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, 2009
or





oTRANSITION 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 o  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. $110,098,000 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 8, 2010:
30,199,952.





Documents
Incorporated By Reference: None.








Table
of Contents





PageNote
      on Forward Looking StatementsPART
      IItem
      1.
                                    Business
                                    1Item
      1A.
                                    Risk
      Factors
                                    20Item
      1B.
                                    Unresolved
      Staff Comments
                                    26Item
      2.
                                    Properties
                                    27Item
      3.
                                    Legal
      Proceedings
                                    28PART
      IIItem
      4.
                                    Market
      for Registrant’s Common Equity and Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                    29Item
      5.
                                    Selected
      Financial Data
                                    31Item
      6.
                                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                    32Item
      6A.
                                    Quantitative
      and Qualitative Disclosures About Market Risk
                                    48Item
      7.
                                    Financial
      Statements and Supplementary Data
                                    49Item
      8.
                                    Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                                    50Item
      8A.
                                    Controls
      and Procedures
                                    51Item
      8AT.
                                    Controls
      and Procedures
                                    52Item
      8B.
                                    Other
      Information
                                    52PART
      IIIItem
      9.
                                    Directors,
      Executive Officers and Corporate Governance
                                    53Item
      10.
                                    Executive
      Compensation
                                    58Item
      11.
                                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                    75Item
      12.
                                    Certain
      Relationships and Related Transactions, and Director
      Independence
                                    78Item
      13.
                                    Principal
      Accountant Fees and Services
                                    80PART
      IVItem
      14.
                                    Exhibits
      and Financial Statement Schedules
                                    82FINANCIAL
      STATEMENTS
                                    F-1SIGNATURES


ii


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 may be required by
law, we undertake no obligation to update any forward-looking statement, whether
as a result of new information, future events or otherwise.


iii


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 them 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.


1


General





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.





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.





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, 2009, and the reports that
we file from time to time with the Securities and Exchange
Commission.





European
Operations





We
produce and distribute our prestige fragrance products primarily under license
agreements with brand owners, and prestige product sales represented
approximately 88% of net sales for 2009.  We have built a portfolio of
prestige brands, which include Burberry, Lanvin, Van Cleef & Arpels, Jimmy
Choo, Montblanc, Paul Smith, S.T. Dupont, 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 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 57%,
56% and 54% of net sales for the years ended December 31, 2009, 2008 and
2007, respectively. In addition, we own the Lanvin brand name for our class of
business and sales of Lanvin product represented 14%, 13% and 12% of net sales
for the years ended December 31, 2009, 2008 and 2007, 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.





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.


2





United
States Operations





Our
specialty retail and mass-market fragrance and fragrance related products are
marketed through our United States operations and represented 12%, of sales for
the year ended December 31, 2009. 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, Brooks
Brothers, bebe, New York & CompanyandJordache
trademarks.





Recent
Developments





Gap
and Banana Republic, Extension Agreement





Although
the initial term of our agreement with The Gap, Inc. covering the Gap and Banana
Republic brands in the United States and Canada expired on August 31, 2009, we
had entered into a series of short-term extension agreements to continue the
relationship as it previously existed while we were in discussions with The Gap,
Inc. for a formal extension of the agreement. In March 2010, we signed a new
specialty retail agreement with The Gap, Inc. covering the Gap and Banana
Republic brands in the United States and Canada, with terms and conditions
similar to those of the original agreement. This new agreement expires December
31, 2011.





Montblanc
Exclusive, Worldwide License Agreement





In January 2010 we reported that our
Paris-based subsidiary, Inter Parfums, S.A., and Montblanc-Simplo GMBH, entered
into an exclusive, worldwide license agreement commencing on July 1, 2010 and
expiring on December 31, 2020, for the creation, development and distribution of
fragrances and fragrance related products under the Montblanc brand. Our rights
under such license agreement are subject to certain minimum sales, advertising
expenditures and royalty payments as are customary in our industry. Inter
Parfums, S.A. has also agreed to pay an upfront entry fee of €1 million
(approximately $1.4 million) for this license, and to purchase the inventory of
the current licensee, which is anticipated to be approximately €4 million
(approximately $5.7 million).





Jimmy
Choo Exclusive, Worldwide License Agreement





In October 2009 Inter Parfums, S.A. and
J Choo Limited entered into an exclusive, worldwide license agreement commencing
on January 1, 2010 and expiring on December 31, 2021, for the creation,
development and distribution of fragrances under the Jimmy Choo brand. Our
rights under such license agreement are subject to certain minimum sales,
advertising expenditures and royalty payments as are customary in our
industry.


3





Our
Prestige Products





General





We
produce and distribute our prestige fragrance products primarily under license
agreements with brand owners. 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.





We have
built a portfolio of prestige brands, which include Burberry, Lanvin, Van Cleef
& Arpels, Jimmy Choo, Paul Smith, Montblanc, S.T. Dupont, and
Nickel.





Our
exclusive world-wide fragrance license with Burberry Limited expires December
31, 2016. This license includes an additional five-year optional term that
requires the mutual consent of Burberry and Inter Parfums, S.A. In addition,
Burberry has the right on December 31, 2011 to buy back the license at its then
fair market value.





In
addition, we have exclusive world-wide licenses for the following brands: Van
Cleef & Arpels, Jimmy Choo, Montblanc, Paul Smith and S.T. Dupont, which run
through the following dates:





Brand Name
              
              License Expiration DateVan
      Cleef & Arpels
              
              December
      31, 2018, plus a 5-year optional term if certain sales targets are
      metJimmy
      Choo
              
              December
      31, 2021Montblanc
              
              December
      31, 2020Paul
      Smith
              
              December
      31, 2017S.T.
      Dupont
              
              June
      30, 2011





For competitive reasons we do not
disclose certain commercial or financial terms in these agreements, such as
specific percentage royalty rates or percentage of net sales for minimum
advertising requirements, as well as the specific dollar amount of royalties,
minimum advertising expenses and minimum sales requirements. With respect to
each item that relates to financial information, the aggregate amounts of such
items are taken into account in connection with the preparation of our
consolidated financial statements. Further, we believe that all commercial and
financial information omitted is commercially reasonable and as such the
specific percentages or dollar amounts are not material. Based upon the
foregoing, we have filed confidential treatment applications for the agreements
that we have filed as material contracts, which have been routinely
granted.


4





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 10% five-year
compounded annual growth rate in sales of Burberry fragrances.





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.





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 included the men’s version of Burberry The Beat, which was
initially previewed exclusively at Bloomingdale’s. In addition, the global
rollout of men’s version of Burberry The Beat followed
during the first half of 2009.For 2010, our plans
include a sports fragrance for men and women and the launch of our first
cosmetics line under the Burberry brand.





We are
committing capital to further grow our largest brand, Burberry, in 2010, through
the launch of a cosmetics line for women in about 30 to 40 shops around the
world.  The launch of this cosmetics line will require a significant
investment in the first year to develop the product, build cosmetic counters,
hire and train personnel, and is expected to negatively affect 2010 net income
attributable to Inter Parfums, Inc. by approximately $1.5 million or
approximately $0.05 per diluted share. We believe that this is an essential
step which will take Burberry to the next level of growth.





LANVIN— In July 2007 we
acquired the worldwide rights to the Lanvin brand names and international
trademarks listed in Class 3 that we had previously 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.


5





In 2006,
we launched Rumeur, our
first new Lanvin fragrance for women. In addition to its debut, solid sales gains and
popularity were achieved by Éclat d’Arpège which has been
a strong seller since its introduction in 2002.  In 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.





During
the Summer of 2009 we launched a our newest 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. In addition, for Lanvin in 2010, we
are creating new women’s scent.





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. 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 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, Collection
Extraordinaire, was
launched in late 2009.In
addition, for Van Cleef & Arpels in 2010, we are creating new women’s
fragrance and our first new men’s fragrance.





JIMMY CHOO — In October 2009
Inter Parfums, S.A. and J Choo Limited entered into an exclusive, worldwide
license agreement commencing on January 1, 2010 and expiring on December 31,
2021, for the creation, development and distribution of fragrances under the
Jimmy Choo brand.





Founded
by Tamara Mellon in 1996, the luxury goods company Jimmy Choo was acquired by
TowerBrook Capital Partners, the international private equity firm, in February
2007. With a heritage in luxury footwear, Jimmy Choo today encompasses a
complete luxury lifestyle accessory brand with women's shoes, handbags, small
leather goods, sunglasses and eyewear.  Its products are available in
the growing network of Jimmy Choo freestanding stores as well as in the most
prestigious department, specialty and duty free stores worldwide. From its
original base in the United Kingdom and United States, the Jimmy Choo store
network now encompasses over 100 locations in 32 countries.


6





The brand
is the recipient of the 2008 “Designer Brand of the Year” award from the British
Fashion Council, the 2008 ACE award for “Brand of the Year” from the Accessory
Council, the 2008 “Brand of the Year” award from Footwear News, and the 2009
“Partner in Excellence” Award from Nordstrom.





We
believe that this relationship with Jimmy Choo offers a perfect fit with our
strategy of expanding our brand portfolio to include new universes and
represents an important milestone in our development. This brand possesses the
quintessential qualities to ensure the ambitious development of fragrance lines
that will be supported by significant advertising commitments over the coming
years. Also, work on our first fragrance for the Jimmy Choo brand has begun, and
we anticipate the fragrance will be launched in early 2011.





MONTBLANC— In January
2010 we reported that our Paris-based subsidiary, Inter Parfums, S.A., and
Montblanc-Simplo GMBH, entered into an exclusive, worldwide license agreement
commencing on July 1, 2010 and expiring on December 31, 2020, for the creation,
development and distribution of fragrances and fragrance related products under
the Montblanc brand.





Montblanc has achieved a world-renowned
position in the luxury segment and become a purveyor of exclusive products which
reflect today’s exacting demands for timeless design, tradition and master
craftsmanship. In the past few years, Montblanc’s product range has been
expanded to Swiss made watches, male accessories and female jewelry, luxury
leather goods and eyewear.





Through its leadership positions in
writing instruments, watches and leather goods, promising growth outlook in
women's jewelry, active presence in more than 70 countries, network of more than
350 boutiques worldwide and high standards of product design and quality,
Montblanc offers our company growth potential for development in fragrances and
ancillary products. We believe this license with the more than 100-year-old,
world-renowned, luxury brand will further strengthen our prospects for continued
expansion in the selective perfume market. Montblanc fragrances are currently
distributed in 50 countries worldwide.





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.





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 2006 we launched the men’s fragrance, Paul Smith Story, and in
2007, we launchedPaul Smith
Rose, a women’s fragrance for Paul Smith. In September 2009 our
European-based operations launched a new men’s scent, Paul Smith Man. In addition, we are
creating new women’s fragrance under the Paul Smith brand for launch in
2010.


7


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 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
women’s fragrance for S.T. Dupont, and in 2008, we launched S.T. Dupont Passenger, new scents for men
and women. During 2009, we launched a new fragrance called S.T. Dupont Rose, and for
2010 we anticipate the launch of a new women’s fragrance line for S.T. Dupont,
S.T. Dupont
Diamant.





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 original
term of the license expires in December 2017. However, in September 2009 by
mutual consent as a result of unsatisfactory commercial development, we agreed
to an early termination of our license agreement with Quiksilver. The
termination will take effect on June 30, 2010 and is not expected to have
any material effect on our consolidated financial statements.





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. This license
is scheduled to expire on December 31, 2010, and we have no intention to renew.
The non-renewal of this license is not expected to have any material effect on
our consolidated financial statements.





Prestige
Skin Care & Cosmetics





BURBERRY — For 2010, our plans
include the launch of our first cosmetics line under the Burberry brand. We are
committing capital to further grow our largest brand, Burberry, in 2010, through
the launch of a cosmetics line for women in approximately 30 shops around the
world. We believe that this is an essential step which will take Burberry
to the next level of growth. The launch of the Burberry cosmetics line is
also an important step to reach new customers and increase our exposure
worldwide, which we believe will build the foundation for further growth in the
years to come.





NICKEL— In April 2004 Inter
Parfums, S.A. acquired a 67.6% interest in Nickel S.A., and in June 2007, the
noncontrolling 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.





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 spa in London.


8





Our
current focus is on skin care products and we have launched several new skin
care categories under the brand name in order to increase 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 Products





Specialty
retail has become an important part of our overall business, and our United
States operations 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.





In
connection with our specialty retail agreements in our United States operations,
we design, produce and manufacture fragrance and fragrance related products for
brand name specialty retailers, primarily in their retail stores. Our initial
agreement with The Gap, Inc. covered the Gap and Banana Republic brands in the
United States and Canada. Although the initial term of this agreement expired on
August 31, 2009, we had entered into a series of short-term extension agreements
to continue the relationship as it previously existed while we were in
discussions with The Gap, Inc. for a formal extension of the agreement. In March
2010, we signed a new specialty retail agreement with The Gap, Inc. covering the
Gap and Banana Republic brands in the United States and Canada., with terms and
conditions similar to those of the original agreement. This new agreement
expires December 31, 2011.





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





We also
have agreements in place for Brooks Brothers, New York & Company and bebe
Stores specialty retail brands. We are responsible for product development,
formula creation, packaging and manufacturing under all of those brands. Our
exclusive agreements for the Brooks Brothers, New York & Company and bebe
brands run through the following dates:





Brand Name
              
              Expiration DateBrooks
      Brothers
              
              December
      31, 2013, plus a 5-year optional term if certain sales targets are met,
      plus additional 5-year optional  term if both parties
      agreeNew
      York & Company
              
              October
      8, 2012, plus subsequent 2 year renewals terms if both parties agree,
      subject to the right of New York & Company to terminate the agreement
      within 3 months after completion of the second year of
    sales,Bebe
      Stores
              
              June
      30, 2014, plus three,  3-year optional terms, if certain sales
      targets are met


9





In addition, our agreement for the
Brooks Brothers brand includes a license for our sales to Brooks Brothers
stores, as well as specialty and department stores outside the United States and
duty free and other travel-related retailers in return for royalty payments and
certain advertising expenditures. Our agreement for the bebe brand also
includes a license for select specialty and department stores worldwide in
return for royalty payments and certain advertising expenditures.





For competitive reasons we do not
disclose certain commercial or financial terms in these agreements, such as
specific percentage royalty rates or percentage of net sales for minimum
advertising requirements, as well as the specific dollar amount of royalties,
minimum advertising expenses and minimum sales requirements. With respect to
each item that relates to financial information, the aggregate amounts of such
items are taken into account in connection with the preparation of our
consolidated financial statements. Further, we believe that all financial
information omitted is commercially reasonable and as such the specific
percentages or dollar amounts are not material. Based upon the foregoing, we
have filed confidential treatment applications for such agreements that we have
filed as material contracts, which have been routinely granted.





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 initial collection
consisted of three scents for women and two for men and in 2007 two additional
fragrances were added and companion products such as body wash, body cream and
shower gel were also introduced.





During 2007, we had a staged rollout of
new products to Gap’s North American stores, including a higher end collection
of fragrances for men and women as well as a men’s fragrance and grooming
products.





In 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
was effective as of July 1, 2007 and expires December 31, 2011.


10


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 120 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 April
2009, we launched a new Gap fragrance, Close, for sale at
approximately 550 Gap stores and 175 Gap Body stores nationwide. International
distribution began in September 2009, including an excusive launch at 240
Sephora doors in Europe.  Total international distribution is expected
to reach approximately 5,000 doors by the end of 2011. Also during 2009, for the
Banana Republic brand, we debuted new fragrances, Republic of Women and Republic of Men, in North
America in late August 2009, and commenced international rollout 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.





In
November 2008, we shipped the Brooks Brothers New York collection for men
and women to Brooks Brothers U.S. stores. In addition, a new Brooks Brothers
fragrance called Black
Fleece, was launched in the fall of 2009. International distribution is
being readied for 2010.





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
success 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 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. Although this line did not meet our expectations
and was discontinued, we launched a new fragrance for New York & Company in
2009 and we supply their stores with color cosmetic products.


11


Bebe
Stores





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 was launched at more than 200 bebe United States stores
and, our bebe signature fragrance was unveiled at bebe stores in the U.S. in
August 2009, which was followed by worldwide distribution later in the third
quarter. In addition, in September 2009, our bebe signature fragrance debuted at
approximately 300 Dillard’s stores. The launch was supported with a print
advertising program in the November 2009 issues of Cosmopolitan, Elle, and In Style, as well as outdoor
advertising on billboards and bus kiosks. Dillard’s has also made a strong
commitment to the bebe
launch as a featured fragrance in its multi-page advertising insert in several
Conde Nast publications plus inclusion in its holiday catalog.





Mass
Market Products





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 are expected contribute
significantly to our growth as it represents 88% of total business in 2009. 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 our successful
track record.


12


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 intend to continue to broaden our product
offering beyond the fragrance category and offer other fragrance related
products and 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.  For 2010, our plans include the launch of our first
cosmetics line under the Burberry brand. We are committing capital to further
grow our largest brand, Burberry, in 2010, through the launch of a cosmetics
line for women in about 30 to 40 shops around the world.  The launch of
this cosmetics line will require a significant investment in the first year to
develop the product, build cosmetic counters, hire and train personnel, and is
expected to affect 2010 net income attributable to Inter Parfums, Inc. by
approximately $1.5 million or approximately $0.05 per diluted share. We
believe that this is an essential step which will take Burberry to the next
level of growth. The launch of the Burberry cosmetics line is also an
important step to reach new customers and increase our exposure worldwide, which
we believe will build the foundation for further growth in the years to
come.





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 and are operating 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 on terms favorable to us, 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.


13





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
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. We also
recently commenced product development to supply fragrances exclusively for
Anthropologie stores, catalog and its internet business on an as needed and when
ordered basis. Gap and Banana Republic, both leading international specialty
retailers offering clothing, accessories and personal care products for men,
women, children and infants, New York & Company, Retail Brand Alliance (for
Brooks Brothers), bebe Stores, Inc. and Anthropologie, a unit of Urban
Outfitters, Inc. (NASDAQ:URBN), are innovative specialty retailers which offer a
variety of lifestyle merchandise to highly defined customer niches, and are each
responsible for marketing and selling fragrance and fragrance related products
we produced in their respective stores.





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.





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.


14





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;





·
            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);





·
            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. The components for our specialty retail
products are sourced and our specialty retail products are primarily produced
and filled in the United States, and our mass market products are manufactured,
produced or filled in the United States or China.





Marketing
and Distribution





Prestige Products





Our
prestige products are distributed in over 100 countries around the world through
a selective distribution network. 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 on an exclusive basis 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
ourbusiness is a
global business, 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 during the first half of 2007 we
formed and presently operate through majority owned distribution subsidiaries in
the major markets of the United Kingdom, Italy, Spain and Germany for
distribution of prestige fragrances.Shipments to these
subsidiaries are not recognized as sales until that merchandise is sold by the
distribution subsidiary to its customers.




15


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 on
terms favorable to us, 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 100 countries
around the world. Sales to one distributor represented 11%, 12% and 13% and of
consolidated net sales in 2009, 2008 and 2007, respectively.




Approximately
35%, 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 hedging foreign currencies to minimize the risk arising
from operations.





The
business of 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
product to their stores, and distribute product as well as to other retailer
outlets and department stores within the United States.





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.


16





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.





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.





Geographic Areas





Export sales from United States
operations were approximately $14.0 million, $22.5 million and $9.5 million in
2009, 2008 and 2007, respectively.




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




Year Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007North
      America
                      
                      $
                      96,800
                      
                      
                      $
                      108,600
                      
                      
                      $
                      115,400Europe
                      
                      
                      184,900
                      
                      
                      
                      204,100
                      
                      
                      
                      173,200Central
      and South America
                      
                      
                      29,300
                      
                      
                      
                      38,000
                      
                      
                      
                      28,200Middle
      East
                      
                      
                      42,300
                      
                      
                      
                      39,200
                      
                      
                      
                      26,100Asia
                      
                      
                      53,600
                      
                      
                      
                      53,000
                      
                      
                      
                      43,900Other
                      
                      
                      2,600
                      
                      
                      
                      3,200
                      
                      
                      
                      2,800$
                      409,500
                      
                      
                      $
                      446,100
                      
                      
                      $
                      389,600





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





Year Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007United
      States
                  
                  $
                  88,000
                  
                  
                  $
                  101,000
                  
                  
                  $
                  113,000United
      Kingdom
                  
                  
                  31,000
                  
                  
                  
                  25,000
                  
                  
                  
                  28,000France
                  
                  
                  37,000
                  
                  
                  
                  38,000
                  
                  
                  
                  30,000





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.


17





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, other than third parties with
the capacity to develop, manufacture and ship product to such specialty
retailers. However, such special retail stores compete directly with other
specialty retail stores such as Abercrombie & Fitch and Victoria’s 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
Procter 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.





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.


18





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 the brand names we license, use or own
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.





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





·
            Burberry


·
            Van
      Cleef & Arpels


·
            Jimmy
      Choo


·
            Montblanc


·
            Gap


·
            Banana
      Republic


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


·
            Brooks
      Brothers


·
            bebe


·
            S.T.
      Dupont


·
            Paul
      Smith


·
            Jordache





In
addition, we are the registered trademark owner of several trademarks for
fragrances and fragrance related products, including:





·
            Lanvin


·
            Intimate


·
            Aziza


·
            Nickel


·
            Regal
      Collections, Royal Selections and
Apple


19





Employees





As of
March 1, 2010 we had 256 full-time employees world-wide. Of these, 171 are
full-time employees in Paris, with 47 employees engaged in sales activities and
124 in administrative, production and marketing activities. In the United
States, 85 employees work full-time, and of these, 35 were engaged in sales
activities and 50 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 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 trading price
of our common stock could decline due to any of these risks, and you may lose
all or part of your investment.





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.


20


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.





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 57%,
56% and 54% of net sales for the years ended December 31, 2009, 2008 and
2007, 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.


21


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.





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 the brand names we
license, use or own 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.


22





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’s 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.





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. We also recently developed and commenced supplying fragrances
exclusively for Anthropologie stores, catalog and its internet business on an as
needed and when ordered basis. Gap and Banana Republic, both leading
international specialty retailers offering clothing, accessories and personal
care products for men, women, children and infants, New York & Company,
Retail Brand Alliance (for Brooks Brothers), bebe Stores, Inc. and
Anthropologie, a unit of Urban Outfitters, Inc. (NASDAQ:URBN), which is an
innovative specialty retail company which offers a variety of lifestyle
merchandise to highly defined customer niches, are each responsible for
marketing and selling fragrance and fragrance related products we produced in
their respective stores. If the sales and marketing efforts of those specialty
retailers are not successful for the products that we have developed, then such
unsuccessful sales and marketing efforts could have a material adverse effect on
our operating results.





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.


23





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


·
            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 ($22.0 million). 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.


24





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. However, 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.





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, weather conditions, or 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
substantial portion of our European operations’ net sales (approximately 35% in
2009) 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 operating
results.





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.


25





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.





Item
1B.  Unresolved Staff Comments.





None.


26


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, 2014





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
    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


27





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 are 2.9 million euro in 2010 and 2.3 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.


28


PART
II





Item 4.  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
      2009
                              
                              High
      Closing Price
                              
                              Low
      Closing PriceFourth
      Quarter
                              
                              13.48
                              
                              10.47Third
      Quarter
                              
                              12.69
                              
                              6.88Second
      Quarter
                              
                              9.42
                              
                              5.27First
      Quarter
                              
                              8.59
                              
                              3.50





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





As of
February 18, 2010 the number of record holders, which include brokers and
broker's nominees, etc., of our common stock was
54.  We believe there are approximately 1,900 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.


29











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





12/04
                  
                  
                  
                  12/05
                  
                  
                  
                  12/06
                  
                  
                  
                  12/07
                  
                  
                  
                  12/08
                  
                  
                  
                  12/09Inter
      Parfums, Inc.
                  
                  
                  100.00
                  
                  
                  
                  113.99
                  
                  
                  
                  122.82
                  
                  
                  
                  116.07
                  
                  
                  
                  75.31
                  
                  
                  
                  121.25NASDAQ
      Composite
                  
                  
                  100.00
                  
                  
                  
                  101.41
                  
                  
                  
                  114.05
                  
                  
                  
                  123.94
                  
                  
                  
                  73.43
                  
                  
                  
                  105.89Peer
      Group
                  
                  
                  100.00
                  
                  
                  
                  101.55
                  
                  
                  
                  116.27
                  
                  
                  
                  134.26
                  
                  
                  
                  112.60
                  
                  
                  
                  123.31





Dividends





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. In January 2010,
our board of directors authorized a 97% increase in the Company’s quarterly cash
dividend to $.065 per share, which brings the annual cash dividend to $.26 per
share. The first cash dividend for 2010 of $.065 per share is payable on
April 15, 2010 to shareholders of record on March 31, 2010.





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.


30





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
December 2009, both the Chief Executive Officer and the President each exercised
75,000 outstanding stock options of the Company’s common stock. The aggregate
exercise prices of $1.5 million were paid by them tendering to the Company an
aggregate of 129,984 shares of the Company’s common stock, previously owned by
them, valued at fair market value on the date 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 an additional 2,503
shares for payment of certain withholding taxes resulting from his option
exercises. This transaction was exempt from the registration requirements of
Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities
Act. Both the Chief Executive Officer and the President agreed that upon
exercise of their options, they would purchase their common stock for investment
and not for resale to the public.





On
February 1, 2010, we granted options to purchase an aggregate of 4,000 shares
for a five-year period at the exercise price of $13.345 per share, the fair
market value on the date of grant, to 5 of our non-employee directors, who are
all deemed our affiliates, under our 2004 Non-Employee Director Stock Option
Plan. Such options vest 25% each year over a 4 year period on a cumulative
basis. This transaction was exempt from the registration requirements of Section
5 of the Securities Act under Sections 4(2) and 4(6) of the Securities Act. 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.





Repurchases
of Our Common Stock





Except as set forth above with respect
to the tendering of shares by our Chief Executive Office and President for the
payment of the exercise price and taxes, we did not repurchased any of our
Common Stock during the fourth quarter of 2009.





Item
5.  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.


31





Years
      Ended December 31,(In
      thousands except per share data)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2005Income
      statement data:Net
      sales
                  
                  $
                  409,464
                  
                  
                  $
                  446,124
                  
                  
                  $
                  389,560
                  
                  
                  $
                  321,054
                  
                  
                  $
                  273,533Cost
      of sales
                  
                  
                  175,296
                  
                  
                  
                  191,915
                  
                  
                  
                  160,137
                  
                  
                  
                  143,855
                  
                  
                  
                  115,827Selling,
      general and administrative expense
                  
                  
                  187,690
                  
                  
                  
                  202,264
                  
                  
                  
                  181,224
                  
                  
                  
                  141,074
                  
                  
                  
                  126,353Operating
      income
                  
                  
                  44,801
                  
                  
                  
                  51,009
                  
                  
                  
                  47,331
                  
                  
                  
                  36,125
                  
                  
                  
                  31,353Income
      before taxes
                  
                  
                  46,348
                  
                  
                  
                  46,434
                  
                  
                  
                  47,276
                  
                  
                  
                  37,135
                  
                  
                  
                  31,724Net
      income attributable to the noncontrolling interest
                  
                  
                  7,791
                  
                  
                  
                  6,357
                  
                  
                  
                  6,784
                  
                  
                  
                  6,192
                  
                  
                  
                  5,328Net
      income attributable to Inter Parfums, Inc.
                  
                  
                  22,367
                  
                  
                  
                  23,765
                  
                  
                  
                  23,817
                  
                  
                  
                  17,742
                  
                  
                  
                  15,263Net
      income attributable to Inter Parfums, Inc. common shareholders’ per
      share:Basic
                  
                  $
                  .
      74
                  
                  
                  $
                  .
      78
                  
                  
                  $
                  .78
                  
                  
                  $
                  .58
                  
                  
                  $
                  .51Diluted
                  
                  $
                  .74
                  
                  
                  $
                  .77
                  
                  
                  $
                  .76
                  
                  
                  $
                  .58
                  
                  
                  $
                  .50Average
      common shares outstanding:Basic
                  
                  
                  30,100
                  
                  
                  
                  30,621
                  
                  
                  
                  30,666
                  
                  
                  
                  30,486
                  
                  
                  
                  30,117Diluted
                  
                  
                  30,121
                  
                  
                  
                  30,778
                  
                  
                  
                  31,004
                  
                  
                  
                  30,853
                  
                  
                  
                  30,731Depreciation
      and amortization
                  
                  $
                  10,963
                  
                  
                  $
                  9,925
                  
                  
                  $
                  8,031
                  
                  
                  $
                  5,347
                  
                  
                  $
                  4,513





As
      at December 31,(In
      thousands except per share data)
                
                2009
                
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005Balance
      sheet and other data:Cash
      and cash equivalents
                
                $
                100,467
                
                
                $
                42,404
                
                
                $
                90,034
                
                
                $
                71,047
                
                
                $
                59,532Working
      capital
                
                
                197,663
                
                
                
                174,126
                
                
                
                178,560
                
                
                
                138,547
                
                
                
                131,084Total
      assets
                
                
                419,088
                
                
                
                425,137
                
                
                
                446,052
                
                
                
                333,045
                
                
                
                240,910Short-term
      bank debt
                
                
                5,021
                
                
                
                13,981
                
                
                
                7,217
                
                
                
                6,033
                
                
                
                989Long-term
      debt (including current portion)
                
                
                29,594
                
                
                
                41,043
                
                
                
                59,733
                
                
                
                10,769
                
                
                
                13,212Inter
      Parfums, Inc. shareholders’ equity
                
                
                228,724
                
                
                
                204,201
                
                
                
                192,660
                
                
                
                155,272
                
                
                
                127,727Dividends
      declared per share
                
                $
                0.133
                
                
                $
                0.133
                
                
                $
                0.133
                
                
                $
                0.107
                
                
                $
                0.107





Item
      6.
            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.


32


We
produce and distribute our prestige products primarily under license agreements
with brand owners, and prestige product sales represented approximately 88% and
87% of net sales in 2009 and 2008, respectively.  We have built a
portfolio of brands, which include Burberry, Lanvin, Van Cleef & Arpels,
Jimmy Choo, Montblanc, Paul Smith, S.T. Dupont 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 57%, 56% and 54%
of net sales for the years ended December 31, 2009, 2008 and 2007,
respectively. In addition, sales of our Lanvin brand products represented 14%,
13% and 12% of net sales for the years ended December 31, 2009, 2008 and
2007, respectively.





In
September 2009, by mutual consent as a result of unsatisfactory commercial
development, we agreed to an early termination of our license agreement with
Quiksilver. The termination will take effect on June 30, 2010 and is not
expected to have any material effect on our consolidated financial
statements.





Our
specialty retail and mass-market fragrance and fragrance related products are
marketed through our United States operations and represented 12% and 13% of
sales in 2009 and 2008, respectively. 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 the introduction of our specialty retail product
lines, sales have become 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.


33


As with
any business, many aspects of our operations are subject to influences outside
our control. These factors include the effect of the current global
economic recession and therefore the potential for further deterioration in
consumer spending and consumer debt levels. The recent economic challenges and
uncertainties in a number of countries where we do business, including the
United States, have impacted our business. This global economic recession
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 some signs
of a recovery have become apparent with improving sales trends in the second
half of 2009, the impact of this financial crisis was challenging for us in 2009
and is expected to continue to be challenging for us in 2010.





We have
reviewed our plans and have taken actions to mitigate the impact of these
conditions. We have adjusted, and we continue to adjust our advertising and
promotional budgets to align our spending with anticipated sales. In addition,
we have implemented cost saving initiatives to right size our staff in an effort
to 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 could negatively affect our net sales and operating
results.





In
addition, our reported net sales are impacted by changes in foreign currency
exchange rates. If the current exchange rates persist or the U.S. dollar
continues to strengthen, there will be an adverse impact on our net sales in
2010. However, earnings are less affected by a strengthening dollar because in
excess of 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.





Recent
Important Events





Gap
and Banana Republic





Although
the initial term of our agreement with The Gap, Inc. covering the Gap and Banana
Republic brands in the United States and Canada expired on August 31, 2009, we
had entered into a series of short-term extension agreements to continue the
relationship as it previously existed while we were in discussions with The Gap,
Inc. for a formal extension of the agreement. In March 2010, we signed a new
specialty retail agreement with The Gap, Inc. covering the Gap and Banana
Republic brands in the United States and Canada., with terms and conditions
similar to those of the original agreement. This new agreement expires December
31, 2011.


34




Montblanc




In
January 2010, we announced that we had entered into an exclusive worldwide
license agreement with Montblanc International GMBH to create, produce and
distribute perfumes and ancillary products under the Montblanc brand. Our rights
under such license agreement, which takes effect on July 1, 2010 and runs
through 2020, are subject to certain minimum sales, advertising expenditures and
royalty payments as are customary in our industry. We also agreed to pay an
upfront entry fee of €1 million (approximately $1.4 million) for this license,
and to purchase the inventory of the current licensee, which is anticipated to
be approximately €4 million (approximately $5.7 million).





Jimmy
Choo





In
October 2009, we entered into an exclusive worldwide license agreement with J
Choo Limited for the creation, development and distribution of fragrances under
the Jimmy Choo brand. Our rights under such license agreement, which runs
through 2022, are subject to certain minimum sales, advertising expenditures and
royalty payments as are customary in our industry. Plans call for our first
Jimmy Choo fragrance launch in early 2011.





bebe
Stores, Inc.





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.





Gap
and Banana Republic International





In April
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.





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.


35


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 euro 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.





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.


36





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.





We
evaluate goodwill and indefinite-lived intangible assets for impairment at least
annually during the fourth quarter, or more frequently when events occur or
circumstances change, such as an unexpected decline in sales, that would more
likely than not (i) reduce the fair value of the reporting unit below its fair
value or (ii) indicate that the carrying value of an indefinite-lived intangible
asset may not be recoverable.  Impairment of goodwill is evaluated
using a two step process. The first step involves a comparison of the estimated
fair value of the reporting unit to the carrying value of that unit. If the
carrying value of the reporting unit exceeds the fair value of the reporting
unit, the second step of the process involves comparison of the implied fair
value of goodwill (based on industry purchase and sale transaction data) with
its carrying value. If the carrying value of the reporting unit’s goodwill
exceeds the implied fair value of that goodwill, an impairment loss is
recognized as an amount equal to the excess. For indefinite-lived intangible
assets, the evaluation requires a comparison of the estimated fair value of the
asset to the carrying value of the asset. If the carrying value of an
indefinite-lived intangible asset exceeds its fair value, impairment is
recorded.





Goodwill
relates to our Nickel skin care business, which is primarily a component of our
European operations. Testing goodwill for impairment requires us to estimate the
fair value of the reporting unit using significant estimates and assumptions.
The assumptions we make will impact the outcome and ultimate results of the
testing. In making our assumptions and estimates, we use industry accepted
valuation models and set criteria that are reviewed and approved by management
and, in certain instances, we engage third party valuation specialists to advise
us. The first step of our goodwill impairment evaluation has given rise to
potential impairment indicators and, as a result of continued sales declines, we
have been testing for impairment of goodwill on a quarterly basis. We have
determined that we may be inclined to sell the Nickel business within the next
few years. Therefore, as of December 31, 2009, we have measured fair value of
goodwill to be equal to the average amount offered by several potential
purchasers of the Nickel business. As a result, the carrying amount of the
goodwill exceeded its implied fair value resulting in an impairment loss of $1.7
million in 2009. We expect Nickel brand sales to remain steady over the next few
years as the result of new product launches in combination with an expected
economic recovery. In estimating future sales, we use our internal budgets
developed from recent sales data for existing products and planned timing of new
product launches. If sales for the reporting unit decreased 10% we could incur
an additional goodwill impairment charge of $0.5 million.


37





To
determine fair value of indefinite-lived intangible assets, we use an income
approach, including the relief-from-royalty method. This method assumes that, in
lieu of ownership, a third party would be willing to pay a royalty in order to
obtain the rights to use the comparable asset. The relief-from-royalty
calculations require us to make a number of assumptions and estimates concerning
future sales levels, market royalty rates, future tax rates and discount rates.
We use this method to determine if an impairment charge is required relating to
our Nickel brand trademarks. For the year ended December 31, 2009, an
impairment charge relating to the Nickel trademark in the amount of $0.54
million was recorded. We assumed a market royalty rate of 6% and a discount rate
of 7.8%. The following table presents the impact a change in the following
significant assumptions would have had on our impairment charge recognized for
the year ended December 31, 2009 assuming all other assumptions remained
constant:





In
      thousands
                  
                  
                  
                  
                  Increase (decrease)Change
                  
                  
                  to impairment chargeWeighted
      average cost of capital
                  
                  
                  +10
                  %
                  
                  $
                  (246
                  )Weighted
      average cost of capital
                  
                  
                  -10
                  %
                  
                  $
                  307Future
      sales levels
                  
                  
                  +10
                  %
                  
                  $
                  244Future
      sales levels
                  
                  
                  -10
                  %
                  
                  $
                  (244
                  )





The fair
values used in our evaluations are also estimated based upon discounted future
cash flow projections using a weighted average cost of capital ranging from 8%
to 9.5%. The cash flow projections are based upon a number of assumptions,
including, future sales levels and future cost of goods and operating expense
levels, as well as economic conditions, changes to our business model or changes
in consumer acceptance of our products which are more subjective in nature. We
believe that the assumptions that we have made in projecting future cash flows
for the evaluations described above are reasonable and currently no impairment
indicators exist for our indefinite-lived assets other than the Nickel
trademarks referred to above. However, if future actual results do not meet our
expectations, we may be required to record an impairment charge, the amount of
which could be material to our results of operations.


38


Intangible
assets subject to amortization are evaluated for impairment testing whenever
events or changes in circumstances indicate that the carrying amount of an
amortizable intangible asset may not be recoverable. If impairment indicators
exist for an amortizable intangible asset, the undiscounted future cash flows
associated with the expected service potential of the asset are compared to the
carrying value of the asset. If our projection of undiscounted future cash flows
is in excess of the carrying value of the intangible asset, no impairment charge
is recorded. If our projection of undiscounted future cash flows is less than
the carrying value of the intangible asset, an impairment charge would be
recorded to reduce the intangible asset to its fair value. The cash flow
projections are based upon a number of assumptions, including future sales
levels and future cost of goods and operating expense levels, as well as
economic conditions, changes to our business model or changes in consumer
acceptance of our products which are more subjective in nature. We believe that
the assumptions we have made in projecting future cash flows for the evaluations
described above are reasonable and currently no impairment indicators exist for
our intangible assets subject to amortization. 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.





In
determining the useful life of our Lanvin brand names and trademarks, we applied
the provisions of ASC topic 350-30-35-3 (formerly paragraph 11 of SFAS 142,
Goodwill and Other Intangible Assets). The only factor that prevented us from
determining that the Lanvin brand names and trademarks were indefinite life
intangible assets was Item c. “Any legal, regulatory, or contractual provisions
that may limit the useful life”. The existence of a repurchase option in 2025
may limit the useful life of the Lanvin brand names and trademarks to the
company. However, this limitation would only take effect if the repurchase
option were to be exercised and the repurchase price was paid. If the repurchase
option is not exercised, then the Lanvin brand names and trademarks are expected
to continue to contribute directly to the future cash flows of our company and
their useful life would be considered to be indefinite.





With respect to the application of ASC
topic 350-30-35-8 (formerly paragraph 13 of SFAS 142), the Lanvin brand names
and trademarks would only have a finite life to our company if the repurchase
option were exercised, and in applying ASC topic 350-30-35-8 we assumed that the
repurchase option is exercised. When exercised, Lanvin has an obligation to pay
the exercise price and the Company would be required to convey the Lanvin brand
names and trademarks back to Lanvin. The exercise price to be received (Residual
Value) is well in excess of the carrying value of the Lanvin brand names and
trademarks, therefore no amortization is required.





Derivatives





We
account for derivative financial instruments in accordance with ASC topic 815
(formerly 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 topic also requires the
recognition of all derivative instruments as either assets or liabilities on the
balance sheet and that they are measured at fair value.





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


39





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 31,2009
                      
                      
                      % Change
                      
                      
                      2008
                      
                      
                      % Change
                      
                      
                      2007(in
      millions)European
      based product sales
                      
                      $
                      361.7
                      
                      
                      
                      (6
                      )%
                      
                      $
                      386.4
                      
                      
                      
                      17
                      %
                      
                      $
                      330.8United
      States based product sales
                      
                      
                      47.8
                      
                      
                      
                      (20
                      )%
                      
                      
                      59.7
                      
                      
                      
                      1
                      %
                      
                      
                      58.8Total
      net sales
                      
                      $
                      409.5
                      
                      
                      
                      (8
                      )%
                      
                      $
                      446.1
                      
                      
                      
                      15
                      %
                      
                      $
                      389.6




Net sales
for the year ended December 31, 2009 decreased 8% to $409.5 million. For the
year ended December 31, 2008, net sales were up 15%. At comparable foreign
currency exchange rates, net sales declined 8% in 2009 and rose 12% in 2008.
While significant fluctuations in currency exchange rates were experienced
during the year in both 2008 and 2009, for each year as a whole the overall
impact was minimal.





European
based prestige product sales, which were up 17% in 2008, declined 6% in 2009.
Considering the challenges we faced in the first half of 2009, we are very
pleased with full year 2009 sales results. The global economic recession
negatively affected consumer demand, which had an adverse impact on our
distributors and our retail customers. These events have led distributors and
retailers to carry less inventory than usual and resulted in changes in their
ordering patterns for the products that we sell.  Signs of a recovery
became apparent with improving sales trends beginning in the second half of
2009. This economic crisis was been challenging for us in 2009 and is expected
to continue to be challenging in 2010.





Despite
the economic climate, we maintained an active new product launch schedule
throughout 2009 for our European-based operations which began in January with
the global rollout of the men’s version of Burberry The Beat. Also during the
first quarter, we launched our Quiksilver signature fragrance for men. During
the second quarter of 2009 we introduced ST Dupont Rose,a fragrance for women
and a Lanvin L’Homme
Sport line, with tennis star, Rafael Nadal as its spokesperson. Paul
Smith Man debuted in
August and a limited edition, high-end women’s fragrance line for the Van Cleef
& Arpels brand called Collection Extraordinaire was
launched in September.


40


The bar
was set quite high in 2008 when sales by European-based operations were 17%
ahead of 2007 with much of the gain due to the rollout of Burberry The Beat for women. Burberry
fragrance, which drove sales growth with an increase of 18% in 2008, performed
in line with the rest of the group with a 6% sales decline in 2009. Lanvin, our
second largest prestige brand, has proven somewhat resilient to the economic
downturn in 2009 with sales of $56.7 million, virtually unchanged from 2008 in
dollars and up 4% in local currency. In 2008, Lanvin product sales were up 25%
aided by the launch of the Jeanne Lanvin
fragrance.





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 $28.1 million, $30.9 million and $16.3 million in 2009, 2008 and
2007, respectively.





Notwithstanding
the challenging economic environment in many parts of the world, certain
territories continued to perform at satisfactory levels, notably, Western Europe
(up 1%), Asia (up 10%) and the Middle East (up 19%) all in local currency for
the year ended December 31, 2009, as compared to the prior year.





Our
current plans for 2010 include a sports fragrance for men and women and
cosmetics under the Burberry brand. We are committing capital to further grow
our largest brand, Burberry, in 2010, through the launch of a cosmetics line for
women in about 30 to 40 shops around the world. The Burberry cosmetics
collection will include 100 products for skin, lips and eyes. The launch of this
cosmetics line will require a significant investment in the first year to
develop the product, build cosmetic counters, hire and train personnel, and is
expected to affect 2010 net income attributable to Inter Parfums, Inc. by
approximately $1.5 million or approximately $0.05 per diluted share. We
believe that this is an essential step which will take Burberry to the next
level of growth.





In
addition, we are creating a new women’s scent for Lanvin, and Paul Smith and
men’s and women’s scents for Van Cleef & Arpels.





With
respect to our United States specialty retail and mass market products, net
sales declined 20% in 2009 after increasing 1% in 2008 and 15% in 2007. In 2008,
we expanded our relationship with Gap Inc. with the signing of a license
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. In early 2008, United States specialty retail product
sales were climbing as a steady domestic business combined with a new and
vibrant international business to drive sales growth. However, beginning in the
fourth quarter of 2008, United States specialty retail product sales came under
pressure and our United States operations continued to feel the effects of the
global economic recession throughout most of 2009.





As
discussed in previous filings, management reported that new product launches
together with existing distribution would stem the sales decline for our U.S.
operations, and that was most certainly the case as we moved to the latter half
of 2009. In April 2009, Close, a new Gap fragrance
was launched at approximately 550 Gap stores and roughly 175 Gap Body stores
nationwide. International distribution began in September, including an excusive
launch at 240 Sephora doors in Europe.  Total international
distribution is expected to reach approximately 5,000 doors by the end of 2011.
In August 2009, new fragrances, Republic of Menand Republic of Women, were
launched at Banana Republic stores in North America with international
distribution following shortly thereafter. For 2010, two new Gap scents are in
the works along with additional ancillary products and holiday gift
sets.


41





In
November 2008, we shipped the Brooks Brothers New York collection for men
and women to Brooks Brothers U.S. stores. In addition, a new Brooks Brothers
fragrance called Black
Fleece, launched in the fall of 2009. International distribution is being
readied for 2010. Also in 2010, several new fragrance categories are in the
pipeline. Our signature bebe fragrance was unveiled at 212 bebe stores in the
U.S. in August 2009, and over 300 Dillards stores in September 2009. Worldwide
distribution began late in the third quarter of 2009. In 2010, bebe Sheer, a new women’s scent is
planned along with several color cosmetic products and holiday gift sets. We
also introduced a new fragrance for New York & Company during the fourth
quarter 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 $17
million, $21 million and $24 million in 2009, 2008 and 2007,
respectively.





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





Gross
Profit Margins





Years
      ended December 31,2009
                
                
                2008
                
                
                2007(in
      millions)Net
      sales
                
                $
                409.5
                
                
                $
                446.1
                
                
                $
                389.6Cost
      of sales
                
                
                175.3
                
                
                
                191.9
                
                
                
                160.2Gross
      margin
                
                $
                234.2
                
                
                $
                254.2
                
                
                $
                229.4Gross
      margin as a  percent of net sales
                
                
                57
                %
                
                
                57
                %
                
                
                59
                %





As a
percentage of sales, gross profit margins were 57% in both 2009 and 2008 and 59%
in 2007. For the year ended December 31, 2009, gross margin included a benefit
of approximately 94 basis points as a result of cash flow hedging activities
entered into in late 2008 to take advantage of the effect a strong U.S. dollar
relative to 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.





Additional
fluctuations in gross margin results from product sales mix within individual
lines of Company products. 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 small positive effects on the
gross margin percentage in both 2009 and 2008 as sales from United States
operations continued to represent a smaller portion of consolidated
sales.


42





The
decline in gross margin as a percentage of sales in 2008 primarily reflects the
effect the decline in the value of the US dollar against the euro has on our
European based product sales to United States customers. As mentioned above,
sales to these customers are denominated in dollars while our costs are incurred
in euro.





Generally,
we do not bill customers for shipping and handling costs and such costs, which
aggregated $5.0 million in 2009 and $6.2 million in both 2008 and 2007 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 Expenses





Years
      ended December 31,2009
                
                
                2008
                
                
                2007(in
      millions)Selling,
      general & administrative expenses
                
                $
                187.7
                
                
                $
                202.3
                
                
                $
                181.2Selling,
      general & administrative expenses as a percent of net
      sales
                
                
                46
                %
                
                
                45
                %
                
                
                47
                %




Selling,
general and administrative expenses decreased 7% for the year ended
December 31, 2009, as compared to 2008 and increased 12% for the year ended
December 31, 2008, as compared to 2007. As a percentage of sales selling,
general and administrative expenses was 46%, 45% and 47% for the years ended
December 31, 2009, 2008 and 2007, respectively.





Two major
components of selling, general and administrative expenses are promotion and
advertising expenditures and royalty expense. Promotion and advertising
aggregated $55.8 million, $65.8 million and $58.5 million for the years ended
December 31, 2009, 2008 and 2007, respectively. Promotion and advertising
as a percentage of sales represented 13.6%, 14.7% and 15.0% of net sales for the
years ended December 31, 2009, 2008 and 2007, respectively. Advertising
expenditures in 2008 were high in support of the launch of Burberry The Beatfor women. As we
anticipated lower sales volume in 2009 as compared to 2008, advertising
expenditures were curtailed. Royalty expense aggregated $35.5 million, $37.3
million and $35.6 million for the years ended December 31, 2009, 2008 and 2007,
respectively.





Selling,
general and administrative expenses also include servicing fees related to the
operations of our majority-owned European distribution subsidiaries which
aggregated approximately $13 million in both 2009 and 2008 and $12 million in
2007.





We review
goodwill 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. The first step of our goodwill impairment
evaluation has given rise to potential impairment indicators and, as a result of
continued sales declines, we have been testing for impairment of goodwill on a
quarterly basis. As of December 31, 2009, we have measured fair value of
goodwill to be equal to the average amount offered by several potential
purchasers of the Nickel brand. As a result, the carrying amount of the goodwill
exceeded fair value resulting in an additional impairment
loss.  Goodwill impairment losses aggregated $1.7 million in 2009 and
$0.9 million in both 2008 and 2007. Accumulated impairment losses relating to
goodwill aggregated $3.5 million as of December 31, 2009.


43





Income
from operations decreased 12% to $44.8 million in 2009 and income from
operations increased 8% to $51.0 million, as compared to $47.3 million in 2007.
Operating margins aggregated 10.9%, 11.4% and 12.1% for the years ended December
31, 2009, 2008 and 2007, respectively.





Interest
expense aggregated $2.6 million, $4.9 million and $3.7 million for the years
ended December 31, 2009, 2008 and 2007, 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.  Loans payable – banks and long-term debt
including current maturities aggregated $34.6 million as of December 31, 2009,
as compared to $55.0 million as of December 31, 2008. In addition, due to the
changes in fair value of interest rate swaps, interest expense for the year
ended December 31, 2008 includes a charge of $0.9 million, as compared to a
small benefit ($0.08 million) recorded for the year ended December 31,
2009.





Foreign
currency gains or (losses) aggregated $3.2 million, ($1.4) million and ($0.2)
million for the years ended December 31, 2009, 2008 and 2007, 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 foreign currency forward exchange contracts to hedge
approximately 80% of our 2009 sales expected to be invoiced in U.S. dollars. As
a result, we recorded a gain of $3.5 million in 2009 and a (loss) of ($0.8)
million in 2008, including amounts reclassified from Other Comprehensive Income
into earnings relating to these contracts.





Our
effective income tax rate was 34.9%, 35.1% and 35.5% for the years ended
December 31, 2009, 2008 and 2007, 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.
Our foreign tax rate has declined slightly over the past two years as a result
of the 2008 formation of IP Suisse, who receives a favorable tax rate on a
portion of Inter Parfums, S.A. taxable income. In 2008 and 2007, valuation
allowances of $0.8 million and $0.2 million, respectively, 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.


44


Net
Income and Earnings per Share





Year
      ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007(In
      thousands except per share data)Net
      income
                  
                  $
                  30,158
                  
                  
                  $
                  30,122
                  
                  
                  $
                  30,601Less:
      Net income attributable to the noncontrolling interest
                  
                  
                  7,791
                  
                  
                  
                  6,357
                  
                  
                  
                  6,784Net
      income attributable to Inter Parfums, Inc.
                  
                  $
                  22,367
                  
                  
                  $
                  23,765
                  
                  
                  $
                  23,817Net
      income attributable to Inter Parfums, Inc. common
      shareholders’:Basic
                  
                  $
                  0.74
                  
                  
                  $
                  0.78
                  
                  
                  $
                  0.78Diluted
                  
                  
                  0.74
                  
                  
                  
                  0.77
                  
                  
                  
                  0.76Weighted
      average number of shares outstanding:Basic
                  
                  
                  30,099,998
                  
                  
                  
                  30,621,070
                  
                  
                  
                  30,666,141Diluted
                  
                  
                  30,121,077
                  
                  
                  
                  30,777,985
                  
                  
                  
                  31,004,299





Net
income was virtually unchanged in 2009 aggregating $30.2 million, as compared to
$30.1 million in 2008. Net income decreased 2% to $30.1 million in 2008, as
compared to $30.6 million in 2007.





Net
income attributable to the noncontrolling interest aggregated 25.8%, 21.1% and
22.2% of net income in 2009, 2008 and 2009, respectively. In 2008 and 2007,
losses from our 51% owned European distribution subsidiaries offset profits from
our other 75% owned European subsidiaries.





Net
income attributable to Inter Parfums, Inc. declined 6% to $22.4 million in 2009,
as compared to $23.8 million in 2008. In 2008, net income attributable to Inter
Parfums, Inc. was unchanged from 2007 aggregating $23.8 million in both years.
Net margins attributable to Inter Parfums, Inc. aggregated 5.5%, 5.3% and 6.1%
for the years ended December 31, 2009, 2008 and 2007, respectively.





Diluted
earnings per share aggregated $0.74, $0.77 and $0.76 in 2009, 2008 and 2007,
respectively. Weighted average shares outstanding aggregated 30.1 million, 30.6
million and 30.7 million for the years ended December 31, 2009, 2008 and 2007,
respectively. On a diluted basis, average shares outstanding were 30.1 million,
30.8 million and 31.0 million for the years ended December 31, 2009, 2008 and
2007, respectively. The decline in shares outstanding is primarily the result of
shares repurchased pursuant to board of directors authorizations.





Liquidity
and Capital Resources





Our
financial position remains strong. At December 31, 2009, working capital
aggregated $198 million and we had a working capital ratio of almost 2.9 to 1.
Cash and cash equivalents aggregated $100 million.


45





Cash
provided by (used-in) operating activities aggregated $84.6 million, ($6.4)
million and $38.5 million for the years ended December 31, 2009, 2008 and 2007,
respectively. Working capital items provided $43 million in cash from operations
in 2009 as compared to a use of $55 million in 2008. As of December 31,
2007 and continuing through December 31, 2008, we had a significant buildup of
inventory to support a very aggressive launch schedule including Burberry The Beatand new fragrance
families for each of Lanvin, Van Cleef & Arpels, ST Dupont and Nickel. In
terms of cash flows, for the year ended December 31, 2009, inventories decreased
$40.6 million or 33%. The global economic crisis has resulted in lower sales
levels, especially in the first half of 2009. Our inventory levels have been
steadily declining throughout 2009 as we have made modifications to our sales
projections to take into account the difficult environment. In terms of cash
flow, accounts receivable decreased $21 million or 17% for the year ended
December 31, 2009, as we began to tighten extended payment terms offered to
certain international distributors in the early days of the global economic
recession. In addition, in the 2009 period, accounts payable and accrued
expenses decreased $19 million as our vendor obligations for the 2008 year end
inventory buildup became due.





Cash
flows used in investing activities in 2009 reflect payments of approximately
$5.5 million for capital items. Our business is not capital intensive as we do
not own any manufacturing facilities. We typically spend between $2.0 million
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 2010 are expected to be in the range
of $5.0 million to $5.5 million, considering our 2010 launch
schedule.





In
December 2007, we acquired an additional 1.2% interest in IPSA, our
majority-owned French subsidiary, from its noncontrolling 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%.





Our
short-term financing requirements are expected to be met by available cash on
hand at December 31, 2009, cash generated by operations and short-term credit
lines provided by domestic and foreign banks. The principal credit facilities
for 2010 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, 2009, short-term borrowings aggregated $5.0 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, 2009, total long-term debt
including current maturities aggregated $29.6 million.





As of
December 31, 2008, the Company’s board of directors authorized the repurchase of
up to 1,031,863 shares of the Company’s common stock and in 2009, the Company
repurchased 108,100 shares of its common stock at an average price of $5.84 per
common share.


46


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. In January 2010 the board of
directors authorized an approximate 100% increase in the annual dividend to
$0.26 per share. The first quarterly dividend of $0.065 per share will be paid
on April 15, 2010 to shareholders of record on March 31, 2010. Dividends paid,
including dividends paid once per year to noncontrolling stockholders of Inter
Parfums, S.A., aggregated $5.7 million, $5.8 million and $5.5 million for the
years ended December 31, 2009, 2008 and 2007, respectively. The cash dividends
paid in 2009 represented a small part of our cash position and the dividends for
2010 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,
2009.





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).





Payments due by periodContractual Obligations
                              
                              Total
                              
                              
                              Less than
                                1year
                              
                              
                              Years
                                2-3
                              
                              
                              Years
                                4-5
                              
                              
                              More than
                                5yearsLong-Term
      Debt (2)
                              
                              $
                              29,600
                              
                              
                              $
                              11,700
                              
                              
                              $
                              17,900Capital
      Lease ObligationsOperating
      Leases
                              
                              $
                              19,800
                              
                              
                              $
                              7,500
                              
                              
                              $
                              8,600
                              
                              
                              $
                              2,300
                              
                              
                              $
                              1.400Purchase
      obligations(1)
                              
                              $
                              1,210,700
                              
                              
                              $
                              134,700
                              
                              
                              $
                              313,300
                              
                              
                              $
                              327,400
                              
                              
                              $
                              435,300Other
      Long-Term Liabilities Reflected on the Registrant's Balance Sheet under
      GAAPTotal
                              
                              $
                              1,260,100
                              
                              
                              $
                              153,900
                              
                              
                              $
                              339,800
                              
                              
                              $
                              329,700
                              
                              
                              $
                              436,700





(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, 2009, without
      consideration for potential renewal periods and do not reflect the fact
      that our distributors share our advertising
  obligations.





(2)
            Interest
      due on the Company’s long-term debt is payable $0.70 million, $0.40
      million and $0.07 million in 2010, 2011 and 2012,
      respectively.


47


Item
6A. 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.





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 foreign currency forward
exchange contracts to hedge approximately 80% of our 2009 sales 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. At December 31, 2009, we had
foreign currency contracts in the form of forward exchange contracts in the
amount of approximately U.S. $36 million and GB pounds 5.4 million
which all have maturities of less than one year.We believe that our risk
of loss as the result of nonperformance by any of such financial institutions is
remote.


48


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 was paid in full as of
September 30, 2009.





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%. The remaining balance owed pursuant to this facility is as
of December 31, 2009 was €12.1 million. These derivative instruments are
recorded at fair value and changes in fair value are reflected in the
accompanying consolidated statements of income.





Item
7.  Financial Statements and Supplementary Data





The
required financial statements commence on page F-1.





Supplementary
Data


Quarterly
Data (Unaudited)


For
the Year Ended December 31, 2009


(In
Thousands Except Per Share Data)


1st Quarter
                          
                          
                          2nd Quarter
                          
                          
                          3rd Quarter
                          
                          
                          4th Quarter
                          
                          
                          Full YearNet
      sales
                          
                          $
                          90,409
                          
                          
                          $
                          88,604
                          
                          
                          $
                          117,542
                          
                          
                          $
                          112,909
                          
                          
                          $
                          409,464Gross
      profit
                          
                          
                          53,565
                          
                          
                          
                          50,201
                          
                          
                          
                          67,080
                          
                          
                          
                          63,322
                          
                          
                          
                          234,168Net
      income
                          
                          
                          7,256
                          
                          
                          
                          5,753
                          
                          
                          
                          9,611
                          
                          
                          
                          7,539
                          
                          
                          
                          30,159Net
      income attributable to Inter Parfums, Inc.
                          
                          
                          5,428
                          
                          
                          
                          4,226
                          
                          
                          
                          7,262
                          
                          
                          
                          5,451
                          
                          
                          
                          22,367Net
      income attributable to Inter Parfums, Inc. per share:Basic
                          
                          $
                          0.18
                          
                          
                          $
                          0.14
                          
                          
                          $
                          0.24
                          
                          
                          $
                          0.18
                          
                          
                          $
                          0.74Diluted
                          
                          $
                          0.18
                          
                          
                          $
                          0.14
                          
                          
                          $
                          0.24
                          
                          
                          $
                          0.18
                          
                          
                          $
                          0.74Average
      common shares outstanding:Basic
                          
                          
                          30,166
                          
                          
                          
                          30,064
                          
                          
                          
                          30,061
                          
                          
                          
                          30,109
                          
                          
                          
                          30,100Diluted
                          
                          
                          30,166
                          
                          
                          
                          30,064
                          
                          
                          
                          30,065
                          
                          
                          
                          30,189
                          
                          
                          
                          30,121


49





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
                      
                      
                      11,136
                      
                      
                      
                      4,490
                      
                      
                      
                      7,879
                      
                      
                      
                      6,617
                      
                      
                      
                      30,123Net
      income attributable to Inter Parfums, Inc.
                      
                      
                      8,708
                      
                      
                      
                      3,772
                      
                      
                      
                      6,188
                      
                      
                      
                      5,097
                      
                      
                      
                      23,765Net
      income attributable to Inter Parfums, Inc. per share:Basic
                      
                      $
                      .28
                      
                      
                      $
                      .12
                      
                      
                      $
                      .20
                      
                      
                      $
                      .17
                      
                      
                      $
                      .78Diluted
                      
                      $
                      .28
                      
                      
                      $
                      .12
                      
                      
                      $
                      .20
                      
                      
                      $
                      .17
                      
                      
                      $
                      .77Average
      common shares outstanding:Basic
                      
                      
                      30,722
                      
                      
                      
                      30,627
                      
                      
                      
                      30,632
                      
                      
                      
                      30,504
                      
                      
                      
                      30,621Diluted
                      
                      
                      30,809
                      
                      
                      
                      30,914
                      
                      
                      
                      30,886
                      
                      
                      
                      30,504
                      
                      
                      
                      30,778





We review
goodwill for impairment at least annually, usually during the fourth quarter,
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. We
determined that the carrying amount of the goodwill exceeded fair value
resulting in impairment losses aggregating $1.7 million in 2009 and $0.9 million
in both 2008 and 2007. Accumulated impairment losses relating to goodwill
aggregated $3.5 million as of December 31, 2009.





Item
      8.
            Changes
      In and Disagreements with Accountants on Accounting andFinancial
      Disclosure





Not
applicable.




50





Item
8A. 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 Company's disclosure controls and procedures were
effective.





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, 2009.





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, 2009, 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.


51


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, 2009, 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, 2009 and 2008 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,
2009 and our report dated March 10, 2010 expressed an unqualified opinion
thereon.





Mazars
LLP





New York,
New York


March 10,
2010




Change in
Internal Controls




’ ’




Item
8 A(T).    Controls and Procedures.





Not
Applicable.





Item
8B.           Other
Information.





None.


52


PART
III





Item
9.  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. andDirector
      General of Inter Parfums, S.A.Philippe
      Benacin
              
              Vice
      Chairman of the Board, President of Inter Parfums, Inc. andChief
      Executive Officer of Inter Parfums, S.A.Russell
      Greenberg
              
              Director,
      Executive Vice President and Chief Financial OfficerPhilippe
      Santi
              
              Director,
      Executive Vice President and Chief Financial Officer, 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 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 18 meetings (or executed consents
in lieu thereof), including meetings of committees of the full board of
directors during 2009 (with the last regular board meeting held during the first
week of January 2010), 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.


53





During
2009 our board of directors initially consisted of ten (10) directors. During
January 2009 Mr. Joseph A. Caccamo stepped down from our board for personal
reasons. Mr. Caccamo did not have 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 that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, as well as other persons performing similar functions, 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
2009 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 2009, the Audit Committee
      consisted of Messrs. Heilbronn, Levy and
Choël.





The
Company does not have an “audit committee financial expert” within the
definition of the applicable Securities and Exchange Commission rules. First,
finding qualified nominees to serve as a director of a public company without
substantial financial resources has been challenging. Second, despite the
applicable Securities and Exchange Commission rule which states that being named
as the audit committee financial expert does not impose any greater duty,
obligation or liability, the Company has been met with resistance from both
present and former directors to being named as such primarily due to potential
additional personal liability.





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 2009,
      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 2009, our board of directors as a group agreed to
nominate the same members of the board who had served the prior
year.


54





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.





Jean
Madar





Jean
Madar, age 49, 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 51, a Director, is President of our Company and the Chief Executive
Officer of Inter Parfums, S.A., 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 53, 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 48 and a Director since December 1999, is the Executive Vice
President and Chief Financial Officer 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.


55





Francois
Heilbronn





Mr.
Heilbronn, age 49, 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.In
addition, during 2009 Mr. Heilbronn became anAssociate
Professor in Business Strategy at Sciences Po, Paris, France.





Jean
Levy





Jean
Levy, age 77, 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 52, has been a Director since March 1997, and also is an
independent director. Mr. Bensoussan is a director of Jimmy Choo, 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 was 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.


56





Serge
Rosinoer





Mr. Rosinoer, age 79, 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 Vice 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 850 million Euro and more than 4,500 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.





Patrick
Choël





Mr. Choël, age 66, 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 a director of our majority-owned subsidiary, Inter
Parfums, S.A., and Modellabs, both publicly held companies, and Christian Dior
and Guerlain, both privately held companies. He is also 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 41,
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.


57


Frederic
Garcia-Pelayo





Frederic
Garcia-Pelayo, age 51, 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 36, 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.





Andy
Clarke





Henry B. “Andy” Clarke, age 49, was
appointed as President of Inter Parfums USA, LLC in 2009, following his
appointment 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 as follows:


Each of
the independent directors, Messrs. Heilbronn, Levy, Bensoussan-Torres, Rosinoer
and Choël, as the result of erroneous advise in respect of a rule change filed
one Form 4 late (ranging from approximately 2 weeks to 11 months), by disclosing
the automatic grant of options on February 2, 2009 incorrectly on their next
required Form 4 rather than on a separate Form 4 for the option grant. Each of
Messrs. Madar, Benacin, Greenberg and Clarke filed one form 4 one day late,
which disclosed the grant of options on December 31, 2009.





Item
10.  Executive Compensation





Compensation
Discussion and Analysis




General




The
executive compensation and stock option committee of our board of directors is
comprised entirely of independent directors and oversee all elements of
compensation (base salary, annual bonus, long term incentives and perquisites)
of our company’s executive officers and administers our company’s stock option
plans, other than the non-employee directors stock option plan, which is self
executing.


58





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 maintaining compensation at reasonable levels on
the other hand. 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.





Mr.
Madar, the chairman and chief executive officer, takes the initiative after
discussions with Mr. Russell Greenberg, an Executive Vice President, Chief
Financial Officer and a Director, and recommends executive compensation levels
for executives in the United States. Mr. Benacin, the president of Inter
Parfums, S.A., takes the initiative after discussions with Philippe Santi, the
Chief Financial Officer of Inter Parfums, S.A., and recommends executive
compensation levels for executives in Europe. The recommendations are presented
to the compensation committee for its consideration, and the compensation
committee makes a final determination regarding salary adjustments and annual
award amounts to executives, including our chief executive officer and
president. Further, Messrs. Madar and Benacin, in addition to being executive
officers and directors, are our largest shareholder’s, and therefore, their
interests are aligned with our shareholder base in keeping executive
compensation at a reasonable level.




The
compensation committee believes that individual executive compensation is at a
level comparable with executives in other companies of similar size and stage of
development that operate in the fragrance industry and take into account our
company’s performance as well as our own strategic goals. As the result of the
global economic downturn, during 2009 previously authorized increases to base
salaries of our executive officers in United States operations were rescinded
and our Chief Executive Officer had his base salary decreased, as discussed in
greater detail under the heading Elements of Compensation — Base Salary.
Further, the compensation committee believes that its present policies to date,
with its emphasis on rewarding performance, has served to focus the efforts of
our executives, which in turn permitted our Company to weather the storm of this
recession and put our company on track to return to a high rate of growth and
profitability, which management believes will result in a substantial increase
in value to our shareholders.




Elements
of Compensation




General




The
compensation of our executive officers is generally comprised of base salaries,
annual cash bonuses and long-term equity incentive awards. In determining
specific components of compensation, the compensation committee considers
individual performance, level of responsibility, skills and experience, and
other compensation awards or arrangements. The compensation committee reviews
and approves all elements of compensation for all of our executive officers
taking into consideration recommendations from our Chief Executive Officer and
the President of Inter Parfums, S.A., as well as information regarding
compensation levels at competitors in our industry.


59





Our named
executive officers have all been with the company for more than the past ten
(10) years, with Messrs. Madar and Benacin being founders of the company in
1985. As previously disclosed, Mr. Madar for United States operations, and Mr.
Benacin for European operations, each recommend executive compensation levels
for executives in the respective operating segments. In addition, and also as
previously reported, Messrs. Greenberg, the Chief Financial Officer of the
company (as well as United States operations) and Santi, the Chief Financial
Officer of European operations, also participate in recommendations for
executive compensation levels for executives in the respective operating
segments.




As Messrs. Madar and Greenberg for
United States operations, and Benacin and Santi for European operations, are
most familiar with the individual performance, level of responsibility, skills
and experience of each executive officer in their respective segments, the
compensation committee relies upon the information provided by such executive
officers in determining individual performance, level of responsibility, skills
and experience of each executive officer.




The
compensation committee views the competitive market place very broadly, which
would include executive officers from both public and privately held companies
in general, including fashion and beauty companies, but not limited to the “peer
companies” contained in the corporate performance graph contained in this annual
report. Rather than tie the compensation committee’s determination of
compensation proposals to any specific peer companies, the members of our
committee have used their business experience, judgement and knowledge to review
the executive compensation proposals recommended to them by Mr. Madar for United
States operations and Benacin for European operations. As such, compensation
committee did not determine the need to “benchmark” of any material item of
compensation or overall compensation.




The
members of the compensation committee have extensive experience and business
acumen and are well qualified in determining the appropriateness of executive
compensation levels. Mr. Heilbronn is a managing partner of a business
consulting firm in the area of mergers and acquisitions of large international
companies in retail, consumer goods and consumer services throughout the world.
Mr. Levy has over thirty years experience as an executive officer, including
more than ten years as President and Chief Executive Officer of well known
cosmetic companies such as Cosmair and Sanofi Beaute (France). Mr. Choël, the
final committee member, is presently a business consultant and advisor, who
previously worked as President and Chief Executive Officer of two divisions of
LVMH Moet Hennessy Louis Vuitton S.A., which included such well known brands as
Parfums Christian Dior, Guerlain, and Parfums Givenchy.





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.


60





As stated
above, as Messrs. Madar and Greenberg for United States operations, and Benacin
and Santi for European operations, are most familiar with the individual
performance, level of responsibility, skills and experience of each executive
officer in their respective segments, the committee relies upon the information
provided by such executive officers in determining individual performance, level
of responsibility, skills and experience of each executive officer.





For
executive officers of United States operations, the bulk of their annual
compensation is in base salary. However, for executive officers of European
operations base salary comprises a smaller percentage of overall
compensation.





We have
paid a lower percentage of overall compensation in the form of base salary to
executive officers of European operations for several years, principally because
European operations historically have had higher profitability than United
States operations and European operations are run differently by the chief
executive officer of European operations, Mr. Benacin, than United States
operations. As the result of this historically higher profitability, European
operations have had the ability to pay higher bonus compensation in addition to
base salary. As bonus compensation is and has historically been discretionary,
no targets were set in order to maintain flexibility. Further, if results of
operations for European operations were not satisfactory (again, no target
amounts were set to maintain flexibility), then bonus compensation, as well as
overall compensation could be lowered without otherwise affecting base salary.
Finally, by keeping annual bonus compensation at a higher percentage of overall
compensation and base salary at a lower percentage, our company benefits because
the base amount for annual salary adjustments would be smaller.





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 220,800 euro in 2008 to 249,600 euro in 2009, a 13%
increase. Likewise, Mr. Benacin’s base compensation was increased from 220,800
euro in 2008 to 249,600 euro in 2009.





A
different approach is taken for United States operations as that segment is much
smaller and profitability is much more volatile. A more significant base salary
is paid in order to attract and retain employees with the skills and talents
needed to run the operation with a lesser emphasis placed on
bonuses.  None of the executive officers for United States operations
have employment agreements, as we believe that having flexibility in structuring
annual base salary is a benefit, which permits us to act quickly to meet a
changing economic environment.





Initially
in 2009, the compensation committee had agreed to have the base salary of Mr.
Madar, the Chief Executive Officer, remain at the same level of $400,000, which
it has been for the past several years. Further, upon recommendation of our
Chairman and Chief Executive Officer, the executive compensation committee had
determined to increase the base salary of Mr. Greenberg, the Chief Financial
Officer, by $20,000 from $435,000 to $455,000, a 4.6%   increase
and to increase the base salary of Mr. Clark, the president of Inter Parfums
USA, LLC (Specialty Retail Division) by $20,000. Mr. Greenberg had received
salary increases of $30,000 for the prior last four years.


61





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 had
decreased substantially. Further, consolidated net sales of our company for the
first quarter of 2009 had decreased and visibility for the remainder of 2009 was
very unclear. Based upon the recommendations of the chief executive officer, the
compensation committee authorized a (i) rollback the $20,000 increase in the
annual base salaries previously authorized for the chief financial officer and
president of Inter Parfums USA, LLC (Specialty Retail Division), so that their
annual base salaries would return to the levels paid in 2008, and (ii) decrease
the annual base salary by $20,000 of the chief executive officer, all on a pro rata basis effective as
of April 16, 2009.





Bonus Compensation/ Annual
Incentives





We have paid a higher percentage of
overall compensation in the form of bonus compensation to executive officers of
European operations for several years, principally because European operations
historically have had higher profitability than United States operations. As the
result of this historically higher profitability, European operations have had
the ability to pay higher bonus compensation in addition to base salary. As
bonus compensation is discretionary no targets were set in order to maintain
flexibility. Further, if results of operations for European operations were not
satisfactory (again, no target amounts were set to maintain flexibility), then
bonus compensation, as well as overall compensation could be lowered without
otherwise affecting base salary.





For 2009, Mr. Benacin, the chief
decision maker for European operations, proposed and the committee concurred in
the payment of bonus compensation equal to approximately 70% of base salary for
executive officers of European operations. This is compared to bonus
compensation as a percentage of annual salary of 70% for 2008 and 82% for 2007
for Messrs. Santi and Garcia-Pelayo and approximately 70% for 2008 and 64% for
2007 for Mr. Benacin.





A different approach is taken for
United States operations as that segment is much smaller and profitability is
much more volatile. A more significant base salary is paid in order to attract
and retain employees with the skills and talents needed to run the operation
with a lesser emphasis placed on bonuses. Based upon the recommendation of the
Chief Executive Officer, no officers of United States operations received any
cash bonuses for 2009. Mr. Greenberg received a cash bonus of $35,000 for 2008
and $43,100 for 2007. In order for Mr. Madar, the Chief Executive Officer to
receive a cash bonus, United States operations has to achieve after tax profit
target. In 2009 and 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
2010.





As required by French law, Inter
Parfums, SA maintains its own profit sharing plan for all French employees who
have completed three months of service, including executive officers of our
European operations other than Mr. Benacin, the Chief Executive Officer of Inter
Parfums, SA. Benefits are calculated based upon a percentage of taxable income
of Inter Parfums, S.A. and allocated to employees based upon salary. The maximum
amount payable per year per employee is 25,000 euros, or approximately
$34,792.


62





Calculation of total annual benefits
contribution is made according to the following formula:





50% of
(Inter Parfums, S.A. net income, less 5% of shareholders equity without net
income for the year) times a fraction, the numerator of which is wages, and
the denominator of which is net income before tax + wages + taxes (other
than income tax) + valuation allowances + amortization expenses + interest
expenses.





Contribution to individual employees is
then made pro rata based upon their individual salaries for the
year.





Long Term Incentives





Stock Options. 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 increasing our
overall performance. 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.





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, for the past few years we had temporarily discontinued all option
grants to purchase shares of our majority-owned, French subsidiary, Inter
Parfums, S.A. to avoid decrease the dilution of our ownership interest in Inter
Parfums, S.A. In lieu of option grants to purchase shares of our majority-owned,
French subsidiary, we had 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 serve 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. Pursuant to 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 a vesting period reduces benefits afforded to an
executive when an executive officer leaves our employ.


63





Over
the past several 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.





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 compensation committee believes the option grants are valid
incentives for these executive officers and are fair to our shareholders.
Generally we grant options to executive officers in December of each
year.





In December 2009, upon the
recommendation of the company’s Chief Executive Officer, the compensation
committee granted options to purchase a total of 19,000 shares of our common
stock to each of Jean Madar and Philippe Benacin at the fair market value on the
date of grant, which were the same number of shares for which options had been
granted to Messrs. Madar and Benacin in December 2008. Option grants to Messrs
Madar and Benacin were identical as each is the Chief Executive Officer of their
respective operating segments. Also in December 2009, the compensation committee
granted options to purchase 25,000 shares to Mr. Greenberg, the Chief Financial
Officer, at the fair market value on the date of grant. This represented an
increase from the option granted in December 2008 to purchase 15,000 shares,
which was done to offset the absence of a salary increase.





No options were granted to Messrs.
Santi and Garcia-Pelayo from our company during 2009 or for 2008. For the past
few years we had temporarily discontinued all option grants to purchase shares
of our majority-owned, French subsidiary, Inter Parfums, S.A. to avoid a
decrease in the dilution of our ownership interest in Inter Parfums, S.A.
However, at the request of Messrs. Benacin and Santi, Inter Parfums, S.A. again
commenced granting options to its employees and executive officers, including to
Messrs. Santi and Garcia-Pelayo, as Messrs. Benacin and Santi had determined
that it was more beneficial for the employees and executive officers of European
operations have a stake in Inter Parfums, S.A., rather than our company.
Accordingly, in December 2009 Inter Parfums, S.A. authorized a stock option plan
which provides for a maximum of 3% of the outstanding shares of Inter Parfums,
S.A. to be available for grant. Under the Inter Parfums S.A. stock option plan,
options are granted at the fair market value at the time of grant for a term of
6 years and vest 4 years after the date of grant. In December 2009, Inter
Parfums, S.A. authorized grants of options to employees of Inter Parfums, S.A.
for an aggregate of 0.5% of outstanding shares, including options to purchase
6,000 shares for each of Messrs. Madar, Benacin, Santi and Garcia-Pelayo and
1,200 shares for Mr. Greenberg.


64


Stock Appreciation Rights.Our 2004 stock option plan authorizes us to grant stock appreciation
rights, or SARs. An SAR represents a right to receive the appreciation in value,
if any, of our common stock over the base value of the SAR. To date, we have not
granted any SARs under the 2004 plan. While the compensation committee currently
does not plan to grant any SARs under our 2004 plan, it may choose to do so in
the future as part of a review of the executive compensation strategy. The Inter
Parfums S.A. stock option plan does not have stock appreciate
rights.





Restricted Stock.We have not
in the past, and we do not have any future plans to grant restricted stock to
our executive officers.However, while the
compensation committee currently does not plan to authorize any restricted stock
plans, the compensation committee may choose to do so in the future as part of a
review of the executive compensation strategy.





Other
Compensation





Mr. Benacin is the Chief Executive
Officer of Inter Parfums, S.A. (European operations), as well as a founder of
our company, and we believe we should recognize his responsibility, skills and
experience, as well as the results of the company. In view of his service to the
company, Mr. Benacin has received a housing and automobile allowance for more
than the past ten (10) years. This is a way we have differentiated him from
other executive officers of European operations, and acknowledged his
responsibility, skills and experience, as well as the company’s operating
results, while maintaining his base salary at the same level as Messrs. Santi
and Garcia-Pelayo, the other named executive officers of European
operations.





No
Stock Ownership Guidelines





We do not require any minimum level of
stock ownership by any of our executive officers. As stated above, Messrs. Madar
and Benacin, are our largest shareholders, which aligns their interests with our
shareholder base in keeping executive compensation at a reasonable
level.





Retirement
and Pension Plans





We maintain a 401K plan for United
States operations. However, we do not match any contributions to such plan, as
we have determined base compensation together with annual bonuses and stock
option awards, are sufficient incentives to retain talented employees. Our
European operations maintains a pension plan for it employees as required by
French law.





Compensation
Committee Report





We have reviewed and discussed with
management the Compensation Discussion and Analysis provisions to be included in
this amendment to the Annual Report on Form 10-K for fiscal year ended
December 31, 2009 and the proxy statement for the upcoming annual meeting
of shareholders. Based on this review and discussion, we recommend to the board
of directors that the Compensation Discussion and Analysis referred to above be
included in this Annual Report on Form 10-K as well as the proxy statement for
the upcoming annual meeting of shareholders.





Francois Heilbronn, Jean Levy and
Patrick Choël


65


The
following table sets forth a summary of all compensation awarded to, earned by
or paid to our “named executive officers,” who are our principal executive
officer, our principal financial officer, and each of the 3 most highly
compensated executive officers of our Company. This table covers all such
compensation during fiscal years ended December 31, 2009, December 31, 2008 and
December 31, 2007. For all compensation related matters disclosed in this Item
10, all amounts paid in euro have been converted to US dollars at the average
rate of exchange in each year.





SUMMARY
COMPENSATION TABLE





Name and Principal Position
                                                    
                                                    Year
                                                    
                                                    Salary ($)
                                                    
                                                    
                                                    Bonus ($)
                                                    
                                                    
                                                    Stock
                                                      Awards ($)
                                                    
                                                    
                                                    Option
                                                      Awards
                                                      ($)(1)
                                                    
                                                    
                                                    Non-Equity
                                                      Incentive Plan
                                                      Compensation
                                                      ($)(2)
                                                    
                                                    
                                                    Change in Pension
                                                      Value and
                                                      Nonqualified
                                                      Deferred
                                                      Compensation
                                                      Earnings ($)
                                                    
                                                    
                                                    All Other
                                                      Compensation ($)(3)
                                                    
                                                    
                                                    Total ($)Jean
      Madar,
                                                    
                                                    2009
                                                    
                                                    
                                                    380,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    115,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    495,000Chief
      Executive Officer
                                                    
                                                    2008
                                                    
                                                    
                                                    400,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    98,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    498,0002007
                                                    
                                                    
                                                    400,000
                                                    
                                                    
                                                    
                                                    100,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    124,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    624,000Russell
      Greenberg,
                                                    
                                                    2009
                                                    
                                                    
                                                    435,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    118,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    553,000Chief
      Financial Officer
                                                    
                                                    2008
                                                    
                                                    
                                                    435,000
                                                    
                                                    
                                                    
                                                    35,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    37,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    2,214
                                                    
                                                    
                                                    
                                                    553,2142007
                                                    
                                                    
                                                    405,000
                                                    
                                                    
                                                    
                                                    43,100
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    98,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    2,214
                                                    
                                                    
                                                    
                                                    546,100Philippe
      Benacin, President of
                                                    
                                                    2009
                                                    
                                                    
                                                    348,492
                                                    
                                                    
                                                    
                                                    201,052
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    115,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    11,496
                                                    
                                                    
                                                    
                                                    98,850
                                                    
                                                    
                                                    
                                                    774,890Inter
      Parfums, Inc. and Chief
                                                    
                                                    2008
                                                    
                                                    
                                                    324,489
                                                    
                                                    
                                                    
                                                    229,258
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    98,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    11,757
                                                    
                                                    
                                                    
                                                    104,039
                                                    
                                                    
                                                    
                                                    767,543Executive
      Officer of Inter Parfums, S.A.
                                                    
                                                    2007
                                                    
                                                    
                                                    263,750
                                                    
                                                    
                                                    
                                                    170,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    124,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    10,610
                                                    
                                                    
                                                    
                                                    93,479
                                                    
                                                    
                                                    
                                                    661,090Philippe
      Santi,
                                                    
                                                    2009
                                                    
                                                    
                                                    348,492
                                                    
                                                    
                                                    
                                                    238,750
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    30,000
                                                    
                                                    
                                                    
                                                    29,599
                                                    
                                                    
                                                    
                                                    11,496
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    658,337Executive
      Vice President and
                                                    
                                                    2008
                                                    
                                                    
                                                    324,489
                                                    
                                                    
                                                    
                                                    229,258
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    49,000
                                                    
                                                    
                                                    
                                                    22,632
                                                    
                                                    
                                                    
                                                    11,757
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    637,000Chief
      Financial Officer, Inter Parfums, S.A.
                                                    
                                                    2007
                                                    
                                                    
                                                    263,750
                                                    
                                                    
                                                    
                                                    216,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    27,474
                                                    
                                                    
                                                    
                                                    10,610
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    517,834Frédéric
      Garcia-Pelayo,
                                                    
                                                    2009
                                                    
                                                    
                                                    348,492
                                                    
                                                    
                                                    
                                                    238,750
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    30,000
                                                    
                                                    
                                                    
                                                    29,599
                                                    
                                                    
                                                    
                                                    11,496
                                                    
                                                    
                                                    
                                                    9,550
                                                    
                                                    
                                                    
                                                    667,887Director
      Export Sales,
                                                    
                                                    2008
                                                    
                                                    
                                                    324,489
                                                    
                                                    
                                                    
                                                    229,258
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    49,000
                                                    
                                                    
                                                    
                                                    22,632
                                                    
                                                    
                                                    
                                                    11,757
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    637,136Inter
      Parfums, S.A.
                                                    
                                                    2007
                                                    
                                                    
                                                    263,750
                                                    
                                                    
                                                    
                                                    216,000
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    27,474
                                                    
                                                    
                                                    
                                                    10,610
                                                    
                                                    
                                                    
                                                    -0-
                                                    
                                                    
                                                    
                                                    517,834


66


1
Amounts reflected under Option Awards represent the grant date fair values in
2009, 2008 and 2007 based on the fair value of stock option awards using a
Black-Scholes option pricing model. The assumptions used in this model are
detailed in Footnote 10 to the audited consolidated financial statements in our
Annual Report on Form 10-K for the year ended December 31, 2009 and filed with
the SEC.





2 As
required by French law, Inter Parfums, S.A. maintains its own profit sharing
plan for all French employees who have completed three months of service,
including executive officers of  our European operations other than
Mr. Benacin, the Chief Executive Officer of Inter Parfums, S.A. Benefits are
calculated based upon a percentage of taxable income of Inter Parfums, S.A. and
are allocated to employees  based upon salary. The maximum amount
payable per year is 25,000 euro, or approximately $34,792.





Calculation
of total annual benefits contribution is made according to the following
formula:





50% of
(Inter Parfums, S.A. net income, less 5% of shareholders equity without net
income for the year) times a fraction, the numerator of which is wages, and the
denominator of which is net income before taxes, + wages + taxes (other than
income tax) + valuation allowances + amortization expenses + interest
expenses.





Contribution
to individual employees is then made pro rata based upon their individual
salaries for the year.





3 The
following table identifies (i) perquisites and other personal benefits provided
to our named executive officers in fiscal 2009 and quantifies those required by
SEC rules to be quantified and (ii) all other compensation that is required by
SEC rules to be separately identified and quantified.





Name and Principal Position
                        
                        Perquisites
                          and other
                          Personal
                          Benefits ($)
                        
                        
                        Personal
                          Automobile
                          Expense($)
                        
                        
                        Lodging
                          Expense($)
                        
                        
                        Total ($)Jean
      Madar,
                          Chief
      Executive Officer
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-Russell
      Greenberg,Chief
      Financial Officer
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-Philippe
      Benacin,President
      of Inter Parfums, Inc. and Chief Executive Officer of Inter Parfums,
      S.A.
                        
                        
                        -0-
                        
                        
                        
                        15,079
                        
                        
                        
                        83,672
                        
                        
                        
                        98,850Philippe
      Santi,
                          Executive
      Vice President and Director General Delegue, Inter Parfums,
      S.A.
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-Frédéric
      Garcia-Pelayo,
                          Director
      Export Sales,Inter
      Parfums, S.A.
                        
                        
                        -0-
                        
                        
                        
                        9,550
                        
                        
                        
                        -0-
                        
                        
                        
                        9,550





Plan
Based Awards





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


67





Grants of Plan-Based AwardsEstimated Future Payouts Under
                                          Non-Equity Incentive Plan
                                          Awards
                                        
                                        
                                        Estimated Future Payouts
                                          Under Equity Incentive Plan
                                          Awards
                                        
                                        
                                        All Other
                                          Stock
                                          Awards:
                                          Number of
                                          Shares of
                                        
                                        
                                        All Other
                                          Option
                                          Awards:
                                          Number of
                                          Securities
                                        
                                        
                                        Exercise
                                          orBase
                                          Priceof
                                          OptionName
                                        
                                        Grant Date
                                        
                                        Threshold
                                          ($)
                                        
                                        
                                        Target
                                          ($)
                                        
                                        
                                        Maximum
                                          ($)
                                        
                                        
                                        Threshold
                                          ($)
                                        
                                        
                                        Target
                                          ($)
                                        
                                        
                                        Maximum
                                          ($)
                                        
                                        
                                        Stock or
                                          Units(#)
                                        
                                        
                                        Underlying
                                          Options (#)
                                        
                                        
                                        Awards
                                          ($/Sh)
                                        
                                        
                                        Closing
                                          PriceJean
      Madar
                                        
                                        12/31/09
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        19,000
                                        
                                        
                                        
                                        12.14
                                        
                                        
                                        
                                        12.17Russell
      Greenberg
                                        
                                        12/31/09
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        25,000
                                        
                                        
                                        
                                        12.14
                                        
                                        
                                        
                                        12.17Philippe
      Benacin
                                        
                                        12/31/09
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        19,000
                                        
                                        
                                        
                                        12.14
                                        
                                        
                                        
                                        12.17Philippe
      Santi
                                        
                                        12/31/09
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-Frédéric
      Garcia-Pelayo
                                        
                                        12/31/09
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-
                                        
                                        
                                        
                                        -0-





In
addition, the following table indicates Grants of Plan-Based Awards of Inter
Parfums, S.A. during 2009.





Grants of Plan-Based AwardsEstimated Future Payouts Under
                                            Non-Equity Incentive Plan
                                            Awards
                                          
                                          
                                          Estimated Future Payouts
                                            Under Equity Incentive Plan
                                            Awards
                                          
                                          
                                          All Other
                                            Stock
                                            Awards:
                                            Number of
                                            Shares of
                                          
                                          
                                          All Other
                                            Option
                                            Awards:
                                            Number of
                                            Securities
                                          
                                          
                                          Exercise
                                            orBase
                                            Priceof
                                            OptionName
                                          
                                          Grant Date
                                          
                                          Threshold
                                            ($)
                                          
                                          
                                          Target
                                            ($)
                                          
                                          
                                          Maximum
                                            ($)
                                          
                                          
                                          Threshold
                                            ($)
                                          
                                          
                                          Target
                                            ($)
                                          
                                          
                                          Maximum
                                            ($)
                                          
                                          
                                          Stock or
                                            Units(#)
                                          
                                          
                                          Underlying
                                            Options (#)
                                          
                                          
                                          Awards
                                            ($/Sh)
                                          
                                          
                                          Closing
                                            PriceJean
      Madar
                                          
                                          12/17/09
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          6,000
                                          
                                          
                                          
                                          25.36
                                          
                                          
                                          
                                          25.95Russell
      Greenberg
                                          
                                          12/17/09
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          1,200
                                          
                                          
                                          
                                          25.36
                                          
                                          
                                          
                                          25.95Philippe
      Benacin
                                          
                                          12/17/09
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          6,000
                                          
                                          
                                          
                                          25.36
                                          
                                          
                                          
                                          25.95Philippe
      Santi
                                          
                                          12/17/09
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          6,000
                                          
                                          
                                          
                                          25.36
                                          
                                          
                                          
                                          25.95Frédéric
      Garcia-Pelayo
                                          
                                          12/17/09
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          -0-
                                          
                                          
                                          
                                          6,000
                                          
                                          
                                          
                                          25.36
                                          
                                          
                                          
                                          25.95





Options





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. 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. Further, options granted to French employees
under the stock option plan of Inter Parfums, S.A. likewise 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.


68





Under our stock option plans, the fair
market value is determined by the average of the high and low price on the date
of grant, not the closing price as reported by The Nasdaq Stock
Market.





We also note that the Summary
Compensation Table does not include income realized by the named executive
officers as the result of the exercise of stock options, but rather reflects the
dollar amount recognized for financial statement reporting purposes for options
granted in accordance with SFAS 123R. However, value realized as the result of
stock option exercises is set forth in the table entitled “Option Exercises and
Stock Vested”.





Inter Parfums, S.A. Profit Sharing
Plan





As required by French law, Inter
Parfums, SA maintains its own profit sharing plan for all French employees who
have completed three months of service, including executive officers of our
European operations other than Mr. Benacin, the Chief Executive Officer of Inter
Parfums, SA. Benefits are calculated based upon a percentage of taxable income
of Inter Parfums, S.A. and allocated to employees based upon salary. The maximum
amount payable per year per employee is 25,000 euros, or approximately
$34,792.





Calculation of total annual benefits
contribution is made according to the following formula:





50% of
(Inter Parfums, S.A. net income, less 5% of shareholders equity without net
income for the year) times a fraction, the numerator of which is wages, and
the denominator of which is net income before tax + wages + taxes (other
than income tax) + valuation allowances + amortization expenses + interest
expenses.





Contribution to individual employees is
then made pro rata based upon their individual salaries for the
year.





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.


69


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-
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      9.967
                                                      
                                                      04/19/1036,000
                                                      
                                                      
                                                      
                                                      24,000
                                                      (1)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      13.103
                                                      
                                                      12/14/1211,400
                                                      
                                                      
                                                      
                                                      17,100
                                                      (2)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      12.577
                                                      
                                                      12/26/135,500
                                                      
                                                      
                                                      
                                                      10,825
                                                      (3)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      11.297
                                                      
                                                      2/13/143,800
                                                      
                                                      
                                                      
                                                      15,200
                                                      (4)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      6.925
                                                      
                                                      12/30/14-0-
                                                      
                                                      
                                                      
                                                      19,000
                                                      (5)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      12.14
                                                      
                                                      12/30/15Russell
      Greenberg
                                                      
                                                      
                                                      30,000
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      9.967
                                                      
                                                      04/19/1022,500
                                                      
                                                      
                                                      
                                                      15,000
                                                      (6)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      13.103
                                                      
                                                      12/14/129,000
                                                      
                                                      
                                                      
                                                      13,500
                                                      (7)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      12.577
                                                      
                                                      12/26/133,000
                                                      
                                                      
                                                      
                                                      12,000
                                                      (8)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      6.925
                                                      
                                                      12/30/14-0-
                                                      
                                                      
                                                      
                                                      25,000
                                                      (9)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      12.14
                                                      
                                                      12/30/15Philippe
      Benacin
                                                      
                                                      
                                                      75,000
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      9.967
                                                      
                                                      04/19/1036,000
                                                      
                                                      
                                                      
                                                      24,000
                                                      (10)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      13.103
                                                      
                                                      12/14/1211,400
                                                      
                                                      
                                                      
                                                      17,100
                                                      (11)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      12.577
                                                      
                                                      12/26/135,500
                                                      
                                                      
                                                      
                                                      10,825
                                                      (12)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      11.297
                                                      
                                                      2/13/143,800
                                                      
                                                      
                                                      
                                                      15,200
                                                      (13)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      6.925
                                                      
                                                      12/30/14-0-
                                                      
                                                      
                                                      
                                                      19,000
                                                      (14)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      12.14
                                                      
                                                      12/30/15Philippe
      Santi
                                                      
                                                      
                                                      11,250
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      9.967
                                                      
                                                      04/19/104,500
                                                      
                                                      
                                                      
                                                      3,000
                                                      (15)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      13.103
                                                      
                                                      12/14/12-0-
                                                      
                                                      
                                                      
                                                      12,750
                                                      (16)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      11.297
                                                      
                                                      2/13/14Frédéric
      Garcia-Pelayo
                                                      
                                                      
                                                      4,500
                                                      
                                                      
                                                      
                                                      3,000
                                                      (17)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      13.103
                                                      
                                                      12/14/12-0-
                                                      
                                                      
                                                      
                                                      12,750
                                                      (18)
                                                      
                                                      
                                                      -0-
                                                      
                                                      
                                                      
                                                      11.297
                                                      
                                                      2/13/14
 
 [Footnotes from table
above]
 
 1 Option
vests as to 12,000 shares on each of 12/15/10 and 12/15/11.
 2 Option
vests as to 5,700 shares on each of 12/26/10, 12/26/11 and
12/26/2012.
 3 Option
vests as to 2,775 shares on each of 2/13/11, 2/13/12 and 2/13/2013.
 4 Option
vests as to 3,800 shares on each of 12/30/10, 12/30/11, 12/30/12 and
12/30/2013.
 5 Option
vests as to 3,800 shares on each of 12/30/10, 12/30/11, 12/30/12, 12/30/13 and
12/30/2014.
 6 Option
vests as to 7,500 shares on each of 12/15/10 and 12/15/11.
 7 Option
vests as to 4,500 shares on each of 12/26/10, 12/26/11 and
12/26/2012.
 8 Option
vests as to 3,000 shares on each of 12/30/10, 12/30/11, 12/30/12 and
12/30/2013.
 9 Option
vests as to 5,000 shares on each of 12/30/10, 12/30/11, 12/30/12, 12/30/13 and
12/30/2014.
 10 Option
vests as to 12,000 shares on each of 12/15/10 and 12/15/11.
 11 Option
vests as to 5,700 shares on each of 12/26/10, 12/26/11 and
12/26/2012.
 12 Option
vests as to 2,775 shares on each of 2/13/11, 2/13/12 and 2/13/2013.
 13 Option
vests as to 3,800 shares on each of 12/30/10, 12/30/11, 12/30/12 and
12/30/2013.
 14 Option
vests as to 3,800 shares on each of 12/30/10, 12/30/11, 12/30/12, 12/30/13 and
12/30/2014.
 15 Option
vests as to 100% on 2/14/2012.
 16 Option
vests as to 1,500 shares on each of 12/15/10 and 12/15/11.
 17 Option
vests as to 1,500 shares on each of 12/15/10 and 12/15/11.
 18 Option
vests as to 100% on 2/14/2012.
  70
 
 The
following table sets certain information relating to outstanding equity awards
granted by Inter Parfums, S.A., our majority-owned French subsidiary which has
its shares traded on the Euronext, 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 (1)
                                              
                                              
                                              Option
                                                Exercise Price
                                                (euro)(2)
                                              
                                              Option Expiration
                                                DateJean Madar
                                              
                                              
                                              24,598
                                              
                                              
                                              
                                              
                                              
                                              
                                              18.40
                                              
                                              03/25/1017,570
                                              
                                              
                                              
                                              
                                              
                                              
                                              17.20
                                              
                                              05/26/1115,972
                                              
                                              
                                              
                                              21.90
                                              
                                              06/01/126,000
                                              
                                              
                                              
                                              17.60
                                              
                                              12/17/15Russell
      Greenberg
                                              
                                              
                                              1,407
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              18.40
                                              
                                              03/25/101,758
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              17.20
                                              
                                              05/26/111,278
                                              
                                              
                                              
                                              21.90
                                              
                                              06/01/121,200
                                              
                                              
                                              
                                              17.60
                                              
                                              12/17/15Philippe
      Benacin
                                              
                                              
                                              24,598
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              18.40
                                              
                                              03/25/1017,570
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              17.20
                                              
                                              05/26/1115,972
                                              
                                              
                                              
                                              21.90
                                              
                                              06/01/126,000
                                              
                                              
                                              
                                              17.60
                                              
                                              12/17/15Philippe
      Santi
                                              
                                              
                                              12,652
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              18.40
                                              
                                              03/25/1010,542
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              17.20
                                              
                                              05/26/119,584
                                              
                                              
                                              
                                              21.90
                                              
                                              06/01/126,000
                                              
                                              
                                              
                                              17.60
                                              
                                              12/17/15Frédéric
      Garcia-Pelayo
                                              
                                              
                                              12,652
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              18.40
                                              
                                              03/25/1010,542
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              17.20
                                              
                                              05/26/1115,972
                                              
                                              
                                              
                                              21.90
                                              
                                              06/01/126,000
                                              
                                              
                                              
                                              17.60
                                              
                                              12/17/15
 [Footnotes from
table above]
 
 1 All
options fully vest 4 years after the date of grant.
 2 As of
December 31, 2009 the closing price of Inter Parfums, S.A. as reported by
Euronext was 18.1 euro, and the exchange rate was 1.4406 U.S. dollars to 1
euro.
 
 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.
  71
 
 OPTION EXERCISES AND STOCK VESTEDOption 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
                      
                      
                      75,000
                      
                      
                      
                      118,500
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Russell
      Greenberg
                      
                      
                      37,500
                      
                      
                      
                      60,953
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Philippe
      Benacin
                      
                      
                      75,000
                      
                      
                      
                      118,500
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-Philippe
      Santi
                      
                      
                      11,250
                      
                      
                      
                      18,237
                      
                      
                      
                      -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., our majority-owned French subsidiary which
has its shares traded on the Euronext, for the executive officers of our company
listed in the Summary Compensation Table.





OPTION EXERCISES AND STOCK VESTEDOption 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
                          
                          
                          17,570
                          
                          
                          
                          19,826
                          
                          
                          
                          -0-
                          
                          
                          
                          -0-Philippe
      Benacin
                          
                          
                          17,570
                          
                          
                          
                          19,826
                          
                          
                          
                          -0-
                          
                          
                          
                          -0-Russell
      Greenberg
                          
                          
                          5,449
                          
                          
                          
                          43,143
                          
                          
                          
                          -0-
                          
                          
                          
                          -0-Philippe
      Santi
                          
                          
                          8,786
                          
                          
                          
                          27,924
                          
                          
                          
                          -0-
                          
                          
                          
                          -0-Frédéric
      Garcia-Pelayo
                          
                          
                          17,584
                          
                          
                          
                          100,108
                          
                          
                          
                          -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.





72





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
                            
                            
                            117,500
                            
                            
                            
                            11,496Philippe
      Santi
                            
                            Inter
      Parfums SA Pension Plan
                            
                            NA
                            
                            
                            117,500
                            
                            
                            
                            11,496Frédéric
      Garcia-Pelayo
                            
                            Inter
      Parfums SA Pension Plan
                            
                            NA
                            
                            
                            117,500
                            
                            
                            
                            11,496





Inter Parfums, S.A. maintains a pension
plan for all of its employees, including all executive officers. The calculation
of commitments for severance benefits involves estimating the probable present
value of projected benefit obligations. This projected benefit obligations is
then prorated to take into account seniority of the employees of Inter Parfums,
S.A. on the calculation date.





In calculating benefits, the following
assumptions were applied:





-
voluntary retirement at age 65;


- a rate
of 45% for employer payroll contributions for all employees;


- a 5%
average annual salary increase;


- an
annual rate of turnover for all employees under 55 years of age and nil
above;


- the TH
00-02 mortality table for men and the TF 00-02 mortality table for
women;


- a
discount rate of 3.96%.





The normal retirement age is 65 years,
but employees, including Messrs. Benacin, Santi and Garcia-Pelayo, can collect
reduced benefits if they retire at age 60.





Nonqualified
Deferred Compensation





We do not maintain any nonqualified
deferred compensation plans.





73





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 2010 Mr. Benacin presently
receives an annual salary of €260,400 (approximately $364,000, plus annual
lodging expenses of €60,000 (approximately $84,000) and automobile expenses of
€10,800 (approximately $15,000), 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 COMPENSATIONName
                      
                      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
                        ($)
                      
                      
                      Total ($)Francois
      Heilbronn1
                      
                      
                      12,000
                      
                      
                      
                      -0-
                      
                      
                      
                      1,922
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      1,893
                      
                      
                      
                      15,815Jean
      Levy2
                      
                      
                      12,000
                      
                      
                      
                      -0-
                      
                      
                      
                      1,922
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      3,273
                      
                      
                      
                      17,195Robert
      Bensoussan-
                        Torres3
                      
                      
                      6,000
                      
                      
                      
                      -0-
                      
                      
                      
                      961
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      6,961Serge
      Rosinoer4
                      
                      
                      6,000
                      
                      
                      
                      -0-
                      
                      
                      
                      961
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      6,961Patrick
      Choël5
                      
                      
                      12,000
                      
                      
                      
                      -0-
                      
                      
                      
                      1,922
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      -0-
                      
                      
                      
                      13,922





[Footnotes from
table above]





1.
            As
      of the end of the last fiscal year, Mr. Heilbronn held options to purchase
      an aggregate of 5,500 shares of our common
  stock.


3.
            As
      of the end of the last fiscal year, Mr. Levy held options to purchase an
      aggregate of 5,500 shares of our common
stock.


4.
            As
      of the end of the last fiscal year, Mr. Bensoussan-Torres held options to
      purchase an aggregate of 5,500 shares of our common
  stock.


5.
            As
      of the end of the last fiscal year, Mr. Rosinoer held options to purchase
      an aggregate of 3,504 shares of our common
  stock.


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





For 2009
all nonemployee directors received $2,000 for each board meeting at which they
participate. 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.





74





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, 2010, options to
purchase 1,000 shares were granted to each of Francois Heilbronn, Jean Levy,
Serge Rosinoer and Patrick Choël, and an option to purchase 500 shares was
granted to Robert Bensoussan-Torres, all at the exercise price of $13.345 per
share under the 2004 plan. Such options vest ratably over a 4 year
period.





Item
11.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters





The
following table sets forth information, as of February 19, 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 February 19, 2009 we had 30,171,952 shares of common stock
outstanding.





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
                          
                          
                          7,833,745
                          2
                          
                          
                          25.85
                          %Philippe
      Benacin
                            c/o
      Inter Parfums, S.A.
                            4,
      Rond Point Des Champs Elysees
                            75008
      Paris, France
                          
                          
                          7,527,282
                          3
                          
                          
                          24.8
                          %




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 3,410,929 shares held directly, 4,291,066 shares held indirectly through Jean
Madar Holding SAS, a personal holding company, and options to purchase 131,750
shares.


3 Consists
of 4,729,468 shares held directly, 2,666,064 shares held indirectly through
Philippe Benacin Holding SAS, a personal holding company, and options to
purchase 131,750 shares.





75





Name and Address
                                                  of Beneficial Owner
                                                
                                                Amount of Beneficial Ownership1
                                                
                                                Approximate Percent of ClassRussell
      Greenberg
                                                  c/o
      Inter Parfums, Inc.
                                                  551
      Fifth Avenue
                                                  New
      York, NY 10176
                                                
                                                
                                                73,996
                                                4
                                                Less
      than 1%Philippe
      Santi
                                                  Inter
      Parfums, S.A.
                                                  4,
      Rond Point Des Champs Elysees
                                                  75008,
      Paris France
                                                
                                                
                                                15,750
                                                5
                                                Less
      than 1%Francois
      Heilbronn
                                                  60
      Avenue de  Breteuil
                                                  75007
      Paris, France
                                                
                                                
                                                73,188
                                                6
                                                Less
      than 1%Jean
      Levy
                                                  Chez
      Axcess Groupe
                                                  8
      rue de Berri
                                                  75008
      Paris, France
                                                
                                                
                                                5,125
                                                7
                                                Less
      than 1%Robert
      Bensoussan-Torres
                                                  c/o
      Sirius Equity LLP
                                                  52
      Brook Street
                                                  W1K
      5DS London
                                                
                                                
                                                12,625
                                                8
                                                Less
      than 1%Serge
      Rosinoer
                                                  14
      rue LeSueur
                                                  75116
      Paris, France
                                                
                                                
                                                14,114
                                                9
                                                Less
      than 1%Patrick
      Choël
                                                  Universite
      -82
                                                  7
      rue de Talleyrand
                                                  75007,
      Paris, France
                                                
                                                
                                                10,575
                                                10
                                                Less
      than 1%Frederic
      Garcia-Pelayo
                                                  Inter
      Parfums, S.A.
                                                  4,
      Rond Point Des Champs Elysees
                                                  75008,
      Paris France
                                                
                                                
                                                4,500
                                                11
                                                Less
      than 1%Axel
      Marot
                                                  Inter
      Parfums, S.A.
                                                  4,
      Rond Point Des Champs Elysees
                                                  75008,
      Paris France
                                                
                                                
                                                -0-
                                                
                                                NA





4
            Consists
      of 11,995 shares held directly and options to purchase 62,000
      shares.


5
            Consists
      of shares of common stock underlying
options.


6
            Consists
      of 47,063 shares held directly, 22,500 shares held indirectly by his
      children and options to purchase 3625
shares.


7
            Consists
      of 1,500 shares held directly and options to purchase 3,625
      shares.


8
            Consists
      of 9,000 shares held directly and options to purchase 3,625
      shares.


9
            Consists
      of 11,550 shares held directly and options to purchase 2,625
      hares.


10
            Consists
      of 5,450 shares held directly and options to purchase 5,125
      shares.


11
            Consists
      of shares of common stock underlying
options.





76





Name and Address
                              of Beneficial Owner
                            
                            Amount of Beneficial Ownership1
                            
                            
                            Approximate Percent of ClassHugues
      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
                            
                            
                            19,125
                            12
                            
                            Less
      than 1%Royce
      & Associates, LLC13
                              1414
      Avenue of the Americas
                              New
      York, NY 10019
                            
                            
                            3,769,533
                            
                            
                            
                            12.49
                            %Fidelity
      Low-Priced Stock Fund14
                              82
      Devonshire Street, Boston,
                              Massachusetts  02109
                            
                            
                            2,200,000
                            
                            
                            
                            7.29
                            %All
      Directors and Officers
                              As
      a Group 16 Persons)
                            
                            
                            15,588,025
                            15
                            
                            
                            51.02
                            %





The following table sets fort 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
                    
                    
                    920,075
                    
                    
                    
                    11.32
                    
                    
                    
                    949,075Equity
      compensation plans not approved by security holders
                    
                    
                    -0-
                    
                    
                    
                    N/A
                    
                    
                    
                    -0-Total
                    
                    
                    920,075
                    
                    
                    
                    11.32
                    
                    
                    
                    949,075







12 Consists
of 1,625 shares held directly and options to purchase 17,500
shares.


13 Information
derived from an Amendment to Schedule 13G filed January 25, 2010.


14 Information
derived from a Schedule 13G filed February 16, 2010.


15 Consists
of 15,208,210 shares held directly or indirectly, options to purchase 379,815
shares.





77





Item
12.  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.





Jimmy
Choo





Inter Parfums, S.A. and J Choo Limited
entered into an exclusive, worldwide license agreement commencing on January 1,
2010 and expiring on December 31, 2021, for the creation, development and
distribution of fragrances under the Jimmy Choo brand. Mr. Robert
Bensoussan-Torres, a director of the Corporation, is a director of J Choo
Limited and has an indirect ownership interest in J Choo Limited.





Yelo.
Cab and Nickel USA





Nickel
USA, Inc., a wholly-owned subsidiary of our company and Yelo, LLC, a related
party by virtue of the 3% equity interest in Yelo owned by Mr. Jean Madar, the
Chairman of the Board and Chief Executive Officer, have entered into an
agreement  to have Yelo perform management services at the spa owned
and operated by Nickel in New York City for a one (1) year period, subject to
subsequent annual renewals upon agreement of the parties, and Nickel is to pay
Yelo a monthly base fee of $5,000, plus a monthly performance fee based upon a
percentage of increased monthly revenues above a baseline.





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.





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





78





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.





Board
Leadership Structure and Risk Management





For more than the past ten (10) years,
Jean Madar has held the positions of Chairman of the Board of Directors and
Chief Executive Officer of our company. Almost since inception, Mr. Madar has
been allocated the responsibility of overseeing our United States operations and
the operation of Inter Parfums, Inc., as a public company. Philippe Benacin, as
Chief Executive Officer of Inter Parfums, S.A., has been allocated the
responsibility of overseeing our European operations and its operation as a
public company in France. In addition, Mr. Benacin is also the Vice Chairman of
the Board of Directors of our company. Our board of directors is comfortable
with this approach, as the two largest stockholders of our company are also
directly responsible for the operations of our company’s two operating segments.
Accordingly, our board of directors does not have a “Lead Director,” a
non-management director who controls the meetings of our board of
directors.





Our board of directors manages risk by
(i) period operating reports and discussion with management; (ii) approval of
executive compensation incentive plans through its committee, the Executive
Compensation and Stock Option Committee; (iii) approval of related party
transactions through its committee, the Audit Committee; and (iv) approval of
material transactions not in the ordinary course of business. Since our
inception, we have never been the subject of any material product liability
claims, and we have had no recent material property damage claims.





Further,
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.





79





In
addition, 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.





Item
13.  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, 2009 and December 31,
2008.





Audit Fees





During 2009 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
$857,000. 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.





Audit-Related Fees





Mazars billed us $8,500 and $11,000 for
audit related fees during 2009 and 2008, respectively.





Tax Fees





Mazars LLP did not bill us for tax
services during 2009 or 2008.





All Other Fees





Mazars LLP did not bill us for any
other services during 2009 or 2008.





80





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 2009 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, 2009.





·
            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, 2009. 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.





·
            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
2010, the audit committee authorized the same non-audit services to be performed
by Mazars LLP as disclosed above.





81





PART
IV





Item
14. 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, 2009and
      December 31, 2008
                        
                        F-3Consolidated
      Statements of Income for each of the years in the three-year period ended
      December 31, 2009
                        
                        F-4Consolidated
      Statements of Changes in Shareholders’ Equity and Comprehensive Income for
      each of the years in the three-year period ended December 31,
      2009
                        
                        F-5Consolidated
      Statements of Cash Flows for each of the years in the three-year period
      ended December 31, 2009
                        
                        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.





82





(a)(3)
Exhibits





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.).





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.
                    
                    Description10.116
                    
                    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)





83





Exhibit No.
                    
                    Description10.119.1
                    
                    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)10.120
                    
                    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.
                  
                  Description10.124
                  
                  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.
                      
                      Description10.127
                      
                      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).




84


Exhibit
      No.
                        
                        Description10.127.1
                        
                        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 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





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
      Granted





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





85





he 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.
              
              Description10.130
              
              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 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:





86





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 Officer31.2
                              
                              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).





87





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.)





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, 2008:





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).





88




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
      Officer32.2
                          
                          Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer
 
 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, 2009:
 
 Exhibit
                            No.
                          
                          Description10.137
                          
                          Lease
      Extension Agreement between 14th
      Street Development, LLC and Nickel USA, Inc. dated June 8,
      2009
  The
following document heretofore filed with the Commission is incorporated by
reference to the Company's Quarterly Report for the quarterly period ended
September 30, 2009:
 
 Exhibit
                          No.
                        
                        Description10.138
                        
                        Licence
      Agreement between J Choo Limited and Inter Parfums, S.A. signed on
      September 29, 2009 (Certain confidential information in this Exhibit
      10.138 was omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc).
  89
  The
following documents, which have been previously filed, are filed again with this
report:
 
 Exhibit
      No.
                        
                        Description3.1.1
                        
                        Restated
      Certificate of Incorporation dated September 3, 19873.1.2
                        
                        Amendment
      to Restated Certificate of Incorporation dated July 31,
    19923.1.3
                        
                        Amendment
      to Restated Certificate of Incorporation dated July 9,
  19933.1.4
                        
                        Amendment
      to Restated Certificate of Incorporation, as amended, dated July 13,
      19993.1.5
                        
                        Amendment
      to Restated Certificate of Incorporation, as amended, dated July 12,
      20003.1.6
                        
                        Amendment
      to Restated Certificate of Incorporation dated August 6,
    20043.2
                        
                        Amended
      and Restated By-laws4.20
                        
                        1999
      Stock Option Plan, as amended4.22
                        
                        2004
      Stock Option Plan10.25
                        
                        Employment
      Agreement between the Company and Philippe Benacin dated July 29,
      199110.26
                        
                        Lease
      for portion of 15th Floor, 551 Fifth Avenue, New York, New
      York10.26.1
                        
                        Third
      Modification of Lease dated June 17, 2002 between Metropolitan Life
      Insurance Company, and Jean Philippe Fragrances, LLC (previously
      erroneously filed as exhibit no. 19.92 )10.61
                        
                        Lease
      for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial
      Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated
      July 10, 199510.69
                        
                        Exclusive
      License Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter
      Parfums (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.).
  90
 
 10.70
                      
                      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).10.104
                      
                      Lease
      dated as of 1 March 2001 for 300 West 14th
      Street, New York, NY10.106
                      
                      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)10.107
                      
                      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)10.110
                      
                      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 October 12,
      200410.113
                      
                      Indemnity
      Agreement among Burberry Ltd., Inter Parfums, S.A. and Inter Parfums, Inc.
      dated October 12,
2004
  91
  The
following documents are filed with this report:
 
 Exhibit No.
                      
                      Description3.3
                      
                      Articles
      of Incorporation of Inter Parfums Holdings, S.A.3.3.1
                      
                      Articles
      of Incorporation of Inter Parfums Holdings, S.A. (English
      translation)3.4
                      
                      Articles
      of Incorporation of Inter Parfums, S.A.3.4.1
                      
                      Articles
      of Incorporation of Inter Parfums, S.A. (English
    translation)4.21.3
                      
                      2004
      Nonemployee Director Stock Option Plan, as amended4.30
                      
                      Form
      of Option Agreement for Options Granted to Executive Officers on December
      31, 2009 with Schedule of Option Holders and Options
    Granted10.139
                      
                      License
      Agreement between Montblanc-Simplo Gmbh and Inter Parfums, S/.A.(Certain
      confidential information in this Exhibit 10.139 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).10.140
                      
                      Personal
      Care Agreement among The Gap, Inc., et al., and Inter Parfums, Inc. and
      its wholly-owned subsidiary Inter Parfums USA, LLC effective March 1, 2010
      (Certain confidential information in this Exhibit 10.140 was omitted and
      filed separately with the Securities and Exchange Commission with a
      request for confidential treatment by Inter Parfums,
  Inc).21
                      
                      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
      Officer32.2
                      
                      Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer
  92
  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, 2009 and 2008
                    F-3Consolidated
      Statements of Income for each of the years in the three-year period ended
      December 31, 2009
                    F-4Consolidated
      Statements of Changes in Shareholders’ Equity and Comprehensive Income for
      each of the years in the three-year period ended December 31,
      2009
                    F-5Consolidated
      Statements of Cash Flows for each of the years in the three-year period
      ended December 31, 2009
                    F-6Notes
      to Consolidated Financial Statements
                    F-7Financial
      Statement Schedule:Schedule
      II – Valuation and Qualifying Accounts
                    F-30
  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, 2009 and 2008, 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,
2009. 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, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2009 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, 2009. 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, 2009, 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 10,
2010 expressed an unqualified opinion thereon.
 
 Mazars
LLP
 
 New York,
New York
 March 10,
2010
  F-2
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 Consolidated
Balance Sheets
 December 31,
2009 and 2008
 (In
thousands except share and per share data)
 
 2009
                                
                                
                                2008AssetsCurrent
      assets:Cash
      and cash equivalents
                                
                                $
                                100,467
                                
                                
                                $
                                42,404Accounts
      receivable, net
                                
                                
                                101,334
                                
                                
                                
                                120,507Inventories
                                
                                
                                85,428
                                
                                
                                
                                123,633Receivables,
      other
                                
                                
                                3,229
                                
                                
                                
                                2,904Other
      current assets
                                
                                
                                8,090
                                
                                
                                
                                10,034Income
      tax receivable
                                
                                
                                —
                                
                                
                                
                                1,631Deferred
      tax assets
                                
                                
                                4,088
                                
                                
                                
                                3,388Total
      current assets
                                
                                
                                302,636
                                
                                
                                
                                304,501Equipment
      and leasehold improvements, net
                                
                                
                                9,191
                                
                                
                                
                                7,670Trademarks,
      licenses and other intangible assets, net
                                
                                
                                101,799
                                
                                
                                
                                104,922Goodwill
                                
                                
                                3,927
                                
                                
                                
                                5,470Other
      assets
                                
                                
                                1,535
                                
                                
                                
                                2,574Total
      assets
                                
                                $
                                419,088
                                
                                
                                $
                                425,137Liabilities
      and EquityCurrent
      liabilities:Loans
      payable – banks
                                
                                $
                                5,021
                                
                                
                                $
                                13,981Current
      portion of long-term debt
                                
                                
                                11,732
                                
                                
                                
                                13,352Accounts
      payable - trade
                                
                                
                                48,138
                                
                                
                                
                                66,236Accrued
      expenses
                                
                                
                                37,440
                                
                                
                                
                                35,368Income
      taxes payable
                                
                                
                                1,646
                                
                                
                                
                                442Dividends
      payable
                                
                                
                                996
                                
                                
                                
                                996Total
      current liabilities
                                
                                
                                104,973
                                
                                
                                
                                130,375Deferred
      tax liability
                                
                                
                                8,840
                                
                                
                                
                                11,562Long-term
      debt, less current portion
                                
                                
                                17,862
                                
                                
                                
                                27,691Commitments
      and contingenciesEquity:Inter
      Parfums, Inc. shareholders’ 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,
      30,171,952 and 30,168,939 shares at December 31, 2009 and 2008,
      respectively
                                
                                
                                30
                                
                                
                                
                                30Additional
      paid-in capital
                                
                                
                                45,126
                                
                                
                                
                                41,950Retained
      earnings
                                
                                
                                186,611
                                
                                
                                
                                168,025Accumulated
      other comprehensive income
                                
                                
                                30,000
                                
                                
                                
                                25,515Treasury
      stock, at cost, 10,056,966  and 9,966,379 common shares at
      December 31, 2009 and 2008, respectively
                                
                                
                                (33,043
                                )
                                
                                
                                (31,319
                                )Total
      Inter Parfums, Inc. shareholders’ equity
                                
                                
                                228,724
                                
                                
                                
                                204,201Noncontrolling
      interest
                                
                                
                                58,689
                                
                                
                                
                                51,308Total
      equity
                                
                                
                                287,413
                                
                                
                                
                                255,509Total
      liabilities and equity
                                
                                $
                                419,088
                                
                                
                                $
                                425,137
 
 See
accompanying notes to consolidated financial statements.
  F-3
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 Consolidated
Statements of Income
 Years
ended December 31, 2009, 2008, and 2007
 (In
thousands except share and per share data)
 
 2009
                            
                            
                            2008
                            
                            
                            2007Net
      sales
                            
                            $
                            409,464
                            
                            
                            $
                            446,124
                            
                            
                            $
                            389,560Cost
      of sales
                            
                            
                            175,296
                            
                            
                            
                            191,915
                            
                            
                            
                            160,137Gross
      margin
                            
                            
                            234,168
                            
                            
                            
                            254,209
                            
                            
                            
                            229,423Selling,
      general, and administrative expenses
                            
                            
                            187,690
                            
                            
                            
                            202,264
                            
                            
                            
                            181,224Impairment
      of goodwill
                            
                            
                            1,677
                            
                            
                            
                            936
                            
                            
                            
                            868Income
      from operations
                            
                            
                            44,801
                            
                            
                            
                            51,009
                            
                            
                            
                            47,331Other
      expenses (income):Interest
      expense
                            
                            
                            2,647
                            
                            
                            
                            4,940
                            
                            
                            
                            3,667(Gain)
      loss on foreign currency
                            
                            
                            (3,212
                            )
                            
                            
                            1,380
                            
                            
                            
                            219Interest
      and dividend income
                            
                            
                            (982
                            )
                            
                            
                            (1,745
                            )
                            
                            
                            (3,166
                            )Gain
      on subsidiary’s issuance of stock
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            (665
                            )(1,547
                            )
                            
                            
                            4,575
                            
                            
                            
                            55Income
      before income taxes
                            
                            
                            46,348
                            
                            
                            
                            46,434
                            
                            
                            
                            47,276Income
      taxes
                            
                            
                            16,190
                            
                            
                            
                            16,312
                            
                            
                            
                            16,675Net
      income
                            
                            
                            30,158
                            
                            
                            
                            30,122
                            
                            
                            
                            30,601Less:
      Net income attributable to the noncontrolling interest
                            
                            
                            7,791
                            
                            
                            
                            6,357
                            
                            
                            
                            6,784Net
      income attributable to Inter Parfums, Inc.
                            
                            $
                            22,367
                            
                            
                            $
                            23,765
                            
                            
                            $
                            23,817Net
      income attributable to Inter Parfums, Inc. common
      shareholders’:Basic
                            
                            $
                            0.74
                            
                            
                            $
                            0.78
                            
                            
                            $
                            0.78Diluted
                            
                            
                            0.74
                            
                            
                            
                            0.77
                            
                            
                            
                            0.76Weighted
      average number of shares outstanding:Basic
                            
                            
                            30,099,998
                            
                            
                            
                            30,621,070
                            
                            
                            
                            30,666,141Diluted
                            
                            
                            30,121,077
                            
                            
                            
                            30,777,985
                            
                            
                            
                            31,004,299Dividends
      declared per share
                            
                            $
                            0.133
                            
                            
                            $
                            0.133
                            
                            
                            $
                            0.133
 
 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, 2009, 2008, and 2007
 (In
thousands except share data)
 
 Inter Parfums, Inc. shareholdersAccumulatedAdditional
                        
                        
                        
                        
                        
                        
                        
                        
                        otherCommon stock
                        
                        
                        paid-in
                        
                        
                        Retained
                        
                        
                        Comprehensive
                        
                        
                        comprehensive
                        
                        
                        Treasury stock
                        
                        
                        NoncontrollingShares
                        
                        
                        Amount
                        
                        
                        capital
                        
                        
                        earnings
                        
                        
                        income
                        
                        
                        income
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        interest
                        
                        
                        TotalBalance
      – January 1, 2007
                        
                        
                        30,652,188
                        
                        
                        $
                        31
                        
                        
                        $
                        38,085
                        
                        
                        $
                        127,834
                        
                        
                        
                        
                        
                        $
                        15,170
                        
                        
                        
                        9,371,830
                        
                        
                        $
                        (25,848
                        )
                        
                        $
                        44,075
                        
                        
                        $
                        199,347Comprehensive
      income:Net
      income
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        23,817
                        
                        
                        $
                        23,817
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        6,784
                        
                        
                        
                        30,601Foreign
      currency translation adjustments
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        15,816
                        
                        
                        
                        15,816
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        15,816Net
      derivative instrument loss, net of tax
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (31
                        )
                        
                        
                        (31
                        )
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (16
                        )
                        
                        
                        (47
                        )Total
      comprehensive income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        39,602Dividends
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (4,093
                        )
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (1,594
                        )
                        
                        
                        (5,687
                        )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
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        168
                        
                        
                        
                        823Purchase
      of subsidiary shares from  noncontrolling
    interest
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (3,206
                        )
                        
                        
                        (3,206
                        )Sale
      of subsidiary shares to noncontrolling interest
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        2,260
                        
                        
                        
                        2,260Foreign
      currency translation adjustment
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        5,454
                        
                        
                        
                        5,454Shares
      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
                        )
                        
                        
                        53,925
                        
                        
                        
                        246,585Comprehensive
      income:Net
      income
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        23,765
                        
                        
                        $
                        23,765
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        6,357
                        
                        
                        
                        30,122Foreign
      currency translation adjustments
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (9,755
                        )
                        
                        
                        (9,755
                        )
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (9,755
                        )Net
      derivative instrument gain, net of tax
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        4,315
                        
                        
                        
                        4,315
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        1,514
                        
                        
                        
                        5,829Total
      comprehensive income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        18,325Dividends
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (4,039
                        )
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (1,735
                        )
                        
                        
                        (5,774
                        )Shares
      issued upon exercise of stock options including income tax benefit of
      $988
                        
                        
                        33,150
                        
                        
                        
                        —
                        
                        
                        
                        1,260
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        1,260Stock
      compensation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        452
                        
                        
                        
                        304
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        134
                        
                        
                        
                        890Purchase
      of subsidiary shares from  noncontrolling
    interest
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (8,462
                        )
                        
                        
                        (8,462
                        )Sale
      of subsidiary shares to noncontrolling interest
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        215
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        2,463
                        
                        
                        
                        2,678Foreign
      currency translation adjustment
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (2,888
                        )
                        
                        
                        (2,888
                        )Purchased
      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
                        )
                        
                        
                        51,308
                        
                        
                        
                        255,509Comprehensive
      income:Net
      income
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        22,367
                        
                        
                        $
                        22,367
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        7,791
                        
                        
                        
                        30,158Foreign
      currency translation adjustments
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        8,767
                        
                        
                        
                        8,767
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        8,767Reclassification
      from OCI into earnings, net
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (4,423
                        )
                        
                        
                        (4,423
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (1,499
                        )
                        
                        
                        (5,922
                        )Net
      derivative instrument gain, net of tax
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        141
                        
                        
                        
                        141
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        32
                        
                        
                        
                        173Total
      comprehensive income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        26,852Dividends
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (3,974
                        )
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (1,716
                        )
                        
                        
                        (5,690
                        )Shares
      issued upon exercise of stock options including income tax benefit of
      $692
                        
                        
                        243,600
                        
                        
                        
                        —
                        
                        
                        
                        2,711
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        (150,000
                        )
                        
                        
                        476
                        
                        
                        
                        —
                        
                        
                        
                        3,187Stock
      compensation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        510
                        
                        
                        
                        193
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        102
                        
                        
                        
                        805Sale
      of subsidiary shares to noncontrolling interest
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (45
                        )
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        2,671
                        
                        
                        
                        2,626Purchased
      treasury shares
                        
                        
                        (108,100
                        )
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        108,100
                        
                        
                        
                        (631
                        )
                        
                        
                        —
                        
                        
                        
                        (631
                        )Shares
      received as proceeds of option exercises
                        
                        
                        (132,487
                        )
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        
                        132,487
                        
                        
                        
                        (1,569
                        )
                        
                        
                        —
                        
                        
                        
                        (1,569
                        )Balance
      – December 31, 2009
                        
                        
                        30,171,952
                        
                        
                        $
                        30
                        
                        
                        $
                        45,126
                        
                        
                        $
                        186,611
                        
                        
                        
                        
                        
                        
                        $
                        30,000
                        
                        
                        
                        10,056,966
                        
                        
                        $
                        (33,043
                        )
                        
                        $
                        58,689
                        
                        
                        $
                        287,413
 
 See
accompanying notes to consolidated financial statements.
  F-5
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 Consolidated
Statements of Cash Flows
 Years
ended December 31, 2009, 2008, and 2007
 (In
thousands)
 
 2009
                            
                            
                            2008
                            
                            
                            2007Cash
      flows from operating activities:Net
      income
                            
                            $
                            30,158
                            
                            
                            $
                            30,122
                            
                            
                            $
                            30,601Adjustments
      to reconcile net income to net cash provided by (used-in) operating
      activities:Depreciation
      and amortization
                            
                            
                            10,963
                            
                            
                            
                            9,925
                            
                            
                            
                            8,031Impairment
      of goodwill and trademark
                            
                            
                            2,213
                            
                            
                            
                            936
                            
                            
                            
                            868Provision
      for doubtful accounts
                            
                            
                            1,394
                            
                            
                            
                            148
                            
                            
                            
                            588Noncash
      stock compensation
                            
                            
                            947
                            
                            
                            
                            1,119
                            
                            
                            
                            1,096Deferred
      tax (benefit) provision
                            
                            
                            (3,079
                            )
                            
                            
                            4,118
                            
                            
                            
                            (657
                            )Change
      in fair value of derivatives
                            
                            
                            (861
                            )
                            
                            
                            1,759
                            
                            
                            
                            —Gain
      on subsidiary’s issuance of stock
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            (665
                            )Changes
      in:Accounts
      receivable
                            
                            
                            20,912
                            
                            
                            
                            (8,768
                            )
                            
                            
                            2,984Inventories
                            
                            
                            40,628
                            
                            
                            
                            (23,285
                            )
                            
                            
                            (28,677
                            )Other
      assets
                            
                            
                            (4,841
                            )
                            
                            
                            4,010
                            
                            
                            
                            (1,602
                            )Accounts
      payable and accrued expenses
                            
                            
                            (18,900
                            )
                            
                            
                            (18,051
                            )
                            
                            
                            25,014Income
      taxes payable, net
                            
                            
                            5,106
                            
                            
                            
                            (8,461
                            )
                            
                            
                            936Net
      cash provided by (used-in) operating activities
                            
                            
                            84,640
                            
                            
                            
                            (6,428
                            )
                            
                            
                            38,517Cash
      flows from investing activities:Purchases
      of short-term investments
                            
                            
                            —
                            
                            
                            
                            (5,144
                            )
                            
                            
                            (300
                            )Proceeds
      from sale of short-term investments
                            
                            
                            —
                            
                            
                            
                            5,144
                            
                            
                            
                            13,100Purchase
      of equipment and leasehold improvements
                            
                            
                            (5,526
                            )
                            
                            
                            (3,803
                            )
                            
                            
                            (2,380
                            )Payment
      for intangible assets acquired
                            
                            
                            (775
                            )
                            
                            
                            (1,095
                            )
                            
                            
                            (58,723
                            )Proceeds
      from sale of stock of subsidiary
                            
                            
                            2,658
                            
                            
                            
                            2,695
                            
                            
                            
                            2,879Payment
      for acquisition of noncontrolling interests
                            
                            
                            —
                            
                            
                            
                            (18,493
                            )
                            
                            
                            (10,984
                            )Net
      cash (used in) investing activities
                            
                            
                            (3,643
                            )
                            
                            
                            (20,696
                            )
                            
                            
                            (56,408
                            )Cash
      flows from financing activities:Proceeds
      from (repayment of) loans payable – banks
                            
                            
                            (9,005
                            )
                            
                            
                            7,089
                            
                            
                            
                            762Proceeds
      from issuance of long-term debt
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            54,948Repayment
      of long-term debt
                            
                            
                            (12,408
                            )
                            
                            
                            (16,292
                            )
                            
                            
                            (10,440
                            )Purchase
      of treasury stock
                            
                            
                            (660
                            )
                            
                            
                            (4,975
                            )
                            
                            
                            (107
                            )Proceeds
      from exercise of options including tax benefits
                            
                            
                            1,648
                            
                            
                            
                            1,260
                            
                            
                            
                            1,331Dividends
      paid
                            
                            
                            (3,974
                            )
                            
                            
                            (4,069
                            )
                            
                            
                            (3,879
                            )Dividends
      paid to noncontrolling interests
                            
                            
                            (1,716
                            )
                            
                            
                            (1,735
                            )
                            
                            
                            (1,594
                            )Net
      cash provided by (used in) financing activities
                            
                            
                            (26,115
                            )
                            
                            
                            (18,722
                            )
                            
                            
                            41,021Effect
      of exchange rate changes on cash
                            
                            
                            3,181
                            
                            
                            
                            (1,784
                            )
                            
                            
                            8,657Net
      increase (decrease) in cash and cash equivalents
                            
                            
                            58,063
                            
                            
                            
                            (47,630
                            )
                            
                            
                            31,787Cash
      and cash equivalents – beginning of year
                            
                            
                            42,404
                            
                            
                            
                            90,034
                            
                            
                            
                            58,247Cash
      and cash equivalents – end of year
                            
                            $
                            100,467
                            
                            
                            $
                            42,404
                            
                            
                            $
                            90,034Supplemental
      disclosures of cash flow information:Cash
      paid for:Interest
                            
                            $
                            2,633
                            
                            
                            $
                            3,894
                            
                            
                            $
                            3,872Income
      taxes
                            
                            
                            13,085
                            
                            
                            
                            13,311
                            
                            
                            
                            15,211
 
 See
accompanying notes to consolidated financial statements.
  F-6
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (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 57%, 56% and 54%
of net sales in 2009, 2008 and 2007, 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
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 noncontrolling 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 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.
  In
preparing these consolidated financial statements, the Company has evaluated
events and transactions for potential recognition or disclosure through the date
the consolidated financial statements were issued.
  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.  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.
  F-7
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  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 $2.4 million and $1.3 million as of
December 31, 2009 and 2008, 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.
  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, $2.3 million, $4.1 million
and $3.2 million as of December 31, 2009, 2008 and 2007,
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
  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 tables present our financial assets and liabilities that are measured
at fair value on a recurring basis and are categorized using the fair value
hierarchy. The fair value hierarchy has three levels based on the reliability of
the inputs used to determine fair value.
  F-8
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 (In thousands)
                          
                          
                          
                          
                          Fair Value Measurements at December 31, 2009Quoted Prices in
                          
                          
                          Significant Other
                          
                          
                          SignificantActive Markets for
                          
                          
                          Observable
                          
                          
                          UnobservableIdentical Assets
                          
                          
                          Inputs
                          
                          
                          InputsTotal
                          
                          
                          (Level
      1)
                          
                          
                          (Level
      2)
                          
                          
                          (Level
      3)Assets:Money
      market funds
                          
                          $
                          27,693
                          
                          
                          $
                          27,693
                          
                          
                          $
                          —
                          
                          
                          $
                          —Foreign
      currency forward exchange contracts not accounted for using hedge
      accounting
                          
                          
                          5,620
                          
                          
                          
                          —
                          
                          
                          
                          5,620
                          
                          
                          
                          —$
                          33,313
                          
                          
                          $
                          27,693
                          
                          
                          $
                          5,620
                          
                          
                          $
                          —Liabilities:Interest
      rate swaps
                          
                          $
                          752
                          
                          
                          $
                          —
                          
                          
                          $
                          752
                          
                          
                          $
                          —
 
  (In thousands)
                          
                          
                          
                          
                          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
      accounting
                          
                          
                          8,162
                          
                          
                          
                          —
                          
                          
                          
                          8,162
                          
                          
                          
                          —$
                          27,978
                          
                          
                          $
                          19,816
                          
                          
                          $
                          8,162
                          
                          
                          $
                          —Liabilities:Foreign
      currency forward exchange contracts not accounted for using hedge
      accounting
                          
                          $
                          1,429
                          
                          
                          $
                          —
                          
                          
                          $
                          1,429
                          
                          
                          $
                          —Interest
      rate swaps
                          
                          
                          811
                          
                          
                          
                          —
                          
                          
                          
                          811
                          
                          
                          
                          —$
                          2,240
                          
                          
                          $
                          —
                          
                          
                          $
                          2,240
                          
                          
                          $
                          —
 
 The
following table presents gains and losses in derivatives designated as hedges
and the location of those gains and losses in the financial statements (in
thousands):
  Derivatives in Cash
                                      Flow Hedging
                                      Relationships
                                    
                                    Amount of Gain
                                      (Loss) Recognized in
                                      OCI on Derivative
                                      (Effective Portion)
                                    
                                    Location of Gain
                                      (Loss) Reclassified
                                      From Accumulated
                                      OCI into Income
                                      (Effective Portion)
                                    
                                    Amount of Gain (Loss)
                                      Reclassified from
                                      Accumulated OCI into
                                      Income (Effective
                                      Portion)
                                    
                                    Location of Gain
                                      (Loss) Recognized in
                                      Income on Derivative
                                      (Effective Portion)
                                    
                                    Amount of Gain (Loss)
                                      Recognized in Income
                                      On Derivative (Effective
                                      Portion) (A)Year
      ended
                                      December
      31,
                                    
                                    
                                    
                                    Year
      ended
                                      December
      31,
                                    
                                    
                                    
                                    Year
      ended
                                      December
      31,2009
                                    
                                    
                                    2008
                                    
                                    
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    
                                    2009
                                    
                                    
                                    2008Foreign
      exchange contracts
                                    
                                    $
                                    (5,370
                                    )
                                    
                                    
                                    8,162
                                    
                                    Gain
      (loss) on foreign currency
                                    
                                    $
                                    (2,792
                                    )
                                    
                                    
                                    —
                                    
                                    Gain
      (loss) on foreign currency
                                    
                                    $
                                    776
                                    
                                    
                                    
                                    (838
                                    )
 
 (A) The
amount of gain (loss) recognized in income represents the amount excluded from
the assessment of hedge
effectiveness.
  The
following table presents gains and losses in derivatives not designated as
hedges and the location of those gains and losses in the financial statements
(in thousands):
  F-9
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  Derivatives not Designated as
                                      Hedging Instruments under
                                      ASC topic 815-10-10
                                    
                                    Location of Gain (Loss)
                                      recognizedin Income on
                                      Derivative
                                    
                                    December 31,
                                      2009
                                    
                                    
                                    December 31,
                                      2008Interest
      rate swaps
                                    
                                    Interest
      expense
                                    
                                    $
                                    85
                                    
                                    
                                    $
                                    (921
                                    )Foreign
      exchange contracts
                                    
                                    Gain
      (loss) on foreign currency
                                    
                                    $
                                    77
                                    
                                    
                                    $
                                    9
  All
derivative instruments are reported as either assets or liabilities on the
balance sheet measured at fair value. The valuation of interest rate swaps
resulted in a liability which is included in long-term debt on the accompanying
balance sheets. The valuation of foreign currency forward exchange contracts not
accounted for using hedge accounting in 2008 resulted in a liability and are
included in accrued expenses on the accompanying balance sheet. The valuation of
foreign currency forward exchange contracts not accounted for using hedge
accounting in 2009 resulted in an asset and are included in other current assets
on the accompanying balance sheet. The valuation of foreign currency forward
exchange contracts accounted for using hedge accounting in 2008 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.
  The
Company 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 Accounting Standards Codification (“ASC”) topic
815-10-10 (formerly SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities) is also recognized as a gain or loss on foreign currency in
the income statement. For hedge contracts that are no longer deemed highly
effective, hedge accounting is discontinued and gains and losses accumulated in
other comprehensive income are reclassified to earnings. If it is probable
that the forecasted transaction will no longer occur, then any gains or losses
accumulated in other comprehensive income are reclassified to current-period
earnings. Cash-flow hedges were highly effective, in all material
respects.
  At
December 31, 2009, we had foreign currency contracts in the form of forward
exchange contracts in the amount of approximately U.S. $36 million and GB
pounds 5.4 million which all have maturities of less than one
year.
  F-10
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  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 tables present our
assets and liabilities that are measured at fair value on a nonrecurring basis,
and are categorized using the fair value hierarchy.
 
 FairValueMeasurementsatDecember31,2009Quoted Prices in
                          
                          
                          Significant Other
                          
                          
                          SignificantActive Markets for
                          
                          
                          Observable
                          
                          
                          UnobservableIdentical Assets
                          
                          
                          Inputs
                          
                          
                          InputsTotal
                          
                          
                          (Level
      1)
                          
                          
                          (Level
      2)
                          
                          
                          (Level
      3)DescriptionTrademark
      - Nickel
                          
                          $
                          2,586
                          
                          
                          $
                          —
                          
                          
                          $
                          —
                          
                          
                          $
                          2,586Goodwill
                          
                          $
                          3,927
                          
                          
                          $
                          —
                          
                          
                          $
                          —
                          
                          
                          $
                          3,927
 
 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 and trademarks referred to above, relates to the Company’s Nickel skin
care business which is primarily a component of our European operations. Testing
goodwill for impairment requires us to estimate the fair value of the reporting
unit using significant estimates and assumptions. The assumptions we make will
impact the outcome and ultimate results of the testing. In making our
assumptions and estimates, we use industry accepted valuation models and set
criteria that are reviewed and approved by management and, in certain instances,
we engage third party valuation specialists to advise us. The first step of our
goodwill impairment evaluation has given rise to potential impairment indicators
and, as a result of continued sales declines, we have been testing for
impairment of goodwill on a quarterly basis. As of December 31, 2009, we have
measured fair value of goodwill to be equal to the average amount purchase price
indications received from several potential purchasers of the Nickel business.
As a result, the carrying amount of the goodwill exceeded fair value resulting
in an impairment loss of $1.7 million. Accumulated impairment losses relating to
goodwill aggregated $3.5 million as of December 31, 2009. Activity relating to
the goodwill is as follows:
  F-11
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 December
      31,2009
                          
                          
                          2008Balance
      - beginning of year
                          
                          $
                          5,470
                          
                          
                          $
                          6,715Effect
      of changes in foreign currency translation rates
                          
                          
                          134
                          
                          
                          
                          (309
                          )Impairment
      loss
                          
                          
                          (1,677
                          )
                          
                          
                          (936
                          )Balance
      - end of year
                          
                          $
                          3,927
                          
                          
                          $
                          5,470
 
 To
determine fair value of indefinite-lived intangible assets, we use an income
approach, including the relief-from-royalty method. This method assumes that, in
lieu of ownership, a third party would be willing to pay a royalty in order to
obtain the rights to use the comparable asset. The relief-from-royalty
calculations require us to make a number of assumptions and estimates concerning
future sales levels, market royalty rates, future tax rates and discount rates.
We use this method to determine if an impairment charge is required relating to
our Nickel brand trademarks. For the year ended December 31, 2009, an impairment
charge relating to the Nickel trademark in the amount of $0.54 million was
recorded. We assumed a market royalty rate of 6% and a discount rate of
7.8%.
 
 The fair
values used in our evaluations are also estimated based upon discounted future
cash flow projections using a weighted average cost of capital of 7.8%. The cash
flow projections are based upon a number of assumptions, including, future sales
levels and future cost of goods and operating expense levels, as well as
economic conditions, changes to our business model or changes in consumer
acceptance of our products which are more subjective in nature. We believe that
the assumptions that we have made in projecting future cash flows for the
evaluations described above are reasonable and currently no impairment
indicators exist for our indefinite-lived assets other than the Nickel
trademarks referred to above. However, if future actual results do not meet our
expectations, we may be required to record an impairment charge, the amount of
which could be material to our results of operations.
 
 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 $5.0
million, $6.2 million and $6.2 million in 2009, 2008 and 2007, respectively, are
included in selling, general and administrative expenses in the consolidated
statements of income. One customer represented 11%, 12% and 13% of consolidated
net sales in 2009, 2008 and 2007, respectively.
  F-12
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  Payments
to Customers
  The
Company is subject to the provisions of ASC topic 605-50 (formerly 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 expenses were $55.8 million, $65.8
million and $58.5 million for 2009, 2008 and 2007, respectively. Costs relating
to purchase with purchase and gift with purchase promotions that are reflected
in cost of sales aggregated $29.8 million, $34.3 million and $23.0 million in
2009, 2008 and 2007, respectively.  As of December 31, 2009, accrued
expenses include approximately $9.2 million in advertising
liabilities.
  Package
Development Costs
  Package
development costs associated with new products and redesigns of existing product
packaging are expensed as incurred.
  Income
Taxes
  The
Company accounts for income taxes in accordance with the provisions of ASC topic
740-10 (formerly SFAS 109 and FASB Interpretation No. 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 noncontrolling 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 noncontrolling interests, in accordance
with ASC topic 505-10 (formerly SAB 51, Accounting for Sales of Stock by a
subsidiary), 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.
  F-13
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  The
following table sets forth the computation of basic and diluted earnings per
share:
  Year
      ended December 31,2009
                        
                        
                        2008
                        
                        
                        2007Numerator:Net
      income attributable to Inter Parfums, Inc.
                        
                        $
                        22,367
                        
                        
                        $
                        23,765
                        
                        
                        $
                        23,817Effect
      of dilutive securities of consolidated subsidiary
                        
                        
                        (18
                        )
                        
                        
                        (99
                        )
                        
                        
                        (270
                        )Numerator
      for diluted earnings per share
                        
                        $
                        22,349
                        
                        
                        $
                        23,666
                        
                        
                        $
                        23,547Denominator:Weighted
      average shares
                        
                        
                        30,099,998
                        
                        
                        
                        30,621,070
                        
                        
                        
                        30,666,141Effect
      of dilutive securities:Stock
      options and warrants
                        
                        
                        21,079
                        
                        
                        
                        156,915
                        
                        
                        
                        338,158Denominator
      for diluted earnings per share
                        
                        
                        30,121,077
                        
                        
                        
                        30,777,985
                        
                        
                        
                        31,004,299
 
 Not
included in the above computations is the effect of anti-dilutive potential
common shares which consist of outstanding options to purchase 889,000, 541,000,
and 477,000 shares of common stock for 2009, 2008, and 2007, respectively, and
outstanding warrants to purchase 300,000, 187,500 and 150,000 shares of common
stock for 2009, 2008 and 2007, respectively.
 
 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 Authorizations
may be suspended, limited or terminated at any time without notice.
  Recent
Accounting Pronouncements
  In
January 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2010-06,
“Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures
about Fair Value Measurements” which amends ASC Subtopic 820, “Fair Value
Measurements and Disclosures” (“ASU 2010-06”) to add new requirements for
disclosures about transfers into and out of Levels 1 and 2 and separate
disclosures about purchases, sales, issuances, and settlements relating to Level
3 measurements.  ASU 2010-06 also clarifies existing fair value disclosures
about the level of disaggregation and about inputs and valuation techniques used
to measure fair value.  We do not believe that the adoption of provisions
of ASU 2010-06 will have a material impact on our consolidated financial
statements.
  In May
2009, the FASB issued ASC topic 855 (formerly SFAS No. 165, “Subsequent Events”)
which was amended in February 2010 by ASU No. 2010-09. ASC topic 855 provides
guidance on management’s assessment of subsequent events and incorporates this
guidance into accounting literature. ASC topic 855 was effective prospectively
for interim and annual periods ending after June 15, 2009 and the amendment was
effective upon issuance. The adoption of this original pronouncement and the
amendments thereto, did not have a material impact on our consolidated financial
statements.
 
 In June
2009, the FASB issued ASC topic 810 (formerly SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R)”). ASC topic 810 amends the consolidation guidance
applicable to variable interest entities and affects the overall consolidation
analysis.  ASC topic 810 is effective for fiscal years beginning after
November 15, 2009. We do not believe that the adoption of ASC topic 810 will
have a material impact on our consolidated financial
statements.
  F-14


INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 In June
2009, the FASB issued ASC topic 105 (formerly SFAS No. 168, “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles”).  ASC 105 contains guidance which reduces the U.S. GAAP
hierarchy to two levels, one that is authoritative and one that is
not.  ASC topic 105 is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The adoption of this
pronouncement did not have a material impact on our consolidated financial
statements.
 
 In March
2008, the FASB issued ASC topic 815-10-65 (formerly SFAS 161, Disclosures about
Derivative Instruments and Hedging Activities, as an amendment to SFAS 133,
Accounting for Derivative Instruments and Hedging Activities).  ASC
topic 815-10-65 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. ASC topic 815-10-65 is effective for financial
statements issued for fiscal years and interim periods beginning after
November 15, 2008. The adoption by the Company of ASC topic 815-10-65 did
not have a material impact on its consolidated financial
statements.
 
 In
December 2007, the FASB issued ASC topic 810-10-65 (formerly SFAS 160,
“Noncontrolling Interests in Consolidated Financial Statements”).  ASC
topic 810-10-65 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. ASC topic
810-10-65 is effective, on a prospective basis, for fiscal years beginning after
December 15, 2008. The adoption by the Company of ASC topic 810-10-65 did not
have a material impact on its consolidated financial
statements.  However, presentation and disclosure requirements of ASC
topic 810-10-65 were retrospectively applied to Company’s financial
statements.
  In
December 2007, the FASB issued ASC topic 805-10-05 (formerly SFAS 141 (revised
2007), “Business Combinations” (“SFAS 141R”)). ASC topic 805-10-05 provides
guidance on how acquirers recognize and measure the consideration transferred,
identifiable assets acquired, liabilities assumed, noncontrolling interests, and
goodwill acquired in a business combination. ASC topic 805-10-05 also expands
required disclosures surrounding the nature and financial effects of business
combinations. ASC topic 805-10-05 is effective, on a prospective basis, for
fiscal years beginning after December 15, 2008. The adoption by the Company of
ASC topic 805-10-05 did not have a material impact on its consolidated financial
statements. However, additional noncontrolling interests acquired or sold after
adoption of ASC topic 805-10-05 are accounted for as equity transactions and not
subject to purchase accounting.
  There are
no other new accounting pronouncements issued but not yet adopted that would
have a material effect on our consolidated financial
statements.
  F-15
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  (2)
              Recent
      Agreements
  Montblanc
  In
January 2010, we entered into an exclusive worldwide license agreement with
Montblanc International GmbH to create, produce and distribute perfumes and
ancillary products under the Montblanc brand. Our rights under such license
agreement, which takes effect on July 1, 2010 and runs through December 31,
2020, are subject to certain minimum sales, advertising expenditures and royalty
payments as are customary in our industry. We also agreed to pay an upfront
entry fee of €1 million (approximately $1.4 million) for this license, and to
purchase the inventory of the current licensee, which is anticipated to be
approximately €4 million (approximately $5.7 million).
 
 Jimmy
Choo
  In
October 2009, we entered into an exclusive worldwide license agreement with J
Choo Limited, commencing on January 1, 2010, for the creation, development and
distribution of fragrances under the Jimmy Choo brand. Our rights under such
license agreement, which runs through 2022, are subject to certain minimum
sales, advertising expenditures and royalty payments as are customary in our
industry. A member of the Company’s board of directors is also a member of the
board of directors of J Choo Limited.
  Gap
Inc.
  In April
2008, we expanded our current relationship with The 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 The 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 expired on August 31, 2009, and we had entered
into a series of short-term extension agreements to continue the relationship as
it previously existed while we were in discussions with The Gap Inc. for a
formal extension of the agreement. In March 2010, we signed a new specialty
retail agreement with The Gap, Inc. covering the Gap and Banana Republic brands
in the United States and Canada with terms and conditions similar to those of
the original agreement. This new agreement expires December 31,
2011.
  As an
inducement to enter into our initial agreement with The Gap, Inc., in July 2005,
we granted warrants to purchase 150,000 shares of our common stock to Gap Inc.
exercisable for five yearsat $16.80 per share,
125% of the market price on the date of grant and in September 2006 we granted
Gap Inc. an additional warrant 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. 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. Such amount has been capitalized as an
intangible asset and was amortized over the initial term of the agreement. Such
amortization is included in selling, general and administrative expense in the
accompanying consolidated financial statements.
  F-16
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  We have
registered with the Securities and Exchange Commission the 300,000 shares
purchasable pursuant to the 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.
  bebe
Stores, Inc.
  In July 2008, weentered into an exclusive
six-year worldwide agreement withbebeStores,Inc.under whichwedesign, manufacture and supply
fragrance, bath and body products and color cosmeticsfor company-ownedbebe 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.
  F-17
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 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.
 
 In
determining the useful life of our Lanvin brand names and trademarks, we applied
the provisions of ASC topic 350-30-35-3 (formerly paragraph 11 of SFAS 142,
Goodwill and Other Intangible Assets). The only factor that prevented us from
determining that the Lanvin brand names and trademarks were indefinite life
intangible assets was Item c. “Any legal, regulatory, or contractual provisions
that may limit the useful life”. The existence of a repurchase option in 2025
may limit the useful life of the Lanvin brand names and trademarks to the
Company. However, this limitation would only take effect if the repurchase
option were to be exercised and the repurchase price was paid. If the repurchase
option is not exercised, then the Lanvin brand names and trademarks are expected
to continue to contribute directly to the future cash flows of our Company and
their useful life would be considered to be indefinite.
  With
respect to the application of ASC topic 350-30-35-8 (formerly paragraph 13 of
SFAS 142), the Lanvin brand names and trademarks would only have a finite life
to our Company if the repurchase option were exercised, and in applying ASC
topic 350-30-35-8 we assumed that the repurchase option is exercised. When
exercised, Lanvin has an obligation to pay the exercise price and the Company
would be required to convey the Lanvin brand names and trademarks back to
Lanvin. The exercise price to be received (Residual Value) is well in excess of
the carrying value of the Lanvin brand names and trademarks, therefore no
amortization is required.
 
 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.
 
 (3)
              Acquisition
      of Noncontrolling 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 noncontrolling 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
                    
                    
                    $
                    5,469Noncontrolling
      interests
                    
                    
                    8,356
                    
                    
                    
                    2,724Deferred
      tax liability
                    
                    
                    (5,321
                    )
                    
                    
                    (1,883
                    )Total
                    
                    $
                    18,493
                    
                    
                    $
                    6,310
  F-18
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 The
acquisition was accounted for under the purchase method and brought our
ownership interest in IPSA to approximately 75%.
 
 Nickel,
S.A.
  In June
2007, the noncontrolling 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
                    
                    $
                    921Noncontrolling
      interest
                    
                    
                    587Goodwill
                    
                    
                    1,892Total
                    
                    $
                    3,400
 
 (4)
              Inventories
  December31,2009
                        
                        
                        2008Raw materials and component
      parts
                        
                        $
                        29,052
                        
                        
                        $
                        37,248Finished
    goods
                        
                        
                        56,376
                        
                        
                        
                        86,385$
                        85,428
                        
                        
                        $
                        123,633
  (5)
              Equipment
      and Leasehold Improvements
  December31,2009
                        
                        
                        2008Equipment
                        
                        $
                        23,293
                        
                        
                        $
                        18,526Leasehold
      improvements
                        
                        
                        2,101
                        
                        
                        
                        2,09825,394
                        
                        
                        
                        20,624Less accumulated depreciation and
      amortization
                        
                        
                        16,203
                        
                        
                        
                        12,954$
                        9,191
                        
                        
                        $
                        7,670
  Depreciation
and amortization expense was $4.3 million, $3.1 million and $2.5 million for
2009, 2008 and 2007, respectively.
  F-19




INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  (6)
              Trademarks,
      Licenses and Other Intangible
Assets
  2009
                        
                        Gross
                        
                        
                        Accumulated
                        
                        
                        Net BookAmount
                        
                        
                        Amortization
                        
                        
                        ValueTrademarks (indefinite
      lives)
                        
                        $
                        6,864
                        
                        
                        $
                        —
                        
                        
                        $
                        6,864Trademarks (finite
      lives)
                        
                        
                        55,709
                        
                        
                        
                        128
                        
                        
                        
                        55,581Licenses (finite
      lives)
                        
                        
                        52,909
                        
                        
                        
                        15,418
                        
                        
                        
                        37,491Other intangible assets (finite
      lives)
                        
                        
                        15,043
                        
                        
                        
                        13,180
                        
                        
                        
                        1,863Subtotal
                        
                        
                        123,661
                        
                        
                        
                        28,726
                        
                        
                        
                        94,935Total
                        
                        $
                        130,525
                        
                        
                        $
                        28,726
                        
                        
                        $
                        101,799
 
 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
  For the
year ended December 31, 2009, an impairment charge relating to the Nickel
trademark in the amount of $0.54 million was recorded. During 2008 and 2007,
there were no charges for the impairment of trademarks with indefinite useful
lives. Amortization expense was $6.7 million, $6.9 million and $5.3 million for
2009, 2008 and 2007, respectively. Amortization expense is expected to
approximate $6.2 million in 2010, $5.7 million in 2011 and $4.5 million in 2012,
2013 and 2014. The weighted average amortization period for trademarks, licenses
and other intangible assets with finite lives are 15 years, 8 years and 2 years,
respectively, and 11 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 0.6% (the three month EURIBOR was 0.7% at December 31,
2009). Outstanding amounts totaled $0.8 million and $5.6 million at
December 31, 2009 and 2008, respectively.
  The
Company and its domestic subsidiaries have available a $15 million unsecured
revolving line of credit due on demand, which bears interest at the prime rate
minus 0.5% (the prime rate was 3.25% as of December 31, 2009). The line of
credit which has a maturity date of August 1, 2010 is expected to be renewed on
an annual basis. Outstanding amounts totaled $4.2 million and $8.4 at
December 31, 2009 and 2008.
  The
weighted average interest rate on short-term borrowings was 2.50% and 2.76% as
of December 31, 2009 and 2008, respectively.
  (8)
              Long-term
      Debt
  Long-term
debt consists of the following:
  F-20
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 December31,2009
                        
                        
                        200816 million euro variable rate
      facility at three month EURIBOR plus 0.60%, payable in 20 equal quarterly
      installments
                        
                        $
                        —
                        
                        
                        $
                        2,22718 million euro fixed rate
      facility at 4.1%, payable in 20 quarterly
    installments
                        
                        
                        11,011
                        
                        
                        
                        15,63922 million euro variable rate
      facility at three month EURIBOR plus 0.40%, payable in 20 equal quarterly
      installments
                        
                        
                        18,183
                        
                        
                        
                        22,960Other
                        
                        
                        400
                        
                        
                        
                        21729,594
                        
                        
                        
                        41,043Less current
      maturities
                        
                        
                        11,732
                        
                        
                        
                        13,352Total
                        
                        $
                        17,862
                        
                        
                        $
                        27,691
 
 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 a gain of $0.1
million in 2009 and a loss of $0.8 million in 2008 are 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 including a debt equity ratio of less than one and a debt to
adjusted net income ratio of less than three. One facility contains cross
default provisions by permitting acceleration of the debt if any affiliated
company of the debtor defaults in any other debt facility, and the creditor of
such other debt facility accelerates such debt and such affiliated debtor does
not in good faith contest such default and acceleration. We are in compliance
with all of the covenants and other restrictions of our debt agreements. Using
December 31, 2009 exchange rates, maturities of long-term debt subsequent to
December 31, 2009 are $11.7 million in 2010, $12.0 million in 2011 and $5.9
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, $9.9 million and $9.1 million in 2009,
2008 and 2007, respectively. Minimum future annual rental payments are as
follows:
  2010
                                
                                $
                                7,4912011
                                
                                
                                5,9452012
                                
                                
                                2,7012013
                                
                                
                                1,6602014
                                
                                
                                625Thereafter
                                
                                
                                1,423$
                                19,845
  F-21
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (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 2022. 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:
  2010
                                
                                $
                                134,7092011
                                
                                
                                151,2012012
                                
                                
                                162,1372013
                                
                                
                                160,8862014
                                
                                
                                166,453Thereafter
                                
                                
                                435,288$
                                1,210,674
  Future
advertising commitments are estimated based on planned future sales for the
license terms that were in effect at December 31, 2009, 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 $35.5 million,
$37.3 million and $35.6 million, in 2009, 2008 and 2007, respectively. In
addition, we are exposed to certain concentration risk. 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.
 
 (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
2009, 2008 and 2007, 152,591, 77,068 and 121,746 shares, respectively, of
capital stock of IPSA were issued as a result of employees exercising stock
options. At December 31, 2009 and 2008, 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. Options
granted under the plans typically have a six-year term and vest over a four to
five-year period. The fair value of shares vested in 2009 and 2008 aggregated
$0.4 million and $0.3 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.
  F-22
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  The
following table sets forth information with respect to nonvested options for
2009:
  Number of Shares
                      
                      
                      Weighted Average Grant
                        Date Fair ValueNonvested
      options – beginning of year
                      
                      
                      490,263
                      
                      
                      $
                      3.81Nonvested
      options granted
                      
                      
                      99,800
                      
                      
                      $
                      4.40Nonvested
      options vested or forfeited
                      
                      
                      110,215
                      
                      
                      $
                      3.86Nonvested
      options – end of year
                      
                      
                      479,848
                      
                      
                      $
                      3.92
  Share-based
payment expenses decreased income before income taxes by $0.9 million in 2009
and $1.1 million in both 2008 and 2007, decreased net income by $0.54 million,
$0.62 million and $0.54 million in 2009, 2008 and 2007, respectively, and
reduced diluted earnings per share by $0.02 in 2009, 2008 and 2007.
  The
following table summarizes stock option activity and related information as of
December 31, 2009 and does not include information relating to options of
IPSA granted by IPSA, our majority- owned subsidiary:
 
 Year ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Options
                      
                      
                      Weighted
                        Average
                        exercise
                        price
                      
                      
                      Options
                      
                      
                      Weighted
                        Average
                        exercise
                        price
                      
                      
                      Options
                      
                      
                      Weighted
                        Average
                        exercise
                        priceShares
      under option - beginning of year
                      
                      
                      1,138,375
                      
                      
                      $
                      11.23
                      
                      
                      
                      1,206,600
                      
                      
                      $
                      12.29
                      
                      
                      
                      1,301,400
                      
                      
                      $
                      11.02Options
      granted
                      
                      
                      99,800
                      
                      
                      
                      11.90
                      
                      
                      
                      246,100
                      
                      
                      
                      9.86
                      
                      
                      
                      144,450
                      
                      
                      
                      12.75Options
      exercised
                      
                      
                      (243,600
                      )
                      
                      
                      10.24
                      
                      
                      
                      (33,150
                      )
                      
                      
                      8.22
                      
                      
                      
                      (228,150
                      )
                      
                      
                      5.34Options
      cancelled
                      
                      
                      (74,500
                      )
                      
                      
                      14.20
                      
                      
                      
                      (281,175
                      )
                      
                      
                      14.92
                      
                      
                      
                      (11,100
                      )
                      
                      
                      12.61Shares
      under options - end of year
                      
                      
                      920,075
                      
                      
                      
                      11.32
                      
                      
                      
                      1,138,375
                      
                      
                      
                      11.23
                      
                      
                      
                      1,206,600
                      
                      
                      
                      12.29
  At
December 31, 2009, options for 949,075 shares were available for future grant
under the plans. The aggregate intrinsic value of options outstanding is $1.1
million as of December 31, 2009 and unrecognized compensation cost related to
stock options outstanding on Inter Parfums, Inc. common stock aggregated $1.6
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 0.5 million euro. Options under IPSA plans
vest four years after grant.
  The
weighted average fair values of the options granted by Inter Parfums, Inc.
during 2009, 2008 and 2007 were $4.40, $3.36 and $4.37 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, 2009, 2008 and 2007
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
as authorized by the board of directors at the time of stock-based award grant
would continue with no anticipated increases.
  F-23
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  Year Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Weighted-average
      expected stock-price volatility
                      
                      
                      49
                      %
                      
                      
                      41
                      %
                      
                      
                      39
                      %Weighted-average
      expected option life
                      
                      4.5
      years
                      
                      
                      4.7
      years
                      
                      
                      4.5
      yearsWeighted-average
      risk-free interest rate
                      
                      
                      2.6
                      %
                      
                      
                      2.3
                      %
                      
                      
                      3.5
                      %Weighted-average
      dividend yield
                      
                      
                      2.0
                      %
                      
                      
                      1.25
                      %
                      
                      
                      0.9
                      %
  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 IPSA during 2009 were 4.27 euro per share on the date of grant using
the Black-Scholes option pricing model with the following assumptions: dividend
yield 2.7%; volatility of 30%; risk-free interest rate of 3.6%; and an expected
life of the option of five years.
  Cash proceeds, tax benefits and
intrinsic value related to stock options exercised were as
follows:
  Year Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Cash
      proceeds from stock options exercised
                      
                      $
                      956
                      
                      
                      $
                      272
                      
                      
                      $
                      1,331Tax
      benefits
                      
                      $
                      692
                      
                      
                      $
                      988
                      
                      
                      $
                      915Intrinsic
      value of stock options exercised
                      
                      $
                      407
                      
                      
                      $
                      158
                      
                      
                      $
                      1,368
  The
following table summarizes additional stock option information as of
December 31, 2009:
  Options outstandingNumber
                                
                                weighted average remaining
                                
                                OptionsExerciseprices
                                
                                outstanding
                                
                                contractuallife
                                
                                exercisable$6.15 –
    $6.93
                                
                                82,450
                                
                                4.96 years
                                
                                15,690$9.97
                                
                                217,800
                                
                                0.30 years
                                
                                217,800$10.13
                                
                                3,000
                                
                                0.09 years
                                
                                3,000$11.01 –
    $11.49
                                
                                163,725
                                
                                4.00 years
                                
                                10,987$12.14 –
    $12.64
                                
                                215,575
                                
                                4.80 years
                                
                                51,510$13.10 –
    $13.23
                                
                                234,525
                                
                                2.93 years
                                
                                140,040$18.00
                                
                                3,000
                                
                                3.41 Years
                                
                                1,200Totals
                                
                                920,075
                                
                                3.11 Years
                                
                                440,227
  As of
December 31, 2009 the weighted average exercise price of options exercisable was
$11.22 and the weighted average remaining contractual life of options
exercisable is 1.77 years. The aggregate intrinsic value of options exercisable
at December 31, 2009 is $0.6 million.
  The Chief
Executive Officer and the President each exercised 75,000 outstanding stock
options of the Company’s common stock in both 2009 and 2007. The aggregate
exercise prices of $1.5 million in 2009 and $0.8 million in 2007 were paid by
them tendering to the Company in 2009 and 2007 an aggregate of 129,984 and
72,429 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 2009 and 2007 an
additional 2,503 and 9,698 shares, respectively, for payment of certain
withholding taxes resulting from his option exercises.
  F-24
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  Treasury
Stock
  As of
December 31, 2008, the board of directors of the Company authorized the
repurchase of up to 1,031,863 shares of the Company’s common stock. During 2009,
the Company repurchased 108,100 shares of its common stock at an average price
of $5.84 per common share.
  Dividends
  The
quarterly dividend of $1.0 million ($0.033 per share) declared in
December 2009 was paid in January 2010. Furthermore, in January 2010
the board of directors of the Company authorized an approximate 100% increase in
the annual dividend to $0.26 per share. The first quarterly dividend of $0.065
per share will be paid on April 15, 2010 to shareholders of record on March 31,
2010.
  (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 31,2009
                            
                            
                            2008
                            
                            
                            2007Net
      sales:United
      States
                            
                            $
                            47,810
                            
                            
                            $
                            59,657
                            
                            
                            $
                            58,807Europe
                            
                            
                            361,662
                            
                            
                            
                            389,009
                            
                            
                            
                            332,420Eliminations
      of intercompany sales
                            
                            
                            (8
                            )
                            
                            
                            (2,542
                            )
                            
                            
                            (1,667
                            )$
                            409,464
                            
                            
                            $
                            446,124
                            
                            
                            $
                            389,560Net
      income:United
      States
                            
                            $
                            (178
                            )
                            
                            $
                            1,960
                            
                            
                            $
                            2,066Europe
                            
                            
                            22,482
                            
                            
                            
                            21,862
                            
                            
                            
                            21,681Eliminations
                            
                            
                            63
                            
                            
                            
                            (57
                            )
                            
                            
                            70$
                            22,367
                            
                            
                            $
                            23,765
                            
                            
                            $
                            23,817Depreciation
      and amortization expense:United
      States
                            
                            $
                            1,116
                            
                            
                            $
                            1,283
                            
                            
                            $
                            1,076Europe
                            
                            
                            9,847
                            
                            
                            
                            8,642
                            
                            
                            
                            6,955$
                            10,963
                            
                            
                            $
                            9,925
                            
                            
                            $
                            8,031Interest
      and dividend income:United
      States
                            
                            $
                            —
                            
                            
                            $
                            4
                            
                            
                            $
                            227Europe
                            
                            
                            982
                            
                            
                            
                            1,741
                            
                            
                            
                            2,939$
                            982
                            
                            
                            $
                            1,745
                            
                            
                            $
                            3,166Interest
      expense:United
      States
                            
                            $
                            177
                            
                            
                            $
                            142
                            
                            
                            $
                            366Europe
                            
                            
                            2,470
                            
                            
                            
                            4,798
                            
                            
                            
                            3,301$
                            2,647
                            
                            
                            $
                            4,940
                            
                            
                            $
                            3,667Income
      tax expense (benefit):United
      States
                            
                            $
                            148
                            
                            
                            $
                            1,087
                            
                            
                            $
                            1,105Europe
                            
                            
                            15,996
                            
                            
                            
                            15,263
                            
                            
                            
                            15,517Eliminations
                            
                            
                            46
                            
                            
                            
                            (38
                            )
                            
                            
                            53$
                            16,190
                            
                            
                            $
                            16,312
                            
                            
                            $
                            16,675
  F-25
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
 
 December 31,2009
                      
                      
                      2008
                      
                      
                      2007Total
      assets:United
      States
                      
                      $
                      45,580
                      
                      
                      $
                      56,320
                      
                      
                      $
                      52,571Europe
                      
                      
                      382,628
                      
                      
                      
                      380,058
                      
                      
                      
                      403,351Eliminations
      of investment in subsidiary
                      
                      
                      (9,120
                      )
                      
                      
                      (11,241
                      )
                      
                      
                      (9,870
                      )$
                      419,088
                      
                      
                      $
                      425,137
                      
                      
                      $
                      446,052Additions
      to long-lived assets:United
      States
                      
                      $
                      190
                      
                      
                      $
                      479
                      
                      
                      $
                      1,042Europe
                      
                      
                      6,111
                      
                      
                      
                      19,877
                      
                      
                      
                      44,125$
                      6,301
                      
                      
                      $
                      20,356
                      
                      
                      $
                      45,167Total
      long-lived assets:United
      States
                      
                      $
                      5,612
                      
                      
                      $
                      6,537
                      
                      
                      $
                      7,342Europe
                      
                      
                      109,305
                      
                      
                      
                      111,525
                      
                      
                      
                      108,212$
                      114,917
                      
                      
                      $
                      118,062
                      
                      
                      $
                      115,554Deferred
      tax assets:United
      States
                      
                      $
                      1,399
                      
                      
                      $
                      586
                      
                      
                      $
                      591Europe
                      
                      
                      2,689
                      
                      
                      
                      2,802
                      
                      
                      
                      3,709$
                      4,088
                      
                      
                      $
                      3,388
                      
                      
                      $
                      4,300
  United
States export sales were approximately $14.0 million, $22.5 million and $9.5
million in 2009, 2008 and 2007, respectively. Consolidated net sales to
customers by region are as follows:
 
 YearendedDecember31,2009
                      
                      
                      2008
                      
                      
                      2007North
    America
                      
                      $
                      96,800
                      
                      
                      $
                      108,600
                      
                      
                      $
                      115,400Europe
                      
                      
                      184,900
                      
                      
                      
                      204,100
                      
                      
                      
                      173,200Central and SouthAmerica
                      
                      
                      29,300
                      
                      
                      
                      38,000
                      
                      
                      
                      28,200Middle East
                      
                      
                      42,300
                      
                      
                      
                      39,200
                      
                      
                      
                      26,100Asia
                      
                      
                      53,600
                      
                      
                      
                      53,000
                      
                      
                      
                      43,900Other
                      
                      
                      2,600
                      
                      
                      
                      3,200
                      
                      
                      
                      2,800$
                      409,500
                      
                      
                      $
                      446,100
                      
                      
                      $
                      389,600
 
 Consolidated
net sales to customers in major countries are as follows:
  Year Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007United
      States
                      
                      $
                      88,000
                      
                      
                      $
                      101,000
                      
                      
                      $
                      113,000United
      Kingdom
                      
                      $
                      31,000
                      
                      
                      $
                      25,000
                      
                      
                      $
                      28,000France
                      
                      $
                      37,000
                      
                      
                      $
                      38,000
                      
                      
                      $
                      30,000
 
 (12)
              Income
      Taxes
  The
components of income before income taxes consist of the following:
  Year ended December 31,2009
                          
                          
                          2008
                          
                          
                          2007U.S.
      operations
                          
                          $
                          (30
                          )
                          
                          $
                          3,047
                          
                          
                          $
                          3,170Foreign
      operations
                          
                          
                          46,378
                          
                          
                          
                          43,387
                          
                          
                          
                          44,106$
                          46,348
                          
                          
                          $
                          46,434
                          
                          
                          $
                          47,276
  F-26
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  The
provision for current and deferred income tax expense (benefit) consists of the
following:
  YearendedDecember31,2009
                        
                        
                        2008
                        
                        
                        2007Current:Federal
                        
                        $
                        280
                        
                        
                        $
                        56
                        
                        
                        $
                        343State and
    local
                        
                        
                        119
                        
                        
                        
                        86
                        
                        
                        
                        190Foreign
                        
                        
                        18,870
                        
                        
                        
                        12,052
                        
                        
                        
                        16,79919,269
                        
                        
                        
                        12,194
                        
                        
                        
                        17,332Deferred:Federal
                        
                        
                        (260
                        )
                        
                        
                        886
                        
                        
                        
                        437State and
    local
                        
                        
                        9
                        
                        
                        
                        59
                        
                        
                        
                        135Foreign
                        
                        
                        (2,828
                        )
                        
                        
                        3,173
                        
                        
                        
                        (1,229
                        )(3,079
                        )
                        
                        
                        4,118
                        
                        
                        
                        (657
                        )Total income tax
      expense
                        
                        $
                        16,190
                        
                        
                        $
                        16,312
                        
                        
                        $
                        16,675
 
 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 31,2009
                      
                      
                      2008Deferred tax
      assets:State net operating loss
      carryforwards
                      
                      $
                      508
                      
                      
                      $
                      640Federal net operating loss
      carryforwards
                      
                      
                      150
                      
                      
                      
                      605Foreign net operating loss
      carryforwards
                      
                      
                      785
                      
                      
                      
                      764Alternative minimum tax credit
      carryforwards
                      
                      
                      282
                      
                      
                      
                      134Inventory and accounts
      receivable
                      
                      
                      817
                      
                      
                      
                      400Profit
    sharing
                      
                      
                      1,121
                      
                      
                      
                      829Stock option
      compensation
                      
                      
                      360
                      
                      
                      
                      244Effect of inventory profit
      elimination
                      
                      
                      1,011
                      
                      
                      
                      1,112Other
                      
                      
                      450
                      
                      
                      
                      669Total gross deferred tax
      assets
                      
                      
                      5,484
                      
                      
                      
                      5,397Valuation
      allowance
                      
                      
                      (1,396
                      )
                      
                      
                      (2,009
                      )Net deferred tax
      assets
                      
                      
                      4,088
                      
                      
                      
                      3,388Deferred tax liabilities
      (long-term):Property, plant, and
      equipment
                      
                      
                      (13
                      )
                      
                      
                      (67
                      )Trademarks and
      licenses
                      
                      
                      (7,731
                      )
                      
                      
                      (8,104
                      )Unrealized gains on hedging
      transactions
                      
                      
                      (995
                      )
                      
                      
                      (3,084
                      )Other
                      
                      
                      (102
                      )
                      
                      
                      (307
                      )Total deferred tax
      liabilities
                      
                      
                      (8,841
                      )
                      
                      
                      (11,562
                      )Net deferred tax assets
      (liabilities)
                      
                      $
                      (4,753
                      )
                      
                      $
                      (8,174
                      )
 
 At
December 31, 2009 federal net operating loss carry-forwards of approximately
$0.4 million expire at various dates through 2026 and the Company’s state
net operating loss carry-forwards, subject to applicable state apportionment,
for New York State and New York City tax purposes of approximately $7.3 million
and for New Jersey tax purposes of approximately $8.9 million expire at various
dates through 2012. Prior to 2007, valuation allowances had been provided as it
was estimated that future tax benefits from option compensation deductions might
prevent the net operating loss carry-forwards from being fully utilized. In
2009, 2008 and 2007, $0.6 million, $1.1 million and $0.4 million, respectively
of such valuation allowances were realized which is equal to the benefits
realized from the utilization of net operating loss carry-forwards. The amount
realized and any future realization of the valuation allowance is credited to
additional paid-in capital.
  F-27
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  In
addition, a valuation allowance of $0.8 million and $0.2 million has been
provided in 2008 and 2007, respectively against certain foreign net operating
loss carry-forwards, 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 carry-forwards 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 carry-forwards 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
$164 million of undistributed earnings of its non-U.S. subsidiaries as of
December 31, 2009 since the Company intends to continue to reinvest
most of these earnings in its foreign operations indefinitely. The Company may
repatriate some past and possibly some future earnings of its non-U.S.
subsidiaries to the United States but will only do so when it can be done
without material incremental tax provisions.
  Differences
between the United States Federal statutory income tax rate and the effective
income tax rate were as follows:
  YearendedDecember31,2009
                      
                      
                      2008
                      
                      
                      2007Statutory
    rates
                      
                      
                      34.0
                      %
                      
                      
                      34.0
                      %
                      
                      
                      34.0
                      %State and local taxes, net of
      Federal benefit
                      
                      
                      0.2
                      
                      
                      
                      0.3
                      
                      
                      
                      0.5Effect of foreign taxes in excess
      of U.S. statutory rates
                      
                      
                      0.6
                      
                      
                      
                      1.0
                      
                      
                      
                      1.2Other
                      
                      
                      0.1
                      
                      
                      
                      (0.2
                      )
                      
                      
                      (0.4
                      )Effective
    rates
                      
                      
                      34.9
                      %
                      
                      
                      35.1
                      %
                      
                      
                      35.3
                      %
 
  (13)
              Accumulated
      Other Comprehensive Income
  The components of accumulated other
comprehensive income consists of the following:
 
 YearendedDecember31,2009
                      
                      
                      2008
                      
                      
                      2007Net derivative instruments,
      beginning of year
                      
                      $
                      4,412
                      
                      
                      $
                      97
                      
                      
                      $
                      128Reclassification adjustment for
      gains included in net income
                      
                      
                      (4,423
                      )Gain (loss) on derivative
      instruments
                      
                      
                      141
                      
                      
                      
                      4,315
                      
                      
                      
                      (31
                      )Net derivative instruments, end of
      year
                      
                      
                      130
                      
                      
                      
                      4,412
                      
                      
                      
                      97Cumulative translation
      adjustments, beginning of year
                      
                      
                      21,103
                      
                      
                      
                      30,858
                      
                      
                      
                      15,042Translation
      adjustments
                      
                      
                      8,767
                      
                      
                      
                      (9,755
                      )
                      
                      
                      15,816Cumulative translation
      adjustments, end of year
                      
                      
                      29,870
                      
                      
                      
                      21,103
                      
                      
                      
                      30,858Accumulated other comprehensive
      income
                      
                      $
                      30,000
                      
                      
                      $
                      25,515
                      
                      
                      $
                      30,955
  F-28
  INTER
PARFUMS, INC. AND SUBSIDIARIES
 
 Notes to
Consolidated Financial Statements
 December
31, 2009, 2008 and 2007
 (In
thousands except share and per share data)
  (14)
              Net
      Income Attributable to Inter Parfums, Inc. and Transfers from the
      Noncontrolling Interest
  YearendedDecember31,2009
                      
                      
                      2008
                      
                      
                      2007Net income attributable to Inter
      Parfums, Inc.
                      
                      $
                      22,367
                      
                      
                      $
                      23,765
                      
                      
                      $
                      23,817Increase (decrease) in Inter
      Parfums, Inc.'s additional paid-in capital for subsidiary share
      transactions
                      
                      
                      (45
                      )
                      
                      
                      215
                      
                      
                      
                      —Change from net income
      attributable to Inter Parfums, Inc. and transfers from nomcontrolling
      interest
                      
                      $
                      22,322
                      
                      
                      $
                      23,980
                      
                      
                      $
                      23,817
  F-29
  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, 2009:Allowances
      for sales returns and doubtful accounts
                      
                      $
                      1,304
                      
                      
                      
                      1,417
                      
                      
                      
                      57
                      
                      (b)
                      
                      
                      386
                      
                      (a)
                      
                      
                      2,392Year
      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)
                      
                      
                      2,357(a)  Write
      off of bad debts and sales returns.(b)  Foreign
      currency translation adjustment.
 
 See
accompanying report of independent registered public accounting
firm.
  F-30
  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 10, 2010
 
 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
      10, 2010Jean
      Madar
                
                and
      Chief Executive Officer/s/Russell Greenberg
                
                Chief
      Financial and Accounting Officer
                
                March
      10, 2010Russell
      Greenberg
                
                and  Director/s/ Philippe
      Benacin
                
                Director
                
                March
      1, 2010Philippe
      Benacin/s/ Philippe Santi
                
                Director
                
                March
      1, 2010Philippe
      SantiDirector
                
                March
      __, 2010Francois
      Heilbronn/s/ Jean Levy
                
                Director
                
                March
      2, 2010Jean
      LevyDirector
                
                March
      __, 2010Robert
      Bensoussan-Torres/s/ Serge Rosinoer
                
                Director
                
                March
      5, 2010Serge
      Rosinoer/s/ Patrick Choël
                
                Director
                
                February
      27, 2010Patrick
      Choël


EXHIBIT
INDEX




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.).





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.
            Description10.116
            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).





1





Exhibit
      No.
              Description10.119
              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)10.120
              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.
            Description10.124
            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).




2




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.
            Description10.127
            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 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





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
      Granted





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
  3
  The 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.
              Description10.130
              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 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)
  4
  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 Officer31.2
              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).
  5
  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.)
 
 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, 2008:
 
 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).
 
 6
 
 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
      Officer32.2
              Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer
 
 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, 2009:
 
 Exhibit
      No.
              Description10.137
              Lease
      Extension Agreement between 14th
      Street Development, LLC and Nickel USA, Inc. dated June 8,
      2009
  The
following document heretofore filed with the Commission is incorporated by
reference to the Company's Quarterly Report for the quarterly period ended
September 30, 2009:
 
 ExhibitNo.
              Description10.138
              Licence
      Agreement between J Choo Limited and Inter Parfums, S.A. signed on
      September 29, 2009 (Certain confidential information in this Exhibit
      10.138 was omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc).
  7
  The
following documents, which have been previously filed, are filed again with this
report:
  Exhibit
      No.
              Description
              Page
      Number3.1.1
              Restated
      Certificate of Incorporation dated September 3, 1987
              1393.1.2
              Amendment
      to Restated Certificate of Incorporation dated July 31,
    1992
              1433.1.3
              Amendment
      to Restated Certificate of Incorporation dated July 9,
1993
              1483.1.4
              Amendment
      to Restated Certificate of Incorporation, as amended, dated July 13,
      1999
              1503.1.5
              Amendment
      to Restated Certificate of Incorporation, as amended, dated July 12,
      2000
              1513.1.6
              Amendment
      to Restated Certificate of Incorporation dated August 6,
    2004
              1553.2
              Amended
      and Restated By-laws
              1564.20
              1999
      Stock Option Plan, as amended
              2274.22
              2004
      Stock Option Plan
              24110.25
              Employment
      Agreement between the Company and Philippe Benacin dated July 29,
      1991
              24510.26
              Lease
      for portion of 15th Floor, 551 Fifth Avenue, New York, New
      York
              25210.26.1
              Third
      Modification of Lease dated June 17, 2002 between Metropolitan Life
      Insurance Company, and Jean Philippe Fragrances, LLC (previously
      erroneously filed as exhibit no. 19.92 )
              28710.61
              Lease
      for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial
      Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated
      July 10, 1995
              292
  8
  10.69
                              Exclusive
      License Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter
      Parfums (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.).
                              31210.70
                              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).
                              32610.104
                              Lease
      dated as of 1 March 2001 for 300 West 14th
      Street, New York, NY
                              35810.106
                              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, Ground
      and 1st Floor, Paris, France (French Original)
                              37310.106.1
                              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, Ground
      and 1st Floor, Paris, France (English Translation)
                              38510.107
                              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, 5th
      Floor-Left, Paris, France (French Original)
                              39210.107.1
                              Lease
      effective as of 1 April 2004 for 4-6 Rond Point des Champs Elysees, 5th
      Floor-Left, Paris, France(English Translation)
                              39210.110
                              Lease
      For 48 Rue Des Francs-Bourgeois, In Paris, 3rd District (French
      Original)
                              40410.110.1
                              Lease
      For 48 Rue Des Francs-Bourgeois, In Paris, 3rd District (English
      Translation)
                              41010.112
                              Confidential
      Treatment Agreement among Burberry Ltd., Inter Parfums, S.A., Inter
      Parfums, Inc. and LV Capital USA, Inc., et al., dated October 12,
      2004
                              41610.113
                              Indemnity
      Agreement among Burberry Ltd., Inter Parfums, S.A. and Inter Parfums, Inc.
      dated October 12, 2004
                              421
  9
  The
following documents are filed with this report:
  Exhibit
      No.
              Description
              Page
      Number3.3
              Articles
      of Incorporation of Inter Parfums Holdings, S.A.
              1693.3.1
              Articles
      of Incorporation of Inter Parfums Holdings, S.A. (English
      translation)
              1853.4
              Articles
      of Incorporation of Inter Parfums, S.A.
              1993.4.1
              Articles
      of Incorporation of Inter Parfums, S.A. (English
    translation)
              2134.21.3
              2004
      Nonemployee Director Stock Option Plan, as amended
              2354.30
              Form
      of Option Agreement for Options Granted to Executive Officers on December
      31, 2009 with Schedule of Option Holders and Options
    Granted
              24210.139
              License
      Agreement between Montblanc-Simplo Gmbh and Inter Parfums, S/.A. (Certain
      confidential information in this Exhibit 10.139 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).
              42410.140
              Personal
      Care Agreement among The Gap, Inc., et al., and Inter Parfums, Inc. and
      its wholly-owned subsidiary Inter Parfums USA, LLC effective March 1, 2010
      (Certain confidential information in this Exhibit 10.140 was omitted and
      filed separately with the Securities and Exchange Commission with a
      request for confidential treatment by Inter Parfums, Inc).
              47621
              List
      of Subsidiaries
              49623
              Consent
      of Mazars LLP
              49731.1
              Certification
      Required by Rule 13a-14 of Chief Executive Officer
              49831.2
              Certification
      Required by Rule 13a-14 of Chief Financial Officer
              500
  10
 
 32.1
              Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer
              50232.2
              Certification
      Required by Section 906 of the Sarbanes-Oxley Act by Chief Executive
      Officer
              503
  11