedures





The Audit
Committee has the sole authority for the appointment, compensation and oversight
of the work of our independent accountants, who prepare or issue an audit report
for us.





During
the first quarter of 2008 the audit committee authorized the following non-audit
services to be performed by Mazars LLP.





·
            We
      authorized the engagement of Mazars LLP if deemed necessary to provide tax
      consultation in the ordinary course of business for fiscal year ended
      December 31, 2008.





·
            We
      authorized the engagement of Mazars LLP if deemed necessary to provide tax
      consultation as may be required on a project by project basis that would
      not be considered in the ordinary course of business, of up to a $5,000
      fee limit per project, subject to an aggregate fee limit of $25,000 for
      fiscal year ending December 31, 2008. If we require further tax services
      from Mazars LLP, then the approval of the audit committee must be
      obtained.





·
            If
      we require other services by Mazars LLP on an expedited basis such that
      obtaining pre-approval of the audit committee is not practicable, then the
      Chairman of the Committee has authority to grant the required
      pre-approvals for all such
services.





70


·
            We
      imposed a cap of $100,000 on the fees that Mazars can charge for services
      on an expedited basis that are approved by the Chairman without obtaining
      full audit committee approval.





·
            None
      of the non-audit services of either of the Company’s auditors had the
      pre-approval requirement waived in accordance with Rule 2-01(c)(7)(i)(C)
      of Regulation S-X.





In
February 2009, the audit committee authorized the same non-audit services to be
performed by Mazars LLP as disclosed above. o


71


PART
IV





Item
15. Exhibits, Financial Statement Schedules





Page
      No.(a)(1)
                            
                            Financial
      Statements annexed heretoReport
      of Independent Registered Public Accounting Firm
                            
                            F-2Consolidated
      Balance Sheets as of December 31, 2008 and December 31,
    2007
                            
                            F-3Consolidated
      Statements of Income for each of the years in the three-year period ended
      December 31, 2008
                            
                            F-4Consolidated
      Statements of Changes in Shareholders’ Equity and Comprehensive Income for
      each of the years in the three-year period ended December 31,
      2008
                            
                            F-5Consolidated
      Statements of Cash Flows for each of the years in the three-year period
      ended December 31, 2008
                            
                            F-6Notes
      to Consolidated Financial Statements
                            
                            F-7(a)(2)
                            
                            Financial
      Statement Schedules annexed hereto:Schedule
      II - Valuation and Qualifying Accounts
                            
                            F-28Schedules
      other than those referred to above have been omitted as the conditions
      requiring their filing are not present or the information has been
      presented elsewhere in the consolidated financial
    statements.


72


(a)(3)
Exhibits





The
following document heretofore filed with the Commission is incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991:





Exhibit
      No.
                
                Description10.25
                
                Employment
      Agreement between the Company and Philippe Benacin dated July 29,
      1991





The
following documents heretofore filed with the Commission is incorporated by
reference to the Company's Registration Statement on Form S-1 (No.
33-48811):





Exhibit
      No.
              
              Description10.26
              
              Lease
      for portion of 15th Floor, 551 Fifth Avenue, New York, New
      York





The
following documents heretofore filed with the Commission are incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993:





Exhibit
      No.
              
              Description3.3
              
              Articles
      of Incorporation of Inter Parfums Holdings, S.A.3.3.1
              
              English
      Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums
      Holding, S.A.3.4
              
              Articles
      of Incorporation of Inter Parfums, S.A.3.4.1
              
              English
      Translation of Exhibit no. 3.4, Articles of Incorporation of Inter
      Parfums, S.A.10.52
              
              Lease
      for portion of 4, Rond Point Des Champs Des Elysees dated September 30,
      199310.52.1
              
              English
      translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des
      Champs Des Elysees dated September 30, 199310.53
              
              Lease
      for portion of 4, Rond Point Des Champs Des Elysees dated March 2,
      199410.53.1
              
              English
      translation of Exhibit no. 1053, Lease for portion of 4, Rond Point Des
      Champs Des Elysees dated March 2,
1994


73





The
following documents heretofore filed with the Commission are incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994:





Exhibit
      No.
              
              Description10.59
              
              Modification
      of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance
      Company and Jean Philippe Fragrances,
Inc.





The
following documents heretofore filed with the Commission are incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995:





Exhibit
      No.
              
              Description10.61
              
              Lease
      for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial
      Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated
      July 10, 1995





The
following documents heretofore filed with the Commission are incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997:





Exhibit
      No.
              
              Description10.67
              
              Second
      Modification of Lease made as of the 30th
      day of April, 1997 between Metropolitan Life Insurance Company as landlord
      and Jean Philippe Fragrances, Inc. as tenant10.69
              
              Exclusive
      License Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter
      Parfums (English translation, excised
form)





The
following documents heretofore filed with the Commission are incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998:





Exhibit
      No.
                  
                  Description3.2
                  
                  Amended
      and Restated By-laws4.17
                  
                  1997
      Nonemployee Director Stock Option Plan10.70
                  
                  License
      Agreement among Paul Smith Limited, Inter Parfums, S.A. and Jean-Philippe
      Fragrances, Inc. (Certain confidential information in this Exhibit 10.70
      was omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc).


74




Exhibit
      No.
                  
                  Description10.71
                  
                  License
      Agreement between Christian LaCroix, a division of Group LVMH and Inter
      Parfums, S.A. (English translation) (Certain confidential information in
      this Exhibit 10.71 was omitted and filed separately with the Securities
      and Exchange Commission with a request for confidential treatment by Inter
      Parfums,
Inc).


The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999:





Exhibit
      No.
              
              Description3.1.4
              
              Amendment
      to the Company's Restated Certificate of Incorporation, as amended, dated
      July 13, 1999 (listed therein as
3.1(d))





The following document heretofore filed
with the Commission is incorporated by reference to the Company's quarterly
report on Form 10-Q for the period ending 30 June 2000:





Exhibit
      No.
              
              Description3.1.5
              
              Amendment
      to the Company's Restated Certificate of Incorporation, as amended, dated
      12 July 2000 (listed therein as
3.1(e))





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000:





Exhibit
      No.
              
              Description3.1.1
              
              Restated
      Certificate of Incorporation dated September 3, 19873.1.2
              
              Amendment
      to the Company's Restated Certificate of Incorporation dated July 31,
      19923.1.3
              
              Amendment
      to the Company's Restated Certificate of Incorporation dated July 9,
      19934.19
              
              2000
      Nonemployee Director Stock Option
Plan


75





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001:





Exhibit
      No.
              
              Description3.2
              
              Amended
      and Restated By-laws4.20
              
              1999
      Stock Option Plan, as amended





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
quarterly report on Form 10-Q for the period ending 30 June 2002:





Exhibit
      No.
                
                Description19.92
                
                Third
      Modification of Lease dated June 17, 2002 between Metropolitan Life
      Insurance Company, and Jean Philippe Fragrances,
  LLC





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended 31 December 2003:





Exhibit
      No.
              
              Description10.99
              
              Agreement
      between  Inter Parfums, S.A. and Credit Lyonnais dated 28
      November 2003- French original10.99.1
              
              Agreement
      between  Inter Parfums, S.A. and Credit Lyonnais dated 28
      November 2003-English translation10.100
              
              Line
      of Credit Agreement between The Banque OBC-Odier Bungener Courvoisier and
      Inter Parfums, S.A dated 29 October 2003- French
  original10.100.1
              
              Line
      of Credit Agreement between The Banque OBC-Odier Bungener Courvoisier and
      Inter Parfums, S.A dated 29 October 2003- English
    translation14
              
              Code
      of Business Conduct


76


The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended March 31, 2004:





Exhibit
      No.
              
              Description10.102
              
              Agreement
      between BNP Paribas and Inter Parfums SA dated March 17, 2004- French
      Original10.102.1
              
              Agreement
      between BNP Paribas and Inter Parfums SA dated March 17, 2004- English
      translations





The following document heretofore filed
with the Commission is incorporated by reference to the Company's Definitive
Proxy Material filed on June 23, 2004 (and contained as Exhibit A to the
Definitive Proxy Statement):





Exhibit
      No.
              
              Description4.21
              
              2004
      Nonemployee Director Stock Option Plan4.22
              
              2004
      Stock Option Plan





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended June 30, 2004:





Exhibit
      No.
                
                Description3.1.6
                
                Amendment
      to Certificate of Incorporation dated 6 August 200410.104
                
                Lease
      dated as of 1 March 2001 for 300 West 14th
      Street, New York, NY10.105
                
                Loan
      Contract dated 12 July 2004 between Credit Lyonnais and Inter Parfums,
      S.A. (French Original)10.105.1
                
                Loan
      Contract dated 12 July 2004 between Credit Lyonnais and Inter Parfums,
      S.A. (English Translation)10.106
                
                Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, Ground
      and 1st Floor, Paris, France (French Original)10.106.1
                
                Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, Ground
      and 1st Floor, Paris, France (English
  Translation)





77





Exhibit
      No.
              
              Description10.107
              
              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, 5th
      Floor-Left, Paris, France (French Original)10.107.1
              
              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, 5th
      Floor-Left, Paris, France(English Translation)10.108
              
              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, 6th
      Floor-Right, Paris, France (French Original)10.108.1
              
              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, 6th
      Floor-Right, Paris, France(English
Translation)





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended September 30, 2004:





Exhibit
      No.
              
              Description10.109
              
              Lease
      For Asnieres  (92600) — 107, Quai Du Docteur Dervaux, (French
      Original)10.109.1
              
              Lease
      For Asnieres (92600) — 107, Quai Du Docteur Dervaux, (English
      Translation)10.110
              
              Lease
      For 48 Rue Des Francs-Bourgeois, In Paris, 3rdDistrict (French Original)10.110.1
              
              Lease
      For 48 Rue Des Francs-Bourgeois, In Paris,, 3rdDistrict (English Translation)10.112
              
              Confidential
      Treatment Agreement among Burberry Ltd., Inter Parfums, S.A., Inter
      Parfums, Inc. and LV Capital USA, Inc., et al., dated 12 October
      200410.113
              
              Indemnity
      Agreement among Burberry Ltd., Inter Parfums, S.A. and Inter Parfums, Inc.
      dated 12 October 2004





The following document heretofore filed
with the Commission are incorporated by reference to the Company's Quarterly
Report, Form 10-QA Amendment No. 1, for the quarterly period ended September 30,
2004:





Exhibit
      No.
              
              Description10.111
              
              Licence
      Agreement among Burberry Ltd., Inter Parfums, S.A. and Inter Parfums, Inc.
      dated 12 October 2004 (Certain confidential information in Exhibit 10.111
      has been omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc.).


78





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended 31 December 2004:





Exhibit
      No.
              
              Description10.115
              
              Agreement
      dated July 29, 2004 between Credit Lyonnais and Groupe Inter Parfums
      (French Original)10.115.1
              
              Agreement
      dated July 29, 2004 between Credit Lyonnais and Groupe Inter Parfums
      (English Translation)10.116
              
              Logistics
      Service Contract (effective January 1, 2005) between Inter Parfums, S.A.
      and Sagatrans (French Original)10.116.1
              
              Logistics
      Service Contract (effective January 1, 2005) between Inter Parfums, S.A.
      and Sagatrans (English
Translation)





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended June 30, 2005:





Exhibit
      No.
              
              Description10.118
              
              Agreement
      dated July 14, 2005 by and among The Gap, Inc., Banana Republic LLC, Gap
      (Apparel) LLC, Gap (ITM), Inc., Banana Republic (Apparel) LLC, Banana
      Republic (ITM), Inc., Gap (Puerto Rico), Inc., and Gap (Canada) Inc.,
      together with their subsidiaries who operate stores on the one hand and
      Inter Parfums, Inc. and its wholly-owned subsidiary Inter Parfums USA,
      LLC. (Certain confidential information in this Exhibit 10.118 was omitted
      and filed separately with the Securities and Exchange Commission with a
      request for confidential treatment by Inter Parfums,
  Inc).10.119
              
              Renouvellement
      de Bail Commercial entre Civile Immobiliere du 4/6 Rond Point des Champs
      Elysees et Inter Parfums, S.A., 30 Jun 2005, Locaux 4 eme etage droite
      (French original)10.119.1
              
              Renouvellement
      de Bail Commercial entre Civile Immobiliere du 4/6 Rond Point des Champs
      Elysees et Inter Parfums, S.A., 30 Jun 2005, Locaux 4 eme etage droite
      (English translation)


79





Exhibit
      No.
              
              Description10.120
              
              Renouvellement
      de Bail Commercial entre Civile Immobiliere du 4/6 Rond Point des Champs
      Elysees et Inter Parfums, S.A., 30 Jun 2005, Locaux 4 eme etage gauche
      (French original)10.120.1
              
              Renouvellement
      de Bail Commercial entre Civile Immobiliere du 4/6 Rond Point des Champs
      Elysees et Inter Parfums, S.A., 30 Jun 2005, Locaux 4 eme etage gauche
      (English translation)





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended 31 December 2005:





Exhibit
      No.
              
              Description10.122
              
              Agreement
      dated July 31, 2005 between HSBC Bank USA and Jean Philippe Fragrances,
      LLC10.123
              
              Bail
      Commercial, 39 Avenue Franklin Roosevelt, 75008 Paris, eme etage, dated
      December 15, 2005 [French original]10.123.1
              
              Commercial
      Lease, 39 Avenue Franklin Roosevelt, 75008 Paris, 2nd
      Floor, dated December 15, 2005 [English translation]10.124
              
              Fourth
      Modification of Lease, portion of 15th
      Floor, 551 Fifth Avenue, New York, New York10.125
              
              Addendum
      effective March 2, 2006 to Agreement dated July 14, 2005 by and among The
      Gap, Inc., Banana Republic LLC, Gap (Apparel) LLC, Gap (ITM), Inc., Banana
      Republic (Apparel) LLC, Banana Republic (ITM), Inc., Gap (Puerto Rico),
      Inc., and Gap (Canada) Inc., together with their subsidiaries who operate
      stores on the one hand and Inter Parfums, Inc. and its wholly-owned
      subsidiary Inter Parfums USA, LLC. (Certain confidential information in
      this Exhibit 10.125 was omitted and filed separately with the Securities
      and Exchange Commission with a request for confidential treatment by Inter
      Parfums, Inc).





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended March 31, 2006:





Exhibit
      No.
              
              Description10.126
              
              Contrat
      de Licence de Marques entre QS Holdings SARL and Inter Parfums, S.A.,
      executed on 23 March 2006 – French original (Certain confidential
      information in this Exhibit 10.126 was omitted and filed separately with
      the Securities and Exchange Commission with a request for confidential
      treatment by Inter Parfums,
Inc).


80





Exhibit
      No.
              
              Description10.126.1
              
              Trademark
      License Agreement between QS Holdings SARL and Inter Parfums, S.A.,
      executed on 23 March 2006 – English translation (Certain confidential
      information in this Exhibit 10.126.1 was omitted and filed separately with
      the Securities and Exchange Commission with a request for confidential
      treatment by Inter Parfums, Inc).10.127
              
              Avenant
      No. 1 Au Contrat de Licence Exclusive du 20 Juin 1997 entre ST Dupont,
      S.A. et Inter Parfums, S.A., dated 20 March 2006- French original (Certain
      confidential information in this Exhibit 10.127 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).10.127.1
              
              Amendment
      No. 1 to Exclusive License of 20 June 1997 between ST Dupont, S.A. et
      Inter Parfums, S.A., dated 20 March 2006- English translation (Certain
      confidential information in this Exhibit 10.127.1 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums,
Inc).





The following document heretofore filed
with the Commission is incorporated by reference to the Company's Quarterly
Report for the quarterly period ended June 30, 2006:





Exhibit
      No.
              
              Description4.21.1
              
              Amendment
      to the Company’s 2004 Nonemployee Director Stock Option
    Plan





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended September 30, 2006:





Exhibit
      No.
              
              Description10.128
              
              License Agreement
      Between Van Cleef & Arpels Logistics SA, and Inter Parfums, S.A.,
      entered into on June 19, 2006(Certain confidential information in
      this Exhibit 10.128 was omitted and filed separately with the Securities
      and Exchange Commission with a request for confidential treatment by Inter
      Parfums, Inc).10.128.1
              
              Addendum
      No. 1 to License Agreement Between Van Cleef & Arpels Logistics SA,
      and Inter Parfums, S.A


81





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended 31 December 2006:





Exhibit
      No.
              
              Description3.5
              
              Articles
      of Incorporation of Inter Parfums, Limited4.23
              
              Form
      of Option Agreement for Options Granted to Executive Officers on December
      15, 2006 with Schedule Option Holders and Number of Options
      Granted21
              
              List
      of Subsidiaries23
              
              Consent
      of Mazars LLP31.1
              
              Certification
      Required by Rule 13a-14 of Chief Executive Officer31.2
              
              Certification
      Required by Rule 13a-14 of Chief Financial Officer32
              
              Certification
      Required by Section 906 of the Sarbanes-Oxley
  Act





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended March 31, 2007:





Exhibit
      No.
              
              Description10.129
              
              Agreement
      between Inter Parfums, S.A. and BNP Paribas, S.A. dated 3 December 2006 -
      French original10.129.1
              
              Agreement
      between Inter Parfums, S.A. and BNP Paribas, S.A. dated 3 December 2006 -
      English translation


82


The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended June 30, 2007:





Exhibit
      No.
              
              Description2.4
              
              Agreement
      of Sale of Lanvin Trademarks between Jeanne Lanvin, S.A and Inter Parfums,
      S.A. dated 30 July 2007 - French Original2.4.1
              
              Agreement
      of Sale of Lanvin Trademarks between Jeanne Lanvin, S.A and Inter Parfums,
      S.A. dated 30 July 2007 - English Translation10.130
              
              Agreement
      for Technical Assistance between Jeanne Lanvin, S.A and Inter Parfums,
      S.A. dated 30 July 2007 - French Original
                (Certain
      confidential information in this Exhibit 10.130 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).10.130.1
              
              Agreement
      for Technical Assistance between Jeanne Lanvin, S.A and Inter Parfums,
      S.A. dated 30 July 2007 - English Translation
                (Certain
      confidential information in this Exhibit 10.130.1 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).10.131
              
              Coexistence
      Agreement between Jeanne Lanvin, S.A and Inter Parfums, S.A. dated 30 July
      2007- French Original10.131.1
              
              Coexistence
      Agreement between Jeanne Lanvin, S.A and Inter Parfums, S.A. dated 30 July
      2007- English Translation





The following document heretofore filed
with the Commission are incorporated by reference to the Company's Quarterly
Report for the quarterly period ended September 30, 2007:





Exhibit
      No.
              
              Description4.21.2
              
              Amendment
      to the Company’s 2004  Nonemployee Director Stock Option
      Plan


83





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Registration Statement No. 333-141963 as filed April 9, 2007.





Exhibit
      No.
              
              Description4.24
              
              Warrant
      Dated July 14, 2005 to Purchase 100,000 shares of Common Stock of Inter
      Parfums, Inc. (filed as exhibit no. 4.2 therein)4.25
              
              Warrant
      Dated September 1, 2006 to Purchase 100,000 shares of Common Stock of
      Inter Parfums, Inc. (filed as exhibit no. 4.3
  therein)





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended 31 December 2007:





Exhibit
      No.
                
                Description10.132
                
                Manufacturing
      and License Agreement Between Retail Brand Alliance, Inc., D/B/A Brooks
      Brothers – Licensor and Inter Parfums USA, LLL. – Licensee
                  Dated
      November 2007
                  (Certain
      confidential information in this Exhibit 10.132 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).4.26
                
                Addendum
      [France] to 2004 Stock Option Plan4.27
                
                Form
      of Option Agreement for Options Granted to Executive Officers on December
      26, 2007 with Schedule Option Holders and Number of Options
      Granted4.28
                
                Form
      of Option Agreement for Options Granted to Executive Officers on February
      14, 2008 with Schedule Option Holders and Number of Options
      Granted4.29
                
                Form
      of Option Agreement for Options Granted to Executive Officers on February
      14, 2008 under French Addendum to Stock Option Plan with Schedule Option
      Holders and Number of Options Granted21
                
                List
      of Subsidiaries23
                
                Consent
      of Mazars LLP31.1
                
                Certification
      Required by Rule 13a-14 of Chief Executive
  Officer


84





Exhibit
      No.
                  
                  Description31.2
                  
                  Certification
      Required by Rule 13a-14 of Chief Financial Officer32
                  
                  Certification
      Required by Section 906 of the Sarbanes-Oxley
  Act





The following document heretofore filed
with the Commission is incorporated by reference to the Company's Quarterly
Report for the quarterly period ended March 31, 2008:





Exhibit
      No.
              
              Description10.133
              
              License
      Agreement by and among The Gap, Inc., Banana Republic LLC, Gap
      (Apparel) LLC, Gap (ITM), Inc., Banana Republic (Apparel) LLC, and Banana
      Republic (ITM), Inc. and Inter Parfums, Inc. and Inter Parfums USA, LLC
      (signed April 2008 but effective as of July 1, 2007)(Certain
      confidential information in this Exhibit 10.133 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums,
Inc).





The following documents heretofore
filed with the Commission are incorporated by reference to the Company's
Quarterly Report for the quarterly period ended June 30, 2008:





Exhibit No.
              
              Description3.6
              
              Organizational
      Documents of Inter Parfums (Suisse) SA  (French
    original)3.6.1
              
              Organizational
      Documents of Inter Parfums (Suisse) SA  (English
      translation)10.134
              
              Licence
      Agreement among Paul Smith Limited, Inter Parfums, S.A. and Inter Parfums,
      Inc. dated July 3, 2008, but signed on July 17, 2008 (Certain confidential
      information in this Exhibit 10.134 was omitted and filed separately with
      the Securities and Exchange Commission with a request for confidential
      treatment by Inter Parfums,
Inc.)


85


The following documents are filed with
this report:





Exhibit
      No.
              
              Description10.135
              
              Bail
      Commercial situé au 2ème étage, 4/6 rond point des Champs Elysees, Paris,
      France,entre Dauchez
      Administrateur De Bienset Inter Parfums, S.A. [dated] le 21
      janvier 2009 – [French original] (Certain confidential information in this
      Exhibit 10.135 was omitted and filed separately with the Securities and
      Exchange Commission with a request for confidential treatment by Inter
      Parfums, Inc).10.135.1
              
              Commercial
      Lease for portion of the 2nd Floor, at 4/6 rond point des Champs Elysees,
      Paris, France, between Dauchez Property
      Administrators and Inter Parfums, S.A. dated January 21, 2009
      -English translation] (Certain confidential information in this Exhibit
      10.135.1 was omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc).10.136
              
              Bail
      Commercial situé au 6ème étage, 4/6 rond point des Champs Elysees, Paris,
      France,entre Dauchez
      Administrateur De Bienset Inter Parfums, S.A. [dated] le 21
      janvier 2009 – [French original] (Certain confidential information in this
      Exhibit 10.136 was omitted and filed separately with the Securities and
      Exchange Commission with a request for confidential treatment by Inter
      Parfums, Inc).10.136.1
              
              Commercial
      Lease for portion of the 6th
      Floor, at 4/6 rond point des Champs Elysees, Paris, France, between Dauchez Property
      Administrators and Inter Parfums, S.A. dated January 21, 2009 –
      [English translation] (Certain confidential information in this Exhibit
      10.136.1 was omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc).4.30
              
              Form
      of Option Agreement for Options Granted to Executive Officers on December
      31, 2008 with Schedule of Option Holders and Options
    Granted21
              
              List
      of Subsidiaries23
              
              Consent
      of Mazars LLP31.1
              
              Certification
      Required by Rule 13a-14 of Chief Executive Officer31.2
              
              Certification
      Required by Rule 13a-14 of Chief Financial Officer32.1
              
              Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer




86




Exhibit
      No.
                
                Description32.2
                
                Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer


87





INTER
PARFUMS, INC. AND SUBSIDIARIES




Consolidated
Financial Statements and Schedule




Index




PageReport
      of Independent Registered Public Accounting Firm
                F-2Audited
      Financial Statements:Consolidated
      Balance Sheets as of December 31, 2008 and 2007
                F-3Consolidated
      Statements of Income for each of the years in the three-year period ended
      December 31, 2008
                F-4Consolidated
      Statements of Changes in Shareholders’ Equity and Comprehensive Income for
      each of the years in the three-year period ended December 31,
      2008
                F-5Consolidated
      Statements of Cash Flows for each of the years in the three-year period
      ended December 31, 2008
                F-6Notes
      to Consolidated Financial Statements
                F-7Financial
      Statement Schedule:Schedule
      II – Valuation and Qualifying Accounts
                F-28





F-1





Report of Independent
Registered Public Accounting Firm





Board of
Directors and Shareholders


Inter
Parfums, Inc.


New York,
New York





We have
audited the accompanying consolidated balance sheets of Inter Parfums, Inc. and
subsidiaries as of December 31, 2008 and 2007, and the related consolidated
statements of income, changes in shareholders’ equity and comprehensive income,
and cash flows for each of the years in the three-year period ended December 31,
2008. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Inter Parfums, Inc. and
subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2008 in conformity with U.S. generally accepted accounting
principles.




In
connection with our audits of the consolidated financial statements enumerated
above, we audited schedule II for each of the years in the three-year period
ended December 31, 2008. In our opinion, schedule II, when considered in
relation to the financial statements taken as a whole, presents fairly, in all
material respects, the information stated therein.




We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Inter Parfums, Inc.’s internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March __,
2009 expressed an unqualified opinion thereon.





Mazars
LLP





New York,
New York


March 11,
2009





F-2





INTER
PARFUMS, INC. AND SUBSIDIARIES


Consolidated
Balance Sheets


December 31,
2008 and 2007


(In
thousands except share and per share data)





2008
                              
                              
                              2007AssetsCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              42,404
                              
                              
                              $
                              90,034Accounts
      receivable, net
                              
                              
                              120,507
                              
                              
                              
                              118,140Inventories
                              
                              
                              123,633
                              
                              
                              
                              106,022Receivables,
      other
                              
                              
                              2,904
                              
                              
                              
                              5,928Other
      current assets
                              
                              
                              10,034
                              
                              
                              
                              5,253Income
      tax receivable
                              
                              
                              1,631
                              
                              
                              
                              168Deferred
      tax assets
                              
                              
                              3,388
                              
                              
                              
                              4,300Total
      current assets
                              
                              
                              304,501
                              
                              
                              
                              329,845Equipment
      and leasehold improvements, net
                              
                              
                              7,670
                              
                              
                              
                              7,262Trademarks,
      licenses and other intangible assets, net
                              
                              
                              104,922
                              
                              
                              
                              101,577Goodwill
                              
                              
                              5,470
                              
                              
                              
                              6,715Other
      assets
                              
                              
                              2,574
                              
                              
                              
                              653Total
      assets
                              
                              $
                              425,137
                              
                              
                              $
                              446,052Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Loans
      payable – banks
                              
                              $
                              13,981
                              
                              
                              $
                              7,217Current
      portion of long-term debt
                              
                              
                              13,352
                              
                              
                              
                              16,215Accounts
      payable - trade
                              
                              
                              66,236
                              
                              
                              
                              88,297Accrued
      expenses
                              
                              
                              35,368
                              
                              
                              
                              35,507Income
      taxes payable
                              
                              
                              442
                              
                              
                              
                              3,023Dividends
      payable
                              
                              
                              996
                              
                              
                              
                              1,026Total
      current liabilities
                              
                              
                              130,375
                              
                              
                              
                              151,285Deferred
      tax liability
                              
                              
                              11,562
                              
                              
                              
                              4,664Long-term
      debt, less current portion
                              
                              
                              27,691
                              
                              
                              
                              43,518Minority
      interest
                              
                              
                              51,308
                              
                              
                              
                              53,925Commitments
      and contingenciesShareholders’
      equity:Preferred
      stock, $0.001 par value. Authorized 1,000,000 shares; none
      issuedCommon
      stock, $0.001 par value. Authorized 100,000,000 shares; outstanding
      30,168,939 and 30,798,212 shares at December 31, 2008 and 2007,
      respectively
                              
                              
                              30
                              
                              
                              
                              31Additional
      paid-in capital
                              
                              
                              41,950
                              
                              
                              
                              40,023Retained
      earnings
                              
                              
                              168,025
                              
                              
                              
                              147,995Accumulated
      other comprehensive income
                              
                              
                              25,515
                              
                              
                              
                              30,955Treasury
      stock, at cost, 9,966,379  and 9,303,956 common shares at
      December 31, 2008 and 2007, respectively
                              
                              
                              (31,319
                              )
                              
                              
                              (26,344
                              )Total
      shareholders’ equity
                              
                              
                              204,201
                              
                              
                              
                              192,660Total
      liabilities and shareholders’ equity
                              
                              $
                              425,137
                              
                              
                              $
                              446,052


See
accompanying notes to consolidated financial statements.





F-3





INTER
PARFUMS, INC. AND SUBSIDIARIES


Consolidated
Statements of Income


Years
ended December 31, 2008, 2007, and 2006


(In
thousands except share and per share data)





2008
                      
                      
                      2007
                      
                      
                      2006Net
      sales
                      
                      $
                      446,124
                      
                      
                      $
                      389,560
                      
                      
                      $
                      321,054Cost
      of sales
                      
                      
                      191,915
                      
                      
                      
                      160,137
                      
                      
                      
                      143,855Gross
      margin
                      
                      
                      254,209
                      
                      
                      
                      229,423
                      
                      
                      
                      177,199Selling,
      general, and administrative
                      
                      
                      202,264
                      
                      
                      
                      181,224
                      
                      
                      
                      141,074Impairment
      loss
                      
                      
                      936
                      
                      
                      
                      868
                      
                      
                      
                      —Income
      from operations
                      
                      
                      51,009
                      
                      
                      
                      47,331
                      
                      
                      
                      36,125Other
      expenses (income):Interest
      expense
                      
                      
                      4,940
                      
                      
                      
                      3,667
                      
                      
                      
                      1,797(Gain)
      loss on foreign currency
                      
                      
                      1,380
                      
                      
                      
                      219
                      
                      
                      
                      (172
                      )Interest
      and dividend income
                      
                      
                      (1,745
                      )
                      
                      
                      (3,166
                      )
                      
                      
                      (2,303
                      )Gain
      on subsidiary’s issuance of stock
                      
                      
                      —
                      
                      
                      
                      (665
                      )
                      
                      
                      (332
                      )4,575
                      
                      
                      
                      55
                      
                      
                      
                      (1,010
                      )Income
      before income taxes and minority interest
                      
                      
                      46,434
                      
                      
                      
                      47,276
                      
                      
                      
                      37,135Income
      taxes
                      
                      
                      16,312
                      
                      
                      
                      16,675
                      
                      
                      
                      13,201Income
      before minority interest
                      
                      
                      30,122
                      
                      
                      
                      30,601
                      
                      
                      
                      23,934Minority
      interest in net income of consolidated subsidiaries
                      
                      
                      6,357
                      
                      
                      
                      6,784
                      
                      
                      
                      6,192Net
      income
                      
                      $
                      23,765
                      
                      
                      $
                      23,817
                      
                      
                      $
                      17,742Net
      income per share:Basic
                      
                      $
                      0.78
                      
                      
                      $
                      0.78
                      
                      
                      $
                      0.58Diluted
                      
                      
                      0.77
                      
                      
                      
                      0.76
                      
                      
                      
                      0.58Weighted
      average number of shares outstanding:Basic
                      
                      
                      30,621,070
                      
                      
                      
                      30,666,141
                      
                      
                      
                      30,486,463Diluted
                      
                      
                      30,777,985
                      
                      
                      
                      31,004,299
                      
                      
                      
                      30,852,738
 See
accompanying notes to consolidated financial
statements.





F-4





INTER
PARFUMS, INC. AND SUBSIDIARIES


Consolidated
Statements of Changes in Shareholders’ Equity and Comprehensive
Income


Years
ended December 31, 2008, 2007, and 2006


(In
thousands except share data)





AccumulatedAdditional
                  
                  
                  
                  
                  
                  
                  
                  
                  otherCommon
      stock
                  
                  
                  paid-in
                  
                  
                  Retained
                  
                  
                  Comprehensive
                  
                  
                  comprehensive
                  
                  
                  Treasury
      stockShares
                  
                  
                  Amount
                  
                  
                  capital
                  
                  
                  earnings
                  
                  
                  income
                  
                  
                  income
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  TotalBalance
      – January 1, 2006
                  
                  
                  30,378,465
                  
                  
                  $
                  30
                  
                  
                  $
                  36,630
                  
                  
                  $
                  112,802
                  
                  
                  
                  
                  
                  $
                  3,574
                  
                  
                  
                  9,454,153
                  
                  
                  $
                  (25,309
                  )
                  
                  $
                  127,727Comprehensive
      income:Net
      income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  17,742
                  
                  
                  $
                  17,742
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  17,742Foreign
      currency translation adjustments
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  11,527
                  
                  
                  
                  11,527
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  11,527Net
      derivative instrument gain, net of tax
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  69
                  
                  
                  
                  69
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  69Total
      comprehensive income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  29,338Dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,259
                  )
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,259
                  )Shares
      issued upon exercise of stock options
                  
                  
                  341,400
                  
                  
                  
                  1
                  
                  
                  
                  1,379
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  (150,000
                  )
                  
                  
                  402
                  
                  
                  
                  1,782Stock
      compensation
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  76
                  
                  
                  
                  549
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  625Shares
      received as proceeds of option exercises
                  
                  
                  (67,677
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  67,677
                  
                  
                  
                  (941
                  )
                  
                  
                  (941
                  )Balance
      – December 31, 2006
                  
                  
                  30,652,188
                  
                  
                  
                  31
                  
                  
                  
                  38,085
                  
                  
                  
                  127,834
                  
                  
                  
                  
                  
                  
                  
                  15,170
                  
                  
                  
                  9,371,830
                  
                  
                  
                  (25,848
                  )
                  
                  
                  155,272Comprehensive
      income:Net
      income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  23,817
                  
                  
                  $
                  23,817
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  23,817Foreign
      currency translation adjustments
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  15,816
                  
                  
                  
                  15,816
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  15,816Net
      derivative instrument loss, net of tax
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (31
                  )
                  
                  
                  (31
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (31
                  )Total
      comprehensive income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  39,602Dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (4,093
                  )
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (4,093
                  )Shares
      issued upon exercise of stock options including income tax benefit of
      $915
                  
                  
                  228,150
                  
                  
                  
                  —
                  
                  
                  
                  1,720
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  (150,000
                  )
                  
                  
                  414
                  
                  
                  
                  2,134Stock
      compensation
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  218
                  
                  
                  
                  437
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  655Shares
      received as proceeds of option exercises
                  
                  
                  (82,126
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  82,126
                  
                  
                  
                  (910
                  )
                  
                  
                  (910
                  )Balance
      – December 31, 2007
                  
                  
                  30,798,212
                  
                  
                  
                  31
                  
                  
                  
                  40,023
                  
                  
                  
                  147,995
                  
                  
                  
                  
                  
                  
                  
                  30,955
                  
                  
                  
                  9,303,956
                  
                  
                  
                  (26,344
                  )
                  
                  
                  192,660Comprehensive
      income:Net
      income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  23,765
                  
                  
                  $
                  23,765
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  23,765Foreign
      currency translation adjustments
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (9,755
                  )
                  
                  
                  (9,755
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (9,755
                  )Net
      derivative instrument gain, net of tax
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  4,315
                  
                  
                  
                  4,315
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  4,315Total
      comprehensive income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  18,325Dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (4,039
                  )
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (4,039
                  )Shares
      issued upon exercise of stock options including income tax benefit of
      $988
                  
                  
                  33,150
                  
                  
                  
                  —
                  
                  
                  
                  1,260
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,260Stock
      compensation
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  452
                  
                  
                  
                  304
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  756Gain
      on subsidiaries issuance of stock
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  215
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  215Purchased
      treasury shares
                  
                  
                  (662,423
                  )
                  
                  
                  (1
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  662,423
                  
                  
                  
                  (4,975
                  )
                  
                  
                  (4,976
                  )Balance
      – December 31, 2008
                  
                  
                  30,168,939
                  
                  
                  $
                  30
                  
                  
                  $
                  41,950
                  
                  
                  $
                  168,025
                  
                  
                  
                  
                  
                  
                  $
                  25,515
                  
                  
                  
                  9,966,379
                  
                  
                  $
                  (31,319
                  )
                  
                  $
                  204,201





See
accompanying notes to consolidated financial statements.





F-5





INTER
PARFUMS, INC. AND SUBSIDIARIES


Consolidated
Statements of Cash Flows


Years
ended December 31, 2008, 2007, and 2006


(In
thousands)





2008
                              
                              
                              2007
                              
                              
                              2006Cash
      flows from operating activities:Net
      income
                              
                              $
                              23,765
                              
                              
                              $
                              23,817
                              
                              
                              $
                              17,742Adjustments
      to reconcile net income to net cash provided by (used-in) operating
      activities:Depreciation
      and amortization
                              
                              
                              9,925
                              
                              
                              
                              8,031
                              
                              
                              
                              5,347Impairment
      of goodwill
                              
                              
                              936
                              
                              
                              
                              868
                              
                              
                              
                              —Provision
      for doubtful accounts
                              
                              
                              148
                              
                              
                              
                              588
                              
                              
                              
                              118Noncash
      stock compensation
                              
                              
                              1,119
                              
                              
                              
                              1,096
                              
                              
                              
                              625Minority
      interest in net income of consolidated subsidiaries
                              
                              
                              6,357
                              
                              
                              
                              6,784
                              
                              
                              
                              6,192Deferred
      tax provision (benefit)
                              
                              
                              4,118
                              
                              
                              
                              (657
                              )
                              
                              
                              843Change
      in fair value of derivatives
                              
                              
                              1,759
                              
                              
                              
                              —
                              
                              
                              
                              412Gain
      on subsidiary’s issuance of stock
                              
                              
                              —
                              
                              
                              
                              (665
                              )
                              
                              
                              (332
                              )Loss
      on sale of trademark
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              245Changes
      in:Accounts
      receivable
                              
                              
                              (8,768
                              )
                              
                              
                              2,984
                              
                              
                              
                              (18,714
                              )Inventories
                              
                              
                              (23,285
                              )
                              
                              
                              (28,677
                              )
                              
                              
                              (16,053
                              )Other
      assets
                              
                              
                              4,010
                              
                              
                              
                              (1,602
                              )
                              
                              
                              (1,342
                              )Accounts
      payable and accrued expenses
                              
                              
                              (18,051
                              )
                              
                              
                              25,014
                              
                              
                              
                              18,677Income
      taxes payable, net
                              
                              
                              (8,461
                              )
                              
                              
                              936
                              
                              
                              
                              (393
                              )Net
      cash provided by (used-in) operating activities
                              
                              
                              (6,428
                              )
                              
                              
                              38,517
                              
                              
                              
                              13,367Cash
      flows from investing activities:Purchases
      of short-term investments
                              
                              
                              (5,144
                              )
                              
                              
                              (300
                              )
                              
                              
                              (6,700
                              )Proceeds
      from sale of short-term investments
                              
                              
                              5,144
                              
                              
                              
                              13,100
                              
                              
                              
                              11,300Purchase
      of equipment and leasehold improvements
                              
                              
                              (3,803
                              )
                              
                              
                              (2,380
                              )
                              
                              
                              (3,452
                              )Payment
      for intangible assets acquired
                              
                              
                              (1,095
                              )
                              
                              
                              (58,723
                              )
                              
                              
                              (5,042
                              )Proceeds
      from sale of stock of subsidiary
                              
                              
                              2,695
                              
                              
                              
                              2,879
                              
                              
                              
                              2,830Payment
      for acquisition of minority interests
                              
                              
                              (18,493
                              )
                              
                              
                              (10,984
                              )
                              
                              
                              —Proceeds
      from sale of trademark
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              1,131Net
      cash provided by (used in) investing activities
                              
                              
                              (20,696
                              )
                              
                              
                              (56,408
                              )
                              
                              
                              67Cash
      flows from financing activities:Proceeds
      from loans payable – banks
                              
                              
                              7,089
                              
                              
                              
                              762
                              
                              
                              
                              4,974Proceeds
      from issuance of long-term debt
                              
                              
                              —
                              
                              
                              
                              54,948
                              
                              
                              
                              —Repayment
      of long-term debt
                              
                              
                              (16,292
                              )
                              
                              
                              (10,440
                              )
                              
                              
                              (4,019
                              )Purchase
      of treasury stock
                              
                              
                              (4,975
                              )
                              
                              
                              (107
                              )
                              
                              
                              (164
                              )Proceeds
      from exercise of options including tax benefits
                              
                              
                              1,260
                              
                              
                              
                              1,331
                              
                              
                              
                              1,004Dividends
      paid
                              
                              
                              (4,069
                              )
                              
                              
                              (3,879
                              )
                              
                              
                              (3,251
                              )Dividends
      paid to minority interest
                              
                              
                              (1,735
                              )
                              
                              
                              (1,594
                              )
                              
                              
                              (1,218
                              )Net
      cash provided by (used in) financing activities
                              
                              
                              (18,722
                              )
                              
                              
                              41,021
                              
                              
                              
                              (2,674
                              )Effect
      of exchange rate changes on cash
                              
                              
                              (1,784
                              )
                              
                              
                              8,657
                              
                              
                              
                              5,355Net
      increase (decrease) in cash and cash equivalents
                              
                              
                              (47,630
                              )
                              
                              
                              31,787
                              
                              
                              
                              16,115Cash
      and cash equivalents – beginning of year
                              
                              
                              90,034
                              
                              
                              
                              58,247
                              
                              
                              
                              42,132Cash
      and cash equivalents – end of year
                              
                              $
                              42,404
                              
                              
                              $
                              90,034
                              
                              
                              $
                              58,247Supplemental
      disclosures of cash flow information:Cash
      paid for:Interest
                              
                              $
                              3,894
                              
                              
                              $
                              3,872
                              
                              
                              $
                              1,586Income
      taxes
                              
                              
                              13,311
                              
                              
                              
                              15,211
                              
                              
                              
                              13,227See
      accompanying notes to consolidated financial statements.





F-6




INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes to
Consolidated Financial Statements


December
31, 2008, 2007 and 2006


(In
thousands except share and per share data)





(1)
            The
      Company and its Significant Accounting
Policies




Business
of the Company




Inter
Parfums, Inc. and its subsidiaries (“the Company”) are in the fragrance
business, and manufacture and distribute a wide array of fragrances and
fragrance related products.




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. Revenues generated from one such license represented 56%, 54% and 57%
of net sales in 2008, 2007 and 2006, respectively.




Basis
of Preparation




The
consolidated financial statements include the accounts of the Company, including
75% owned Inter Parfums, S.A. (“IPSA”), a subsidiary whose stock is publicly
traded in France. In January 2007, IPSA formed and began operations of four new
majority-owned distribution subsidiaries, Inter Parfums Limited, Inter Parfums
Deutschland GMBH, Inter Parfums srl and Inter España Parfums et Cosmetiques, SL,
covering territories in The United Kingdom, Germany, Italy and Spain,
respectively. The minority shareholders of the majority-owned distribution
subsidiaries have binding obligations to make good on losses in excess of their
investments in the joint ventures. In June 2008, IPSA formed a new wholly-owned
subsidiary, Inter Parfums (Suisse) SA, to hold and manage certain of its brand
names. All material intercompany balances and transactions have been
eliminated.




Management
makes assumptions and estimates to prepare financial statements in conformity
with accounting principles generally accepted in the United States of America.
Those assumptions and estimates directly affect the amounts reported and
disclosures included in the Consolidated Financial Statements. Actual results
could differ from those assumptions and estimates. Significant estimates for
which changes in the near term are considered reasonably possible and that may
have a material impact on the financial statements are disclosed in these notes
to the Consolidated Financial Statements.




Foreign
Currency Translation




For
foreign subsidiaries with operations denominated in a foreign currency, assets
and liabilities are translated to U.S. dollars at year-end exchange rates.
Income and expense items are translated at average rates of exchange prevailing
during the year. Gains and losses from translation adjustments are accumulated
in a separate component of shareholders’ equity.




Cash
and Cash Equivalents




All
highly liquid investments purchased with a maturity of three months or less are
considered to be cash equivalents.




Short-term
Investments




From time
to time the Company has short-term investments which consist of certificates of
deposit with maturities of greater than three months.




Accounts
Receivable




Accounts
receivable represent payments due to the Company for previously recognized net
sales, reduced by an allowance for doubtful accounts or balances which are
estimated to be uncollectible aggregating $1.3 million and $2.4 million as of
December 31, 2008 and 2007, respectively. Accounts receivable balances are
written off against the allowance for doubtful accounts when they become
uncollectible. Recoveries of accounts receivable previously recorded against the
allowance are recorded in the consolidated statement of income when
received.







F-7




INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes to
Consolidated Financial Statements


December
31, 2008, 2007 and 2006


(In
thousands except share and per share data)





Inventories




Inventories,
including promotional merchandise, only includes inventory considered saleable
or usable in future periods, and is stated at the lower of cost or market, with
cost being determined on the first-in, first-out method. Cost components
include raw materials, components, direct labor and overhead (e.g., indirect
labor, utilities, depreciation, purchasing, receiving, inspection and
warehousing) as well as inbound freight. Promotional merchandise is charged
to cost of sales at the time the merchandise is shipped to the Company’s
customers. Overhead included in inventory aggregated, $4.1 million, $3.2 million
and $2.1 million as of December 31, 2008, 2007 and 2006,
respectively.




Equipment
and Leasehold Improvements




Equipment
and leasehold improvements are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided using the straight-line
method over the estimated useful lives for equipment, which range between three
and ten years and the shorter of the lease term or estimated useful asset
lives for leasehold improvements.




Fair
Value of Financial Instruments




Effective
January 1, 2008, we adopted Statement of Financial Accounting Standards (“SFAS”)
157, “Fair Value Measurements”
(“SFAS 157”). SFAS 157 clarifies the definition of fair value, prescribes
methods for measuring fair value, establishes a fair value hierarchy based on
the inputs used to measure fair value and expands disclosure about the use of
fair value measurements. The adoption of SFAS 157 did not have a material impact
on our fair value measurements.




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




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




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




F-8


INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  Fair
      Value Measurements at December 31, 2008Quoted
      Prices in
                          
                          
                          Significant
      Other
                          
                          
                          SignificantActive
      Markets for
                          
                          
                          Observable
                          
                          
                          UnobservableIdentical
      Assets
                          
                          
                          Inputs
                          
                          
                          InputsTotal
                          
                          
                          (Level
      1)
                          
                          
                          (Level
      2)
                          
                          
                          (Level
      3)Assets:Money
      market funds
                          
                          $
                          19,816
                          
                          
                          $
                          19,816
                          
                          
                          $
                          —
                          
                          
                          $
                          —Foreign
      currency forward exchange contracts accounted for using hedge
      accounted
                          
                          
                          8,162
                          
                          
                          
                          —
                          
                          
                          
                          8,162
                          
                          
                          
                          —$
                          27,978
                          
                          
                          $
                          19,816
                          
                          
                          $
                          8,162
                          
                          
                          $
                          —LiabilitiesForeign
      currency forward exchange contracts not accounted for using hedge
      accounted
                          
                          $
                          1,429
                          
                          
                          
                          —
                          
                          
                          $
                          1,429
                          
                          
                          
                          —Interest
      rate swaps
                          
                          
                          811
                          
                          
                          
                          —
                          
                          
                          
                          811
                          
                          
                          
                          —$
                          2,240
                          
                          
                          $
                          —
                          
                          
                          $
                          2,240
                          
                          
                          $
                          —


All
derivative instruments are reported as either assets or liabilities on the
balance sheet measured at fair value. The valuation of inter rate swaps and the
valuation of foreign currency forward exchange contract not accounted for using
hedge accounting resulted in liabilities which are included in accrued expenses
on the accompanying balance sheet as of December 31, 2008. The valuation of
foreign currency forward exchange contracts accounted for using hedge accounting
resulted in assets which are included in either other current assets ($6.4
million) or other assets ($1.8 million) on the accompanying balance sheet as of
December 31, 2008, depending upon the maturity dates of the contract. Generally,
increases or decreases in the fair value of derivative instruments will be
recognized as gains or losses in earnings in the period of change. If the
derivative instrument is designated and qualifies as a cash flow hedge, the
changes in fair value of the derivative instrument will be recorded as a
separate component of shareholders’ equity until the forecasted sale is recorded
or when the hedge is determined to be ineffective.




The
Company occasionally enters 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 foreign
currency. Before entering into a derivative transaction for hedging purposes, it
is determined that a high degree of initial effectiveness exists between the
change in value of the hedged item and the change in the value of the derivative
instrument from movement in exchange rates. High effectiveness means that the
change in the cash flows of the derivative instrument will effectively offset
the change in the cash flows of the hedged item. The effectiveness of each
hedged item is measured throughout the hedged period and is based on the dollar
offset methodology and excludes the portion of the fair value of the foreign
currency forward exchange contract attributable to the change in spot-forward
difference which is reported in current period earnings. Any hedge
ineffectiveness as defined by SFAS No. 133 is also recognized as a gain or
loss on foreign currency in the income statement. For hedge contracts that are
no longer deemed highly effective, hedge accounting is discontinued and gains
and losses accumulated in other comprehensive income are reclassified to
earnings when the underlying forecasted transaction occurs.  If it is
probable that the forecasted transaction will no longer occur, then any gains or
losses accumulated in other comprehensive income are reclassified to
current-period earnings. As of December 31, 2008, cash-flow hedges
were highly effective, in all material respects.







F-9




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)


As a
result of the dramatic strengthening of the U.S. dollar during our fourth
quarter ended December 31, 2008, we entered into $90 million of foreign currency
forward exchange contracts to hedge approximately 80% of our 2009 sales expected
to be invoiced in U.S. dollars. As of December 31, 2008, the Company recorded a
charge of $0.8 million relating to the portion of the fair value of the
foreign currency forward exchange contract attributable to the change in
spot-forward difference. The change in value relating to the
foreign currency forward exchange contracts not accounted for using hedge
accounting is also reported as a gain or loss. These charges are included
in loss on foreign currency in the accompanying consolidated statements of
income. At December 31, 2008, we had foreign currency contracts in the form
of forward exchange contracts in the amount of approximately U.S.
$128 million, GB pounds 3.7 million, and Japanese yen 95.8 million
which all have maturities of less than a year except for U.S. $21 million which
have maturities of 13 to 16 months.





Goodwill
and Other Intangible Assets




The
Company reviews goodwill and trademarks with indefinite lives for impairment at
least annually, and whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. The following table presents our
assets and liabilities that are measured at fair value on a nonrecurring basis
and are categorized using the fair value hierarchy.




Fair Value Measurements at December 31,
      2008Quoted
      Prices in
                
                
                Significant
      Other
                
                
                SignificantActive
      Markets for
                
                
                Observable
                
                
                UnobservableIdentical
      Assets
                
                
                Inputs
                
                
                InputsTotal
                
                
                (Level 1)
                
                
                (Level 2)
                
                
                (Level 3)DescriptionGoodwill
                
                $
                5,470
                
                
                $
                —
                
                
                $
                —
                
                
                $
                5,470





The
goodwill relates to the Company’s Nickel skin care business which is primarily a
component of our European operations. In performing our annual review of the
recoverability of the carrying amount of goodwill, we determined that Nickel
product sales, although up slightly in 2008 as compared to 2007, continue to be
lower than we originally anticipated. We have measured fair value as a multiple
of sales applied to the average of 2007 and 2008 actual sales and projected
sales for 2009. The sales multiple was based on a third party financial
institution study of sales multiples for all transactions in the skin care,
perfume and cosmetic sectors since 2001. As a result, the carrying amount of the
goodwill exceeded fair value resulting in an impairment loss. Accumulated
impairment losses relating to goodwill aggregated $1.8 million as of December
31, 2008. Activity relating to the goodwill is as follows:





F-10




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)


December 31,2008
                
                
                2007Balance
      - beginning of year
                
                $
                6,715
                
                
                $
                4,978Goodwill
      acquired
                
                
                —
                
                
                
                1,892Effect
      of changes in foreign currency translation rates
                
                
                (309
                )
                
                
                713Impairment
      loss
                
                
                (936
                )
                
                
                (868
                )Balance
      - end of year
                
                $
                5,470
                
                
                $
                6,715




The cost
of trademarks, licenses and other intangible assets with finite lives is being
amortized by the straight-line method over the term of the respective license or
the intangible assets estimated useful life which range from three to seventeen
years. If the residual value of a finite life intangible asset exceeds its
carrying value, then the asset is not amortized. The Company reviews intangible
assets with finite lives for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable.




Revenue
Recognition




Revenue
is recognized when merchandise is shipped and the risk of loss passes to the
customer. The Company, at its discretion, permits limited returns of merchandise
and establishes allowances for estimated returns based upon historic trends and
relevant current data. The Company does not bill its customer’s freight and
handling charges. All shipping and handling costs, which aggregated $6.2
million, $6.2 million and $5.5 million in 2008, 2007 and 2006, respectively, are
included in selling, general and administrative expense in the consolidated
statements of income. One customer represented 12%, 13% and 15% of consolidated
net sales in 2008, 2007 and 2006, respectively.




Payments
to Customers




The
Company is subject to the provisions of Emerging Issues Task Force (“EITF”)
Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor’s Products).”  In accordance
with this guidance, the Company has recorded the revenues generated from
purchase with purchase promotions as sales and the costs of its purchase with
purchase and gift with purchase promotions as cost of sales. Certain other
incentive arrangements require the payment of a fee to customers based on their
attainment of pre-established sales levels.  These fees have been recorded
as a reduction of net sales.




Advertising
and Promotion




Advertising
and promotional costs are expensed as incurred and recorded as a component of
cost of goods sold (in the case of free goods given to customers) or selling,
general and administrative expenses. Advertising and promotional costs included
in selling, general and administrative expense were $65.8 million, $58.5 million
and $46.5 million for 2008, 2007 and 2006, respectively. Costs relating to
purchase with purchase and gift with purchase promotions that are reflected in
cost of sales aggregated $34.3 million, $23.0 million and $20.6 million in 2008,
2007 and 2006, respectively.




Package
Development Costs




Package
development costs associated with new products and redesigns of existing product
packaging are expensed as incurred.







F-11




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)




Income
Taxes




The
Company accounts for income taxes in accordance with the provisions of SFAS 109,
“Accounting for Income Taxes” and FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes - an interpretation of FASB No. 109
(“FIN 48”). Deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to the difference between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Tax
benefits recognized are reduced by a valuation allowance where it is more likely
than not that the benefits may not be realized.




Issuance
of Common Stock by Consolidated Subsidiary




Prior to
the acquisition of minority interests discussed in Note (3), the difference
between the Company’s share of the proceeds received by the subsidiary and the
carrying amount of the portion of the Company’s investment deemed sold, was
reflected as a gain or loss in the consolidated statements of income. Subsequent
to the acquisition of minority interests, in accordance with SAB 51, the
difference between the Company’s share of the proceeds received by the
subsidiary and the carrying amount of the portion of the Company’s investment
deemed sold, is reflected as an equity adjustment in the consolidated balance
sheets.




Earnings
Per Share




Basic
earnings per share is computed using the weighted average number of shares
outstanding during each year. Diluted earnings per share is computed using the
weighted average number of shares outstanding during each year, plus the
incremental shares outstanding assuming the exercise of dilutive stock options
and warrants using the treasury stock method. All share and per share amounts
for dates and periods prior to the stock split discussed in Note 10 have been
restated to reflect the retroactive effect of the stock split.




The
following table sets forth the computation of basic and diluted earnings per
share:




Year ended December 31,2008
                
                
                2007
                
                
                2006Numerator:Net
      income
                
                $
                23,966
                
                
                $
                23,817
                
                
                $
                17,742Effect
      of dilutive securities of consolidated subsidiary
                
                
                (99
                )
                
                
                (270
                )
                
                
                —Numerator
      for dilutedearnings per
      share
                
                $
                23,867
                
                
                $
                23,547
                
                
                $
                17,742Denominator:Weighted
      average shares
                
                
                30,621,070
                
                
                
                30,666,141
                
                
                
                30,486,463Effect
      of dilutive securities:Stock
      options and warrants
                
                
                156,915
                
                
                
                338,158
                
                
                
                366,275Denominator
      for diluted earnings per share
                
                
                30,777,985
                
                
                
                31,004,299
                
                
                
                30,852,738





Not
included in the above computations is the effect of anti-dilutive potential
common shares which consist of outstanding options to purchase 541,000, 477,000,
and 324,000 shares of common stock for 2008, 2007, and 2006, respectively, and
outstanding warrants to purchase 187,500 shares of common stock for 2008 and
150,000 shares of common stock for 2007 and 2006.





F-12




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)




Treasury
Stock




The Board
of Directors may authorize share repurchases of the Company’s common stock
(Share Repurchase Authorizations). Share repurchases under these authorizations
may be made through open market transactions, negotiated purchase or otherwise,
at times and in such amounts within the parameters authorized by the Board.
Shares repurchased under Share Repurchase Authorizations are held in treasury
for general corporate purposes, including issuances under various employee stock
option plans. Treasury shares are accounted for under the cost method and
reported as a reduction of Stockholders’ equity. Share Repurchase Authorization
may be suspended, limited or terminated at any time without notice.




Recent
Accounting Pronouncements




In March
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS 161,
Disclosures about Derivative Instruments and Hedging Activities, as an amendment
to SFAS 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
161 requires that objectives for using derivative instruments be disclosed in
terms of underlying risk and accounting designation. The fair value of
derivative instruments and their gains and losses will need to be presented in
tabular format in order to present a more complete picture of the effects of
using derivative instruments. SFAS 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15,
2008. The Company does not believe that the adoption of SFAS 161 will have a
material impact on its consolidated financial statements.




In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160 establishes
requirements for ownership interests in subsidiaries held by parties other than
the Company (sometimes called “minority interests”) be clearly identified,
presented, and disclosed in the consolidated statement of financial position
within equity, but separate from the parent’s equity. All changes in the
parent’s ownership interests are required to be accounted for consistently as
equity transactions and any noncontrolling equity investments in deconsolidated
subsidiaries must be measured initially at fair value. SFAS 160 is effective, on
a prospective basis, for fiscal years beginning after December 15, 2008.
However, presentation and disclosure requirements must be retrospectively
applied to comparative financial statements and upon implementation, the Company
will be required to classify its minority interests as equity in accordance with
SFAS 160.




In
December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations”
(“SFAS 141R”). SFAS 141R provides revised guidance on how acquirers recognize
and measure the consideration transferred, identifiable assets acquired,
liabilities assumed, noncontrolling interests, and goodwill acquired in a
business combination. SFAS 141R also expands required disclosures surrounding
the nature and financial effects of business combinations. SFAS 141R is
effective, on a prospective basis, for fiscal years beginning after December 15,
2008. The Company is currently assessing the impact of SFAS 141R on its
consolidated financial statements. However, if additional minority interests are
acquired after adoption of SFAS 141R, such transactions will be accounted for as
equity transactions and not subject to purchase accounting.




Reclassifications




Certain
prior year amounts in the accompanying consolidated statements of cash flows
have been reclassified to conform to current year presentation.







F-13




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)


(2)
            Recent
      Agreements




Gap
Inc.




In April
2008, we expanded our current relationship with Gap Inc. with the signing of a
licensing agreement for international distribution of personal care products
through Gap and Banana Republic stores as well as select specialty and
department stores outside the United States, including duty-free and other
travel related retailers. The agreement is effective through December 31,
2011.




Our
association with Gap Inc. began in July 2005, when we entered into an exclusive
agreement to develop, produce, manufacture and distribute personal care and home
fragrance products for Gap and Banana Republic brand names to be sold in Gap and
Banana Republic retail stores in the United States and Canada. In March 2006,
the agreement was amended to include Gap Outlet and Banana Republic Factory
Stores in the United States and Canada.




The
initial term of this agreement expires on August 31, 2009, and the agreement
includes an additional two-year optional term that expires on August 31, 2011,
as well as a further additional two-year term that expires August 31, 2013, in
each case if certain retail sales targets are met or if Gap chooses to extend
the term. In addition, if the agreement is extended for the first optional term,
then Gap has the right to terminate our rights under the agreement before the
end of that first optional term if Gap pays to us an amount specified in a
formula, with such right to be exercised during the period beginning on
September 1, 2010 and expiring on August 31, 2011.




As an
inducement to enter into this agreement, in July 2005 we granted warrants to
purchase 150,000 shares of our common stock to Gap exercisable for five
yearsat $16.80 per
share, 125% of the market price on the date of grant. In addition, we agreed to
grant up to three (3) additional warrants to Gap. The first additional warrant
was granted in September 2006 for 150,000 shares of our common stock exercisable
for five years at $11.46 per share, the market price on the date of grant. If
the term of our agreement with Gap is extended as discussed above, we will grant
to Gap two additional warrants. Each such warrant would be exercisable for
75,000 shares of our common stock at 100% of the market price on the date of
grant. The fair market value of the 150,000 warrants granted in July 2005 and
the 150,000 warrants granted in September 2006 aggregated approximately $1.7
million and was determined on the date of the first grant using the
Black-Scholes option pricing model with the following assumptions: dividend
yield 0.7%; volatility of 50%; a risk-free interest rate of 3.84%; and an
expected life of the warrant of five years. Such amount has been capitalized as
an intangible asset and is being amortized over the initial term of the
agreement. Such amortization is included in selling, general and administrative
expense in the accompanying consolidated financial statements.




We have
registered with the Securities and Exchange Commission the 300,000 shares
purchasable pursuant to the first two warrant grants for resale in May 2007. In
the event we fail to maintain an effective registration statement, Gap shall
have the right to convert the warrants or any portion thereof into shares of our
common stock. Upon exercise of this right we have agreed to deliver, without
payment by Gap of any exercise price or any cash or other consideration, that
number of shares of fully paid and nonassessable shares of the Company’s Common
Stock, the value of which would equal the difference between the fair value and
the exercise price of the Company’s Common Stock on the date of exercise
attributable to the warrants exercised divided by the fair value of the
Company’s common Stock on the date of exercise. We do not have any liability
representing future obligations under our registration arrangements relating to
the warrants issued to Gap.




F-14


INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)




bebe
Stores, Inc.




In July
2008, we entered into an exclusive six year worldwide agreement with bebe
Stores, Inc. under which we will design, manufacture and supply fragrance,
bath and body products and color cosmetics for company-owned bebe stores in the
United States and Canada as well as select specialty and department stores
worldwide.




Brooks
Brothers




InNovember 2007, we entered
into exclusive agreements with Retail Brand Alliance, Inc., d/b/a/ Brooks
Brothers (“Brooks Brothers”) under which we design, manufacture and supply
personal care products for men and women sold at Brooks Brothers locations in
the United States as well as a licensing agreement covering Brooks Brothers
stores and specialty retail and department stores outside the United States
including duty free and other travel-related retailers.




Lanvin




In July
2007, we acquired the worldwide rights to the Lanvin brand names and
international trademarks listed in Class 3 from Jeanne Lanvin, S.A. (“Lanvin”).
Among other items, Class 3 of the international classification of trademarks
goods and services include: soaps, perfumery, essential oils, cosmetics and hair
lotions. We paid €22
million (approximately $29.7 million) in cash for the brand names and trademarks
and simultaneously terminated our existing license agreement. We also agreed to
pay to Lanvin a sales based fee for technical and creative assistance in new
product development to be rendered by Lanvin in connection with our use of the
trademarks through June 30, 2019. In addition, Lanvin has the right to
repurchase the brand names and trademarks in 2025 for the greater of €70 million or one times the
average of the annual sales for the years ending December 31, 2023 and
2024.





Prior to
this acquisition, the amount paid to secure the license agreement with Lanvin
was being amortized over the life of the license agreement. At June 30, 2007,
that intangible asset, net of accumulated amortization aggregated €13.2 million. The €22 million paid in July 2007
for the brand names and trademarks together with the carrying value related to
the license agreement represents the total cost of acquiring the brand names and
trademarks. Such total amount is included in trademarks, licenses and other
intangible assets on the Company’s consolidated balance sheets.





Since the
residual value of the Lanvin brand names and trademarks, estimated to be
approximately €42.5
million, exceeds its carrying amount, no further amortization expense has been,
or is expected to be, recorded after June 30, 2007.





New
York & Company, Inc.




In April
2007, we entered into an exclusive agreement with New York & Company, Inc.
under which we design and manufacture personal care products to be sold at the
New York & Company retail locations and on their website. We are responsible
for product development, formula creation, packaging and manufacturing while New
York & Company is responsible for marketing and selling in its
stores.





F-15




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)




Van
Cleef & Arpels




In
September 2006, IPSA entered into an exclusive, worldwide license agreement with
Van Cleef & Arpels Logistics SA, for the creation, development and
distribution of fragrance and related bath and body products under the Van Cleef
& Arpels brand and related trademarks. The agreement runs through December
31, 2018. As an inducement to enter into this license agreement, we agreed to
pay, in January 2007, €18 million (approximately $23.4 million) to Van Cleef
& Arpels Logistics SA in a lump sum, up front payment and we agreed to
purchase existing inventory of approximately $2.1 million held by YSL Beauté,
the former licensee. The asset is included in trademarks, licenses and other
intangible assets on the Company’s consolidated balance sheets and the liability
for the €18 million up front payment was included in accrued expenses on the
December 31, 2006 balance sheet. The license agreement became effective on
January 1, 2007.





Quiksilver,
Inc.




In March
2006, IPSA entered into an exclusive worldwide license agreement with
Quiksilver, Inc. for the creation, development and distribution of fragrance,
suncare, skincare and related products under the Roxy and Quiksilver brands. The
agreement runs through 2017.





(3)
            Acquisition
      of Minority Interests




IPSA




In 2008
and 2007, we acquired an additional 3.6% and 1.2% interest, respectively, in
IPSA, our majority owned French subsidiary, from its minority shareholders for
cash of approximately $18.5 million in 2008 and $6.3 million in
2007.





The
allocation of the purchase price was as follows:





2008
                      
                      
                      2007Trademarks
                      
                      $
                      15,458
                      
                      
                      $
                      5,469Minority
      interest
                      
                      
                      8,356
                      
                      
                      
                      2,724Deferred
      tax liability
                      
                      
                      (5,321
                      )
                      
                      
                      (1,883
                      )Total
                      
                      $
                      18,493
                      
                      
                      $
                      6,310




The
acquisition was accounted for under the purchase method and brought our
ownership interest in IPSA to approximately 75%.





F-16


INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)




Nickel,
S.A.




In June
2007, the minority shareholders of Nickel S.A., a consolidated subsidiary of the
Company, exercised their rights to sell their remaining 32.4% interest in Nickel
S.A. to the Company for approximately $4.7 million in cash. The acquisition was
accounted for under the purchase method. The allocation of the purchase price
was as follows:




Purchase
      price
                    
                    $
                    4,673Less
      amount recorded for put option liability
                    
                    
                    1,273Subtotal
                    
                    $
                    3,400Allocated
      as follows:Trademarks
                    
                    $
                    921Minority
      interest
                    
                    
                    587Goodwill
                    
                    
                    1,892Total
                    
                    $
                    3,400





(4)
            Inventories




December 31,2008
                        
                        
                        2007Raw
      materials and component parts
                        
                        $
                        37,248
                        
                        
                        $
                        41,108Finished
      goods
                        
                        
                        86,385
                        
                        
                        
                        64,914$
                        123,633
                        
                        
                        $
                        106,022




(5)
            Equipment
      and Leasehold Improvements




December 31,2008
                        
                        
                        2007Equipment
                        
                        $
                        18,526
                        
                        
                        $
                        15,499Leasehold
      improvements
                        
                        
                        2,098
                        
                        
                        
                        1,96320,624
                        
                        
                        
                        17,462Less
      accumulated depreciation and amortization
                        
                        
                        12,954
                        
                        
                        
                        10,200$
                        7,670
                        
                        
                        $
                        7,262




Depreciation
and amortization expense was $3.1 million, $2.5 million and $1.9 million for
2008, 2007 and 2006, respectively.







F-17


INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)




(6)
            Trademarks,
      Licenses and Other Intangible
Assets




2008
                
                Gross
                
                
                Accumulated
                
                
                Net
      BookAmount
                
                
                Amortization
                
                
                ValueTrademarks
      (indefinite lives)
                
                $
                7,315
                
                
                $
                —
                
                
                $
                7,315Trademarks
      (finite lives)
                
                
                53,819
                
                
                
                115
                
                
                
                53,704Licenses
      (finite lives)
                
                
                51,113
                
                
                
                9,992
                
                
                
                41,121Other
      intangible assets (finite lives)
                
                
                13,817
                
                
                
                11,035
                
                
                
                2,782Subtotal
                
                
                118,749
                
                
                
                21,142
                
                
                
                97,607Total
                
                $
                126,064
                
                
                $
                21,142
                
                
                $
                104,922


2007
                  
                  Gross
                  
                  
                  Accumulated
                  
                  
                  Net
      BookAmount
                  
                  
                  Amortization
                  
                  
                  ValueTrademarks
      (indefinite lives)
                  
                  $
                  7,497
                  
                  
                  $
                  —
                  
                  
                  $
                  7,497Trademarks
      (finite lives)
                  
                  
                  54,688
                  
                  
                  
                  115
                  
                  
                  
                  54,573Licenses
      (finite lives)
                  
                  
                  41,784
                  
                  
                  
                  5,971
                  
                  
                  
                  35,813Other
      intangible assets (finite lives)
                  
                  
                  13,018
                  
                  
                  
                  9,324
                  
                  
                  
                  3,694Subtotal
                  
                  
                  109,490
                  
                  
                  
                  15,410
                  
                  
                  
                  94,080Total
                  
                  $
                  116,987
                  
                  
                  $
                  15,410
                  
                  
                  $
                  101,577




During
2008, 2007 and 2006, there were no charges for the impairment of trademarks with
indefinite useful lives. Amortization expense was $6.9 million, $5.3 million and
$3.4 million for 2008, 2007 and 2006 respectively. Amortization expense is
expected to approximate $6.0 million in 2009, $5.8 million in 2010 and 2011, and
$4.6 million in 2012 and 2013. The weighted average amortization period for
trademarks, licenses and other intangible assets with finite lives are 16 years,
9 years and 3 years, respectively, and 12 years in the aggregate.




(7)
            Loans
      Payable – Banks




Loans
payable – banks consist of the following:




The
Company’s foreign subsidiaries have available credit lines, including several
bank overdraft facilities totaling $45 million, bearing interest at the three
month EURIBOR plus 0.60% (the three month EURIBOR was 2.89% at December 31,
2008). Outstanding amounts totaled $5.6 million and $6.2 million at
December 31, 2008 and 2007, respectively.




The
Company has borrowings available under a $15 million unsecured revolving line of
credit due on demand and bearing interest at the prime rate minus 1% (the prime
rate was 3.25% as of December 31, 2008). The line of credit which has a maturity
date of July 1, 2009 is expected to be renewed on an annual basis. Outstanding
amounts totaled $8.4 million and $1.0 at December 31, 2008 and
2007.




The
weighted average interest rate on short-term borrowings was 2.76% and 5.49% as
of December 31, 2008 and 2007, respectively.







F-18


INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)


(8)
            Long-term
      Debt




Long-term
debt consists of the following:




December 31,2008
                  
                  
                  200716
      million euro variable rate facility at three month EURIBOR plus 0.60%,
      payable in 20 equal quarterly installments
                  
                  $
                  2,227
                  
                  
                  $
                  7,06618
      million euro fixed rate facility at 4.1%, payable in 20 quarterly
      installments
                  
                  
                  15,639
                  
                  
                  
                  21,62222
      million euro variable rate facility at three month EURIBOR plus 0.40%,
      payable in 20 equal quarterly installments
                  
                  
                  22,960
                  
                  
                  
                  30,767Other
                  
                  
                  217
                  
                  
                  
                  27841,043
                  
                  
                  
                  59,733Less
      current maturities
                  
                  
                  13,352
                  
                  
                  
                  16,215Total
                  
                  $
                  27,691
                  
                  
                  $
                  43,518




In
connection with the 16 million euro variable rate facility, the Company entered
into a swap transaction effectively exchanging the variable interest rate to a
variable rate based on the 12 month EURIBOR with a floor of 3.25% and a ceiling
of 3.85%. In connection with the 22 million euro variable rate facility, the
Company entered into a swap transaction effectively exchanging the variable
interest rate to a fixed rate of 4.42%. These derivative instruments are
recorded at fair value and changes in fair value which aggregated $0.8 million
in 2008 is reflected in interest expense on the consolidated statements of
income.




Some of
the Company’s long-term debt facilities require the maintenance of certain
financial covenants. Using December 31, 2008 exchange rates, maturities of
long-term debt subsequent to December 31, 2008 are $13.4 million in 2009, $11.3
million in 2010, $11.7 million in 2011 and $4.6 million in 2012.




(9)
            Commitments




Leases




The
Company leases its office and warehouse facilities under operating leases which
are subject to escalation clauses and expire at various dates through 2015.
Rental expense amounted to $9.9 million, $9.1 million and $7.1 million in 2008,
2007 and 2006, respectively. Minimum future annual rental payments are as
follows:




2009
                    
                    $
                    7,0712010
                    
                    
                    7,2442011
                    
                    
                    5,7392012
                    
                    
                    2,6152013
                    
                    
                    1,753Thereafter
                    
                    
                    2,700$
                    27,122




F-19




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)


License
Agreements
  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 2018. In connection with certain of
these license agreements, the Company is subject to minimum annual advertising
commitments, minimum annual royalties and other commitments as
follows:
  2009
                          
                          $
                          137,6882010
                          
                          
                          144,5592011
                          
                          
                          148,8032012
                          
                          
                          153,9602013
                          
                          
                          159,961Thereafter
                          
                          
                          561,522$
                          1,306,493
  Future
advertising commitments are estimated based on planned future sales for the
license terms that were in effect at December 31, 2008, without consideration
for potential renewal periods. The above figures do not reflect the fact that
our distributors share our advertising obligations.Royalty expense included
in selling, general, and administrative expenses, aggregated $37.3 million,
$35.6 million and $31.4 million, in 2008, 2007 and 2006,
respectively.
  (10)
              Shareholders’
      Equity
  Stock
Split
  In May
2008, the board of directors of the Company authorized a three-for-two stock
split effected in the form of a 50% stock dividend distributed on May 30, 2008
to shareholders of record as of May 15, 2008. As a result of the stock split,
the accompanying consolidated financial statements reflect an increase in the
number of outstanding shares of common stock and the transfer of the par value
of these additional shares from paid-in capital. All share and per share amounts
for dates and periods prior to the split have been restated to reflect the
retroactive effect of the stock split.
  Issuance
of Common Stock by Consolidated Subsidiary
  During
2008, 2007 and 2006, 77,068, 121,746 and 169,479 shares, respectively, of
capital stock of IPSA were issued as a result of employees exercising stock
options. At December 31, 2008 and 2007, the Company’s percentage ownership
of IPSA was approximately 75%.
  Share-Based
Payments:
  The
Company maintains a stock option program for key employees, executives and
directors. The plans, all of which have been approved by shareholder vote,
provide for the granting of both nonqualified and incentive options. Prior to
2006, options granted under the plans vested immediately and were exercisable
for a period of five years.  Commencing in 2006, options granted under
the plans typically have a six-year term and vest over a five-year period. The
fair value of shares vested in 2008 and 2007 aggregated $0.3 million and $0.2
million, respectively. Compensation cost is
recognized on a straight-line basis over the requisite service period for the
entire award.It is generally the Company’s policy to issue new shares
upon exercise of stock options. The following table sets forth information with
respect to nonvested options for 2008:
  Number
      of Shares
                    
                    
                    Weighted
      Average Grant
                      Date
      Fair ValueNonvested
      options – beginning of year
                    
                    
                    344,700
                    
                    
                    $
                    4.24Nonvested
      options granted
                    
                    
                    246,100
                    
                    
                    $
                    3.37Nonvested
      options vested or forfeited
                    
                    
                    100,538
                    
                    
                    $
                    4.20Nonvested
      options – end of year
                    
                    
                    490,262
                    
                    
                    $
                    3.81
  F-20
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  Share-based
payment expenses decreased income before income taxes by $1.1 million in both
2008 and 2007 and $0.9 million in 2006, decreased net income by $0.62 million,
$0.54 million and $0.44 million in 2008, 2007 and 2006, respectively, and
reduced diluted earnings per share by $0.02 in both 2008 and 2007 and $0.01in
2006.
  The
following table summarizes stock option activity and related information as of
December 31, 2008 and does not include information relating to options of
IPSA granted by IPSA, our majority owned subsidiary:
  Year
      ended December 31,2008
                      
                      
                      2007
                      
                      
                      2006Options
                      
                      
                      Weighted
                        Average
                        exercise
                        price
                      
                      
                      Options
                      
                      
                      Weighted
                        Average
                        exercise
                        price
                      
                      
                      Options
                      
                      
                      Weighted
                        Average
                        exercise
                        priceShares
      under option - beginning of year
                      
                      
                      1,206,600
                      
                      
                      $
                      12.29
                      
                      
                      
                      1,301,400
                      
                      
                      $
                      11.02
                      
                      
                      
                      1,478,325
                      
                      
                      $
                      9.35Options
      granted
                      
                      
                      246,100
                      
                      
                      
                      9.86
                      
                      
                      
                      144,450
                      
                      
                      
                      12.75
                      
                      
                      
                      271,800
                      
                      
                      
                      13.05Options
      exercised
                      
                      
                      (33,150
                      )
                      
                      
                      8.22
                      
                      
                      
                      (228,150
                      )
                      
                      
                      5.34
                      
                      
                      
                      (341,400
                      )
                      
                      
                      5.22Options
      cancelled
                      
                      
                      (281,175
                      )
                      
                      
                      14.92
                      
                      
                      
                      (11,100
                      )
                      
                      
                      12.61
                      
                      
                      
                      (107,325
                      )
                      
                      
                      11.67Shares
      under options - end of year
                      
                      
                      1,138,375
                      
                      
                      
                      11.23
                      
                      
                      
                      1,206,600
                      
                      
                      
                      12.29
                      
                      
                      
                      1,301,400
                      
                      
                      
                      11.02
 
  At
December 31, 2008, options for 1,213,369 shares were available for future grant
under the plans.
  As of
December 31, 2008, the aggregate intrinsic value of options outstanding is $0.1
million and unrecognized compensation cost related to stock options outstanding
on Inter Parfums, Inc. stock aggregated $1.8 million which will be recognized
over the next five years. The amount of unrecognized compensation cost related
to stock options outstanding of our majority owned subsidiary, IPSA, was 0.4
million euro. Options under IPSA plans vest over a four year
period.
  The
weighted average fair values of the options granted by Inter Parfums, Inc.
during 2008, 2007 and 2006 were $3.36, $4.37 and $4.24 per share, respectively,
on the date of grant using the Black-Scholes option pricing model to calculate
the fair value of options granted. The assumptions used in the
Black-Scholes pricing model for the years ended December 31, 2008, 2007 and 2006
are set forth in the following table. Expected volatility is estimated based on
historic volatility of the Company’s common stock. The Company uses the
simplified method in developing its estimate of the expected term of the option
as historic data regarding employee exercise behavior is incomplete for the new
vesting parameters recently instituted by the company. The risk-free rate is
based on the U.S. Treasury yield curve in effect at the time of the grant of the
option and the dividend yield reflects the assumption that the dividend payout
in place at the time of stock-based award grant would continue with no
anticipated increases.
  Year
      Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006Weighted-average
      expected stock-price volatility
                    
                    
                    41
                    %
                    
                    
                    39
                    %
                    
                    
                    30
                    %Weighted-average
      expected option life
                    
                    4.7
      years
                    
                    
                    4.5
      years
                    
                    
                    5
      yearsWeighted-average
      risk-free interest rate
                    
                    
                    2.3
                    %
                    
                    
                    3.5
                    %
                    
                    
                    4.7
                    %Weighted-average
      dividend yield
                    
                    
                    1.25
                    %
                    
                    
                    0.9
                    %
                    
                    
                    0.9
                    %
  F-21
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  Stock-based
employee compensation determined under the fair value based method, net of
related tax effects, includes compensation incurred by IPSA, our majority owned
subsidiary whose stock is publicly traded in France. No options were granted by
IPSA during 2008 and 2007. The weighted average fair values of the options
granted by Inter Parfums, S.A. during 2006 were 10.37 euro per share on the date
of grant using the Black-Scholes option pricing model with the following
assumptions: dividend yield 0.94%; volatility of 25%; risk-free interest rate of
4.6%; and an expected life of the option of four years.
  Cash proceeds, tax benefits and
intrinsic value related to stock options exercised were as
follows:
  Year
      Ended December 31,2008
                        
                        
                        2007
                        
                        
                        2006Cash
      proceeds from stock options exercised
                        
                        $
                        272
                        
                        
                        $
                        1,331
                        
                        
                        $
                        1,004Tax
      benefits
                        
                        $
                        988
                        
                        
                        $
                        915
                        
                        
                        $
                        —Intrinsic
      value of stock options exercised
                        
                        $
                        158
                        
                        
                        $
                        1,368
                        
                        
                        $
                        3,028
  No tax
benefit was realized or recognized in 2006 from stock options exercised as
valuation reserves were allocated to those potential benefits.
  The
following table summarizes additional stock option information as of
December 31, 2008:
  Options
      outstandingNumber
                                          
                                          weighted
      average remaining
                                          
                                          OptionsExercise
      prices
                                          
                                          outstanding
                                          
                                          contractual
      life
                                          
                                          exercisable$6.93
                                          
                                          81,100
                                          
                                          6.00
      years
                                          
                                          —$9.97
                                          
                                          232,650
                                          
                                          1.30
      years
                                          
                                          232,650$10.13
      – $10.26
                                          
                                          243,750
                                          
                                          0.95
      years
                                          
                                          243,750$11.01
      – $11.49
                                          
                                          165,975
                                          
                                          5.00
      years
                                          
                                          3,000$12.58
      – $12.64
                                          
                                          123,675
                                          
                                          4.85
      years
                                          
                                          29,535$13.10
      – $13.23
                                          
                                          246,225
                                          
                                          3.91
      years
                                          
                                          96,578$15.37
                                          
                                          12,000
                                          
                                          0.09
      years
                                          
                                          12,000$16.83
                                          
                                          30,000
                                          
                                          0.12
      years
                                          
                                          30,000$18.00
                                          
                                          3,000
                                          
                                          4.41
      Years
                                          
                                          600Totals
                                          
                                          1,138,375
                                          
                                          2.87
      Years
                                          
                                          648,113
  As of
December 31, 2008 the weighted average exercise price of options exercisable was
$11.09 and the weighted average remaining contractual life of options
exercisable is 1.63 years. The aggregate intrinsic value of options exercisable
at December 31, 2008 is zero.
  The Chief
Executive Officer and the President each exercised 75,000 outstanding stock
options of the Company’s common stock in both 2007 and 2006. The aggregate
exercise prices of $0.8 million in both 2007 and 2006 were paid by them
tendering to the Company in 2007 and 2006 an aggregate of 72,429 and 55,917
shares, respectively, of the Company’s common stock, previously owned by them,
valued at fair market value on the dates of exercise. All shares issued pursuant
to these option exercises were issued from treasury stock of the Company. In
addition, the Chief Executive Officer tendered in 2007 and 2006 an additional
9,698 and 11,760 shares, respectively, for payment of certain withholding taxes
resulting from his option exercises.
  F-22
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  Treasury
Stock
  In
February 2008, the board of directors of the Company authorized a stock
repurchase program whereby the Company is authorized to repurchase a maximum of
500,000 shares of its common stock in the open market. In February 2008, 194,286
shares of the Company’s common stock were repurchased at an average price of
$11.30 per common share. In June 2008, the board of directors authorized a reset
of the stock repurchase program whereby the Company was authorized to repurchase
a maximum of 500,000 shares of its common stock in the open market. In December,
468,137 shares of the Company’s common stock were repurchased at an average
price of $5.92 per common share and the board of directors authorized an
additional 1 million to be potentially purchased pursuant to the stock
repurchase program. Under the current program, as of December 31, 2008 the
Company is authorized to repurchase up to 1,031,863 additional shares of the
Company’s common stock.
  Dividends
  The
Company declared dividends of $0.133, $0.133, and $0.107 per share per annum in
2008, 2007, and 2006, respectively. The quarterly dividend of $1.0 million
declared in December 2008 was paid in January 2009.
  (11)
              Segments
      and Geographic Areas
  The
Company manufactures
and distributes one product line, fragrances and fragrance related products. The
Company manages its business in two segments, European based operations
and United States based operations. The European assets are located, and
operations are primarily conducted, in France. European operations primarily
represent the sales of the prestige brand name fragrances and United States
operations primarily represent the sale of specialty retail and mass market
fragrances. Information on the Company’s operations by segments is as
follows:
  Year
      ended December 31,2008
                                              
                                              
                                              2007
                                              
                                              
                                              2006Net
      sales:United
      States
                                              
                                              $
                                              59,657
                                              
                                              
                                              $
                                              58,807
                                              
                                              
                                              $
                                              50,980Europe
                                              
                                              
                                              389,009
                                              
                                              
                                              
                                              332,420
                                              
                                              
                                              
                                              271,650Eliminations
      of intercompany sales
                                              
                                              
                                              (2,542
                                              )
                                              
                                              
                                              (1,667
                                              )
                                              
                                              
                                              (1,576
                                              )$
                                              446,124
                                              
                                              
                                              $
                                              389,560
                                              
                                              
                                              $
                                              321,054Net
      income:United
      States
                                              
                                              $
                                              1,960
                                              
                                              
                                              $
                                              2,066
                                              
                                              
                                              $
                                              415Europe
                                              
                                              
                                              22,063
                                              
                                              
                                              
                                              21,681
                                              
                                              
                                              
                                              17,270Eliminations
                                              
                                              
                                              (57
                                              )
                                              
                                              
                                              70
                                              
                                              
                                              
                                              57$
                                              23,966
                                              
                                              
                                              $
                                              23,817
                                              
                                              
                                              $
                                              17,742Depreciation
      and amortization expense:United
      States
                                              
                                              $
                                              1,283
                                              
                                              
                                              $
                                              1,076
                                              
                                              
                                              $
                                              763Europe
                                              
                                              
                                              8,642
                                              
                                              
                                              
                                              6,955
                                              
                                              
                                              
                                              4,584$
                                              9,925
                                              
                                              
                                              $
                                              8,031
                                              
                                              
                                              $
                                              5,347Interest
      and dividend income:United
      States
                                              
                                              $
                                              4
                                              
                                              
                                              $
                                              227
                                              
                                              
                                              $
                                              596Europe
                                              
                                              
                                              1,741
                                              
                                              
                                              
                                              2,939
                                              
                                              
                                              
                                              1,707$
                                              1,745
                                              
                                              
                                              $
                                              3,166
                                              
                                              
                                              $
                                              2,303Interest
      expense:United
      States
                                              
                                              $
                                              142
                                              
                                              
                                              $
                                              366
                                              
                                              
                                              $
                                              259Europe
                                              
                                              
                                              4,798
                                              
                                              
                                              
                                              3,301
                                              
                                              
                                              
                                              1,538$
                                              4,940
                                              
                                              
                                              $
                                              3,667
                                              
                                              
                                              $
                                              1,797Income
      tax expense (benefit):United
      States
                                              
                                              $
                                              1,087
                                              
                                              
                                              $
                                              1,105
                                              
                                              
                                              $
                                              (148
                                              )Europe
                                              
                                              
                                              15,263
                                              
                                              
                                              
                                              15,517
                                              
                                              
                                              
                                              13,304Eliminations
                                              
                                              
                                              (38
                                              )
                                              
                                              
                                              53
                                              
                                              
                                              
                                              45$
                                              16,312
                                              
                                              
                                              $
                                              16,675
                                              
                                              
                                              $
                                              13,201
  F-23
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
 
 December
      31,2008
                                          
                                          
                                          2007
                                          
                                          
                                          2006Total
      assets:United
      States
                                          
                                          $
                                          56,320
                                          
                                          
                                          $
                                          52,571
                                          
                                          
                                          $
                                          61,435Europe
                                          
                                          
                                          380,058
                                          
                                          
                                          
                                          403,351
                                          
                                          
                                          
                                          281,378Eliminations
      of investment in subsidiary
                                          
                                          
                                          (11,241
                                          )
                                          
                                          
                                          (9,870
                                          )
                                          
                                          
                                          (9,768
                                          )$
                                          425,137
                                          
                                          
                                          $
                                          446,052
                                          
                                          
                                          $
                                          333,045Additions
      to long-lived assets:United
      States
                                          
                                          $
                                          479
                                          
                                          
                                          $
                                          1,042
                                          
                                          
                                          $
                                          1,337Europe
                                          
                                          
                                          19,877
                                          
                                          
                                          
                                          44,125
                                          
                                          
                                          
                                          30,862$
                                          20,356
                                          
                                          
                                          $
                                          45,167
                                          
                                          
                                          $
                                          32,199Total
      long-lived assets:United
      States
                                          
                                          $
                                          6,537
                                          
                                          
                                          $
                                          7,342
                                          
                                          
                                          $
                                          7,376Europe
                                          
                                          
                                          111,525
                                          
                                          
                                          
                                          108,212
                                          
                                          
                                          
                                          62,750$
                                          118,062
                                          
                                          
                                          $
                                          115,554
                                          
                                          
                                          $
                                          70,126Deferred
      tax assets:United
      States
                                          
                                          $
                                          586
                                          
                                          
                                          $
                                          591
                                          
                                          
                                          $
                                          726Europe
                                          
                                          
                                          2,802
                                          
                                          
                                          
                                          3,709
                                          
                                          
                                          
                                          1,768$
                                          3,388
                                          
                                          
                                          $
                                          4,300
                                          
                                          
                                          $
                                          2,494
 
 United
States export sales were approximately $22.5 million, $9.5 million and $7.2
million in 2008, 2007 and 2006, respectively. Consolidated net sales to
customers by region are as follows:
 
 Year ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006North
      America
                    
                    $
                    108,600
                    
                    
                    $
                    115,400
                    
                    
                    $
                    107,400Europe
                    
                    
                    204,100
                    
                    
                    
                    173,200
                    
                    
                    
                    128,300Central
      and South America
                    
                    
                    38,000
                    
                    
                    
                    28,200
                    
                    
                    
                    24,500Middle
      East
                    
                    
                    39,200
                    
                    
                    
                    26,100
                    
                    
                    
                    21,900Asia
                    
                    
                    53,000
                    
                    
                    
                    43,900
                    
                    
                    
                    37,700Other
                    
                    
                    3,200
                    
                    
                    
                    2,800
                    
                    
                    
                    1,300$
                    446,100
                    
                    
                    $
                    389,600
                    
                    
                    $
                    321,100
 
 Consolidated
net sales to customers in major countries are as follows:
  Year Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006United
      States
                    
                    $
                    101,000
                    
                    
                    $
                    113,000
                    
                    
                    $
                    104,000United
      Kingdom
                    
                    $
                    25,000
                    
                    
                    $
                    28,000
                    
                    
                    $
                    28,000France
                    
                    $
                    38,000
                    
                    
                    $
                    30,000
                    
                    
                    $
                    21,000
 
 (12)
              Income
      Taxes
  The
components of income before income taxes and minority interest consist of the
following:
  Year ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006U.S.
      operations
                    
                    $
                    3,047
                    
                    
                    $
                    3,170
                    
                    
                    $
                    267Foreign
      operations
                    
                    
                    43,387
                    
                    
                    
                    44,106
                    
                    
                    
                    36,868$
                    46,434
                    
                    
                    $
                    47,276
                    
                    
                    $
                    37,135
  F-24
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  The
provision for current and deferred income tax expense (benefit) consists of the
following:
 
 Year
      ended December 31,2008
                        
                        
                        2007
                        
                        
                        2006Current:Federal
                        
                        $
                        56
                        
                        
                        $
                        343
                        
                        
                        $
                        (321
                        )State
      and local
                        
                        
                        86
                        
                        
                        
                        190
                        
                        
                        
                        60Foreign
                        
                        
                        12,052
                        
                        
                        
                        16,799
                        
                        
                        
                        12,61912,194
                        
                        
                        
                        17,332
                        
                        
                        
                        12,358Deferred:Federal
                        
                        
                        886
                        
                        
                        
                        437
                        
                        
                        
                        (81
                        )State
      and local
                        
                        
                        59
                        
                        
                        
                        135
                        
                        
                        
                        195Foreign
                        
                        
                        3,173
                        
                        
                        
                        (1,229
                        )
                        
                        
                        7294,118
                        
                        
                        
                        (657
                        )
                        
                        
                        843Total
      income tax expense
                        
                        $
                        16,312
                        
                        
                        $
                        16,675
                        
                        
                        $
                        13,201
 
 The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities are as
follows:
  December 31,2008
                      
                      
                      2007Deferred
      tax assets:State
      net operating loss carry forwards
                      
                      $
                      640
                      
                      
                      $
                      832Federal
      net operating loss carry forwards
                      
                      
                      605
                      
                      
                      
                      1,490Foreign
      net operating loss carry forwards
                      
                      
                      764
                      
                      
                      
                      2,351Alternative
      minimum tax credit carry forwards
                      
                      
                      134
                      
                      
                      
                      75Inventory
      and accounts receivable
                      
                      
                      400
                      
                      
                      
                      657Profit
      sharing
                      
                      
                      829
                      
                      
                      
                      885Stock
      option compensation
                      
                      
                      244
                      
                      
                      
                      —Effect
      of inventory profit elimination
                      
                      
                      1,112
                      
                      
                      
                      1,308Other
                      
                      
                      669
                      
                      
                      
                      162Total
      gross deferred tax assets
                      
                      
                      5,397
                      
                      
                      
                      7,760Valuation
      allowance
                      
                      
                      (2,009
                      )
                      
                      
                      (3,460
                      )Net
      deferred tax assets
                      
                      
                      3,388
                      
                      
                      
                      4,300Deferred
      tax liabilities (long-term):Property,
      plant, and equipment
                      
                      
                      (67
                      )
                      
                      
                      (225
                      )Trademarks
      and licenses
                      
                      
                      (8,104
                      )
                      
                      
                      (4,147
                      )Unrealized
      gains on cash flow hedges
                      
                      
                      (3,084
                      )
                      
                      
                      —Other
                      
                      
                      (307
                      )
                      
                      
                      (292
                      )Total
      deferred tax liabilities
                      
                      
                      (11,562
                      )
                      
                      
                      (4,664
                      )Net
      deferred tax assets (liabilities)
                      
                      $
                      (8,174
                      )
                      
                      $
                      (364
                      )
  At
December 31, 2008 federal net operating loss carryforwards of approximately $1.8
million expire at various dates through 2026 and the Company’s state net
operating loss carryforwards, subject to applicable state apportionment, for New
York State and New York City tax purposes of approximately $8.7 million and for
New Jersey tax purposes of approximately $10.6 million expire at various dates
through 2012. Prior to 2007, valuation allowances had been provided including
$1.1 million in 2006, as it was estimated that future tax benefits from option
compensation deductions might prevent the net operating loss carryforwards from
being fully utilized. In 2008 and 2007, $1.1 million and $0.4 million,
respectively of such valuation allowances were realized. The amount realized in
2008 and 2007 and any future realization of the valuation allowance is credited
to additional paid-in capital.
  F-25
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  In
addition, a valuation allowance of $0.8 million, $0.2 million and $0.8 million
has been provided in 2008, 2007 and 2006, respectively against certain foreign
net operating loss carryforwards, as it was estimated that future profitable
operations from certain foreign subsidiaries might not be sufficient to realize
the full amount of net operating loss carryforwards recognized. In 2008, one of
our foreign subsidiaries was merged into IPSA and as a result of the merger the
Company recognized a tax benefit of $0.7 million from the utilization of certain
foreign operating loss carryforwards including those for which valuation
allowances had been recorded.
  No
further valuation allowances have been provided as management believes that it
is more likely than not that the asset will be realized in the reduction of
future taxable income.
  The Company
has not provided for U.S. deferred income taxes or foreign withholding taxes on
$141 million of undistributed earnings of its non-U.S. subsidiaries as of
December 31, 2008 since the Company intends to reinvest these earnings
in its foreign operations indefinitely except where it is able to repatriate
these earnings to the United States without material incremental tax
provisions.
  Differences
between the United States Federal statutory income tax rate and the effective
income tax rate were as follows:
  Year ended December
      31,2008
                    
                    
                    2007
                    
                    
                    2006Statutory
      rates
                    
                    
                    34.0
                    %
                    
                    
                    34.0
                    %
                    
                    
                    34.0
                    %State
      and local taxes, net of Federal benefit
                    
                    
                    0.3
                    
                    
                    
                    0.5
                    
                    
                    
                    0.5Effect
      of foreign taxes in excess of U.S. statutory rates
                    
                    
                    1.0
                    
                    
                    
                    1.2
                    
                    
                    
                    2.2Other
                    
                    
                    (0.2
                    )
                    
                    
                    (0.4
                    )
                    
                    
                    (1.1
                    )Effective
      rates
                    
                    
                    35.1
                    %
                    
                    
                    35.3
                    %
                    
                    
                    35.6
                    %
  (13)
              Accumulated
      Other Comprehensive Income
  The components of accumulated other
comprehensive income consists of the following:
  Year ended December
      31,2008
                    
                    
                    2007
                    
                    
                    2006Net
      derivative instruments, beginning of year
                    
                    $
                    97
                    
                    
                    $
                    128
                    
                    
                    $
                    59Gain
      (loss) on derivative instruments
                    
                    
                    4,315
                    
                    
                    
                    (31
                    )
                    
                    
                    69Net
      derivative instruments, end of year
                    
                    
                    4,412
                    
                    
                    
                    97
                    
                    
                    
                    128Cumulative
      translation adjustments, beginning of year
                    
                    
                    30,858
                    
                    
                    
                    15,042
                    
                    
                    
                    3,515Translation
      adjustments
                    
                    
                    (9,766
                    )
                    
                    
                    15,816
                    
                    
                    
                    11,527Cumulative
      translation adjustments, end of year
                    
                    
                    21,092
                    
                    
                    
                    30,858
                    
                    
                    
                    15,042Accumulated
      other comprehensive income
                    
                    $
                    25,504
                    
                    
                    $
                    30,955
                    
                    
                    $
                    15,170
  F-26
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2008, 2007 and 2006
 (In
thousands except share and per share data)
  (14)
              Risks
      and Uncertainties
  As with
any business, many aspects of our operations are subject to influences outside
our control.  These factors include the effect of the current
financial crisis and therefore the potential for further deterioration in
consumer spending and consumer debt levels, as well as the continued
availability of favorable credit sources and capital market conditions in
general. The recent economic challenges and uncertainties in a number of
countries where we do business, including the United States, has begun to impact
on our business. This financial crisis is global in scale and has
negatively affected consumer demand, which is having an adverse impact on our
distributors and our retail customers. These events have led distributors and
retailers to carry less inventory than usual and have resulted in changes in
their ordering patterns for the products that we sell.  Although the impact
of this financial crisis did not have a material impact in 2008, its effect in
2009 is expected to be challenging for us.
 
 The
judgments used by management in applying critical accounting policies could
also be affected by a further and prolonged general deterioration in the
economic environment, which could negatively influence future financial results
and availability of continued financing. Specifically, subsequent evaluations of
our accounts receivables, inventories, and deferred tax assets in light of the
factors then prevailing, could result in significant changes in our allowance
and reserve accounts in future periods which in turn could generate significant
additional charges. However, we believe that the evaluation of our allowance and
reserve accounts is adequate based upon information currently available.
Similarly, the valuation of certain intangible assets could be negatively
impacted by prolonged and severely depressed market conditions thus leading to
the recognition of impairment losses.
 
 We are
also subject to market risks, including foreign exchange risk and interest rate
risk, and occasionally use derivative instruments to manage our exposure to
these risks.
 
 In
addition,, we are exposed to certain concentration risk. As previously
mentioned, 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. Revenues generated from one such license
represented 56%, 54% and 57% of net sales in 2008, 2007 and 2006, respectively
and one customer represented 12%, 13% and 15% of net sales in 2008, 2007 and
2006, respectively.
 
 We
monitor concentrations of credit risk associated with financial institutions
with which we conduct significant business. We believe our credit risk is
minimal, as we primarily conduct business with large, well-established financial
institutions. We have not experienced any difficulty in maintaining our existing
credit lines which we believe, together with cash on hand and cash generated
from operations, will provide us with sufficient resources to meet all present
and reasonably foreseeable future operating needs. We also do not anticipate
nonperformance by any of our derivative counterparties.
 
 In
addition, see Item 1A Risks factors as it relates to the current financial
crisis.
  F-27
  Schedule
II
 
 INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Valuation
and Qualifying Accounts
 
 (In
thousands)
 
 Column A
                      
                      Column B
                      
                      
                      Column C
                      
                      
                      Column D
                      
                      
                      Column EAdditions(1)
                      
                      
                      (2)Charged toBalance at
                      
                      
                      Charged to
                      
                      
                      otherbeginning of
                      
                      
                      costs and
                      
                      
                      accounts –
                      
                      
                      Deductions –
                      
                      
                      Balance atDescription
                      
                      period
                      
                      
                      expenses
                      
                      
                      describe
                      
                      
                      describe
                      
                      
                      end of periodYear
      ended December 31, 2008:Allowances
      for sales returns and doubtful accounts
                      
                      $
                      2,357
                      
                      
                      
                      154
                      
                      
                      
                      (59
                      )(b)
                      
                      
                      1,148
                      (a)
                      
                      
                      1,304Year
      ended December 31, 2007:Allowances
      for sales returns and doubtful accounts
                      
                      $
                      2,244
                      
                      
                      
                      589
                      
                      
                      
                      208
                      (b)
                      
                      
                      684
                      (a)
                      
                      
                      2,357Year
      ended December 31, 2006:Allowances
      for sales returns and doubtful accounts
                      
                      $
                      2,257
                      
                      
                      
                      129
                      
                      
                      
                      188
                      (b)
                      
                      
                      330
                      (a)
                      
                      
                      2,244
 (a)   
 Write off of bad debts and sales returns.
 (b)    
Foreign currency translation adjustment.
 
 See
accompanying report of independent registered public accounting
firm.
  F-28
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 Inter Parfums, Inc.By
                /s/ Jean MadarJean Madar, Chief Executive OfficerDate:
      March 11, 2009
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
 
 Signature
                      
                      Title
                      
                      Date/s/ Jean Madar
                      
                      Chairman
      of the Board of Directors
                      
                      March
      11, 2009Jean
      Madar
                      
                      and
      Chief Executive Officer/s/ Russell Greenberg
                      
                      Chief
      Financial and Accounting Officer
                      
                      March
      11, 2009Russell
      Greenberg
                      
                      and  Director/s/ Philippe Benacin
                      
                      Director
                      
                      March
      3, 2009Philippe
      Benacin/s/ Philippe Santi
                      
                      Director
                      
                      March
      2, 2009Philippe
      Santi/s/ Francois Heilbronn
                      
                      Director
                      
                      March
      2, 2009Francois
      Heilbronn/s/ Jean Levy
                      
                      Director
                      
                      March
      3, 2009Jean
      LevyDirector
                      
                      March
      __, 2009Robert
      Bensoussan-Torres/s/ Serge Rosinoer
                      
                      Director
                      
                      March
      2, 2009Serge
      Rosinoer/s/ Patrick Choël
                      
                      Director
                      
                      February
      27, 2009Patrick
      Choël