UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-Q


(
MARK ONE )





x
            Quarterly
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the quarterly period ended September 30,
  2010.





OR





 ̈
            Transition
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the transition period from ___________to
  ________.





Commission
File No. 0-16469





INTER
PARFUMS, INC.


(Exact
name of registrant as specified in its charter)





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





551
      Fifth Avenue, New York, New
      York             10176(Address
      of Principal Executive
      Offices)        (Zip
      Code)
 
 (212)
      983-2640(Registrants
      telephone number, including area
code)


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 xNo  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes  ̈No
 ̈





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





Large
      accelerated Filer  ̈
                Accelerated
      filer xNon-accelerated
      filer  ̈
      (Do not check if a smaller reporting company)
                Smaller
      reporting company  ̈





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





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





At
November 8, 2010, there were 30,445,881 shares of common stock, par value $.001
per share, outstanding.







INTER
PARFUMS, INC. AND SUBSIDIARIES


INDEX





Page NumberPart
      I.   Financial Information
                1Item
      1. Financial StatementsConsolidated
      Balance Sheets as of September 30, 2010 (unaudited) and December 31,
      2009
                2Consolidated
      Statements of Income for the Three and Nine Months Ended September 30,
      2010 (unaudited) and September 30, 2009 (unaudited)
                3Consolidated
      Statements of Changes in Equity for the Nine Months Ended September 30,
      2010 (unaudited) and September 30, 2009 (unaudited)
                4Consolidated
      Statements of Cash Flows for the Nine Months Ended September 30, 2010
      (unaudited) and September 30, 2009 (unaudited)
                5Notes
      to Consolidated Financial Statements
                6Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
                15Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                28Item
      4. Controls and Procedures
                30Part
      II.   Other Information
                30Item
      6.   Exhibits
                30Signatures
                31







INTER
PARFUMS, INC. AND SUBSIDIARIES





Part
I.  Financial Information





Item
1.  Financial Statements





In our opinion, the accompanying
unaudited consolidated financial statements contain all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly our financial
position, results of operations and cash flows for the interim periods
presented. We have condensed such financial statements in accordance with the
rules and regulations of the Securities and Exchange Commission (“SEC”).
Therefore, such financial statements do not include all disclosures required by
accounting principles generally accepted in the United States of America. In
preparing these consolidated financial statements, the Company has evaluated
events and transactions for potential recognition or disclosure through the date
the consolidated financial statements were issued by filing with the SEC. These
financial statements should be read in conjunction with our audited financial
statements for the year ended December 31, 2009 included in our annual
report filed on Form 10-K.





The results of operations for the nine
months ended September 30, 2010 are not necessarily indicative of the results to
be expected for the entire fiscal year.


Page
1


INTER
PARFUMS, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


(In
thousands except share and per share data)





September 30,
                  2010
                
                
                December 31,
                  2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                48,670
                
                
                $
                100,467Short-term
      investments
                
                
                61,996
                
                
                
                —Accounts
      receivable, net
                
                
                113,816
                
                
                
                101,334Inventories
                
                
                106,273
                
                
                
                85,428Receivables,
      other
                
                
                1,411
                
                
                
                3,229Other
      current assets
                
                
                8,003
                
                
                
                8,090Income
      tax receivable
                
                
                45
                
                
                
                —Deferred
      tax assets
                
                
                5,651
                
                
                
                4,088Total
      current assets
                
                
                345,865
                
                
                
                302,636Equipment
      and leasehold improvements, net
                
                
                9,545
                
                
                
                9,191Goodwill
                
                
                3,729
                
                
                
                3,927Trademarks,
      licenses and other intangible assets, net
                
                
                94,272
                
                
                
                101,799Other
      assets
                
                
                1,457
                
                
                
                1,535Total
      assets
                
                $
                454,868
                
                
                $
                419,088LIABILITIES
      AND EQUITYCurrent
      liabilities:Loans
      payable – banks
                
                $
                6,548
                
                
                $
                5,021Current
      portion of long-term debt
                
                
                11,273
                
                
                
                11,732Accounts
      payable – trade
                
                
                57,987
                
                
                
                48,138Accrued
      expenses
                
                
                56,932
                
                
                
                37,440Income
      taxes payable
                
                
                6,236
                
                
                
                1,646Dividends
      payable
                
                
                1,979
                
                
                
                996Total
      current liabilities
                
                
                140,955
                
                
                
                104,973Long-term
      debt, less current portion
                
                
                8,174
                
                
                
                17,862Deferred
      tax liability
                
                
                7,337
                
                
                
                8,840Equity:Inter
      Parfums, Inc. shareholders’ equity:Preferred
      stock, $.001 par; authorized 1,000,000 shares; none issuedCommon
      stock, $.001 par; authorized 100,000,000 shares; outstanding 30,445,881
      and 30,171,952 shares at September 30, 2010 and December 31, 2009,
      respectively
                
                
                30
                
                
                
                30Additional
      paid-in capital
                
                
                48,674
                
                
                
                45,126Retained
      earnings
                
                
                201,121
                
                
                
                186,611Accumulated
      other comprehensive income
                
                
                18,306
                
                
                
                30,000Treasury
      stock, at cost, 10,009,492 and 10,056,966 common shares at September 30,
      2010 and December 31, 2009, respectively
                
                
                (34,151
                )
                
                
                (33,043
                )Total
      Inter Parfums, Inc. shareholders’ equity
                
                
                233,980
                
                
                
                228,724Noncontrolling
      interest
                
                
                64,422
                
                
                
                58,689Total
      equity
                
                
                298,402
                
                
                
                287,413Total
      liabilities and equity
                
                $
                454,868
                
                
                $
                419,088





See
notes to consolidated financial statements.


Page
2


INTER
PARFUMS, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF INCOME


(In
thousands except per share data)


(Unaudited)





Three Months Ended
                  September 30,
                
                
                Nine Months Ended
                  September 30,2010
                
                
                2009
                
                
                2010
                
                
                2009Net
      sales
                
                $
                120,853
                
                
                $
                117,542
                
                
                $
                347,991
                
                
                $
                296,555Cost
      of sales
                
                
                49,578
                
                
                
                50,462
                
                
                
                140,271
                
                
                
                125,709Gross
      margin
                
                
                71,275
                
                
                
                67,080
                
                
                
                207,720
                
                
                
                170,846Selling,
      general and administrative expenses
                
                
                54,692
                
                
                
                53,169
                
                
                
                163,630
                
                
                
                139,812Income
      from operations
                
                
                16,583
                
                
                
                13,911
                
                
                
                44,090
                
                
                
                31,034Other
      expenses (income):Interest
      expense
                
                
                529
                
                
                
                482
                
                
                
                1,627
                
                
                
                2,192(Gain)
      loss on foreign currency
                
                
                (461
                )
                
                
                (854
                )
                
                
                2,435
                
                
                
                (4,796
                )Interest
      income
                
                
                (382
                )
                
                
                (135
                )
                
                
                (977
                )
                
                
                (745
                )(314
                )
                
                
                (507
                )
                
                
                3,085
                
                
                
                (3,349
                )Income
      before income taxes
                
                
                16,897
                
                
                
                14,418
                
                
                
                41,005
                
                
                
                34,383Income
      taxes
                
                
                5,488
                
                
                
                4,807
                
                
                
                13,663
                
                
                
                11,763Net
      income
                
                
                11,409
                
                
                
                9,611
                
                
                
                27,342
                
                
                
                22,620Less:  Net
      income attributable to the noncontrolling interest
                
                
                2,961
                
                
                
                2,349
                
                
                
                6,988
                
                
                
                5,704Net
      income attributable to Inter Parfums, Inc.
                
                $
                8,448
                
                
                $
                7,262
                
                
                $
                20,354
                
                
                $
                16,916Earnings
      per share:Net
      income attributable to Inter Parfums, Inc. common
      shareholders:Basic
                
                $
                0.28
                
                
                $
                0.24
                
                
                $
                0.67
                
                
                $
                0.56Diluted
                
                $
                0.28
                
                
                $
                0.24
                
                
                $
                0.67
                
                
                $
                0.56Weighted
      average number of shares outstanding:Basic
                
                
                30,443
                
                
                
                30,061
                
                
                
                30,332
                
                
                
                30,097Diluted
                
                
                30,564
                
                
                
                30,065
                
                
                
                30,441
                
                
                
                30,098Dividends
      declared per share
                
                $
                0.065
                
                
                $
                0.033
                
                
                $
                0.195
                
                
                $
                0.099





See
notes to consolidated financial statements.


Page
3


INTER
PARFUMS, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY


(In
thousands)





Inter Parfums, Inc. shareholdersAccumulatedAdditional
                  
                  
                  
                  
                  
                  otherCommon
                  
                  
                  paid-in
                  
                  
                  Retained
                  
                  
                  comprehensive
                  
                  
                  Treasury
                  
                  
                  Noncontrollingstock
                  
                  
                  Capital
                  
                  
                  earnings
                  
                  
                  income
                  
                  
                  stock
                  
                  
                  interest
                  
                  
                  TotalBalance
      – January 1, 2009
                  
                  $
                  30
                  
                  
                  $
                  41,950
                  
                  
                  $
                  168,025
                  
                  
                  $
                  25,515
                  
                  
                  $
                  (31,319
                  )
                  
                  $
                  51,308
                  
                  
                  $
                  255,509Comprehensive
      income:Net
      income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  16,916
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  5,704
                  
                  
                  
                  22,620Foreign
      currency translation adjustment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  13,251
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  13,251Net
      derivative instrument (loss), net of tax
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (3,164
                  )
                  
                  
                  —
                  
                  
                  
                  (1,084
                  )
                  
                  
                  (4,248
                  )Sale
      of subsidiary shares to noncontrolling interests
                  
                  
                  —
                  
                  
                  
                  (53
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2,677
                  
                  
                  
                  2,624Dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,979
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,716
                  )
                  
                  
                  (4,695
                  )Purchased
      treasury stock
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (631
                  )
                  
                  
                  —
                  
                  
                  
                  (631
                  )Shares
      issued upon exercise of stock options
                  
                  
                  —
                  
                  
                  
                  200
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  200Stock
      compensation
                  
                  
                  —
                  
                  
                  
                  381
                  
                  
                  
                  149
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  79
                  
                  
                  
                  609Balance
      – September 30, 2009
                  
                  $
                  30
                  
                  
                  $
                  42,478
                  
                  
                  $
                  182,111
                  
                  
                  $
                  35,602
                  
                  
                  $
                  (31,950
                  )
                  
                  $
                  56,968
                  
                  
                  $
                  285,239Balance
      – January 1, 2010
                  
                  $
                  30
                  
                  
                  $
                  45,126
                  
                  
                  $
                  186,611
                  
                  
                  $
                  30,000
                  
                  
                  $
                  (33,043
                  )
                  
                  $
                  58,689
                  
                  
                  $
                  287,413Comprehensive
      income:Net
      income
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  20,354
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  6,988
                  
                  
                  
                  27,342Foreign
      currency translation adjustment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (12,423
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (12,423
                  )Net
      derivative instrument gain, net of tax
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  729
                  
                  
                  
                  —
                  
                  
                  
                  285
                  
                  
                  
                  1,014Shares
      issued upon exercise of stock options and warrants
                  
                  
                  —
                  
                  
                  
                  3,654
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  493
                  
                  
                  
                  —
                  
                  
                  
                  4,147Purchase
      of subsidiary shares from noncontrolling interests
                  
                  
                  —
                  
                  
                  
                  (1,662
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,933
                  )
                  
                  
                  (4,595
                  )Sale
      of subsidiary shares to noncontrolling interests
                  
                  
                  —
                  
                  
                  
                  1,108
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,385
                  
                  
                  
                  4,493Dividends
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (5,922
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (2,049
                  )
                  
                  
                  (7,971
                  )Shares
      received as proceeds of option exercise
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (1,601
                  )
                  
                  
                  —
                  
                  
                  
                  (1,601
                  )Stock
      compensation
                  
                  
                  —
                  
                  
                  
                  448
                  
                  
                  
                  78
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  57
                  
                  
                  
                  583Balance
      – September 30, 2010
                  
                  $
                  30
                  
                  
                  $
                  48,674
                  
                  
                  $
                  201,121
                  
                  
                  $
                  18,306
                  
                  
                  $
                  (34,151
                  )
                  
                  $
                  64,422
                  
                  
                  $
                  298,402





See
notes to consolidated financial statements.


Page
4


INTER
PARFUMS, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)





Nine months ended
                  September 30,2010
                
                
                2009Cash
      flows from operating activities:Net
      income
                
                $
                27,342
                
                
                $
                22,620Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                6,790
                
                
                
                7,758Provision
      for doubtful accounts
                
                
                (116
                )
                
                
                947Noncash
      stock compensation
                
                
                623
                
                
                
                724Deferred
      tax (benefit)
                
                
                (2,664
                )
                
                
                (2,385
                )Change
      in fair value of derivatives
                
                
                (201
                )
                
                
                (713
                )Changes
      in:Accounts
      receivable
                
                
                (16,399
                )
                
                
                (1,880
                )Inventories
                
                
                (23,577
                )
                
                
                30,891Other
      assets
                
                
                2,872
                
                
                
                (4,694
                )Accounts
      payable and accrued expenses
                
                
                32,770
                
                
                
                (24,530
                )Income
      taxes payable, net
                
                
                3,857
                
                
                
                4,851Net
      cash provided by operating activities
                
                
                31,297
                
                
                
                33,589Cash
      flows from investing activities:Purchases
      of equipment and leasehold improvements
                
                
                (3,235
                )
                
                
                (3,758
                )Purchases
      of short-term investments
                
                
                (67,629
                )
                
                
                —Maturities
      of short-term investments
                
                
                7,891
                
                
                
                —Payment
      for intangible assets acquired
                
                
                (1,987
                )
                
                
                (622
                )Payment
      for acquisition of noncontrolling interests
                
                
                (4,595
                )
                
                
                —Proceeds
      from sale of stock of subsidiary
                
                
                4,493
                
                
                
                2,608Net
      cash used in investing activities
                
                
                (65,062
                )
                
                
                (1,772
                )Cash
      flows from financing activities:Proceeds
      (repayments) of loans payable – banks, net
                
                
                1,483
                
                
                
                (4,025
                )Repayment
      of long-term debt
                
                
                (8,015
                )
                
                
                (10,360
                )Proceeds
      from exercise of options and warrants
                
                
                2,652
                
                
                
                200Dividends
      paid
                
                
                (4,939
                )
                
                
                (2,979
                )Dividends
      paid to noncontrolling interest
                
                
                (2,049
                )
                
                
                (1,716
                )Purchase
      of treasury stock
                
                
                (106
                )
                
                
                (631
                )Net
      cash used in financing activities
                
                
                (10,974
                )
                
                
                (19,511
                )Effect
      of exchange rate changes on cash
                
                
                (7,058
                )
                
                
                3,000Net
      increase (decrease) in cash and cash equivalents
                
                
                (51,797
                )
                
                
                15,306Cash
      and cash equivalents - beginning of period
                
                
                100,467
                
                
                
                42,404Cash
      and cash equivalents - end of period
                
                $
                48,670
                
                
                $
                57,710Supplemental
      disclosure of cash flow information:Cash
      paid for:Interest
                
                $
                1,671
                
                
                $
                2,000Income
      taxes
                
                
                10,296
                
                
                
                9,746





See
notes to consolidated financial statements.


Page
5


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





1.
            Significant Accounting
      Policies:





The
accounting policies we follow are set forth in the notes to our financial
statements included in our Form 10-K which was filed with the Securities and
Exchange Commission for the year ended December 31, 2009. We also discuss
such policies in Part I, Item 2, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, included in this Form
10-Q.





The
consolidated financial statements include the accounts of the Company and its
subsidiaries, including majority-owned Inter Parfums, S.A. (“IPSA”), a
subsidiary whose stock is publicly traded in France. In 2010, IPSA formed and
began operations of two new wholly-owned subsidiaries, Interparfums Singapore
Pte. Ltd. and Interparfums Luxury Brands, Inc. All material intercompany
balances and transactions have been eliminated.





2.
            New Accounting
      Pronouncements - adopted:





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. The new disclosure and clarifications of existing
disclosures are effective for interim and annual periods beginning after
December 31, 2009, except for the disclosures about purchases, sales, issuances
and settlements in the roll forward activity in Level 3 fair value measurements.
Those disclosures are effective for interim and annual periods beginning after
December 31, 2010. The adoption of the applicable provisions of this guidance
did not have a material impact on our consolidated financial
statements.





In June
2009, the FASB issued ASC topic 810 which 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. The adoption of ASC topic 810 did not have a material impact
on our consolidated financial statements.





There are
no other new accounting pronouncements issued but not yet adopted that would
have a material effect on the Company’s financial statements.





3.
            Inventories:





Inventories consist of the
following:





(In thousands)
                    
                    September 30,
                      2010
                    
                    
                    December 31,
                      2009Raw
      materials and component parts
                    
                    $
                    38,990
                    
                    
                    $
                    29,052Finished
      goods
                    
                    
                    67,283
                    
                    
                    
                    56,376$
                    106,273
                    
                    
                    $
                    85,428




Page
6


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





4.
            Fair Value
      Measurement:





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




(Inthousands)
                                        
                                        
                                        
                                        
                                        FairValueMeasurementsatSeptember30,2010Quoted Prices in
                                        
                                        
                                        Significant Other
                                        
                                        
                                        SignificantActive Markets for
                                        
                                        
                                        Observable
                                        
                                        
                                        UnobservableIdentical Assets
                                        
                                        
                                        Inputs
                                        
                                        
                                        InputsTotal
                                        
                                        
                                        (Level1)
                                        
                                        
                                        (Level2)
                                        
                                        
                                        (Level3)Assets:Short-term
      investments
                                        
                                        $
                                        61,996
                                        
                                        
                                        $
                                        —
                                        
                                        
                                        $
                                        61,996
                                        
                                        
                                        $
                                        —Foreign
      currency forwardexchange
      contractsaccounted
      for usinghedge
      accounting
                                        
                                        
                                        1,291
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        1,291
                                        
                                        
                                        
                                        —Foreign
      currency forwardexchange
      contractsnot
      accounted for usinghedge
      accounting
                                        
                                        
                                        2,899
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        2,899
                                        
                                        
                                        
                                        —$
                                        66,186
                                        
                                        
                                        $
                                        —
                                        
                                        
                                        $
                                        66,186
                                        
                                        
                                        $
                                        —Liabilities:Interest
      rate swaps
                                        
                                        $
                                        441
                                        
                                        
                                        $
                                        —
                                        
                                        
                                        $
                                        441
                                        
                                        
                                        $
                                        —




(In thousands)
                          
                          
                          
                          
                          FairValueMeasurementsatDecember31,2009Quoted Prices in
                          
                          
                          Significant Other
                          
                          
                          SignificantActive Markets for
                          
                          
                          Observable
                          
                          
                          UnobservableIdentical Assets
                          
                          
                          Inputs
                          
                          
                          InputsTotal
                          
                          
                          (Level1)
                          
                          
                          (Level2)
                          
                          
                          (Level3)Assets:Foreign
      currency forwardexchange
      contractsnot
      accounted for usinghedge
      accounting
                          
                          $
                          5,620
                          
                          
                          $
                          —
                          
                          
                          $
                          5,620
                          
                          
                          $
                          —Liabilities:Interest
      rate swaps
                          
                          $
                          752
                          
                          
                          $
                          —
                          
                          
                          $
                          752
                          
                          
                          $
                          —





The
carrying amount of cash and cash equivalents including money market funds,
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. Short-term investments consist of certificates of deposit
with maturities of approximately six months. The carrying amount of loans
payable approximates fair value as the interest rates on the Company’s
indebtedness approximate current market rates. The fair value of the Company’s
long-term debt was estimated based on the current rates offered to companies for
debt with the same remaining maturities and is approximately equal to its
carrying value. Foreign currency forward exchange contracts are valued based on
quotations of observable market transactions of spot and forward rates provided
to us by financial institutions and the value of interest rate swaps are the
discounted net present value of the swaps using quotes obtained from financial
institutions. No transfers between Level 1 and Level 2 occurred during the nine
months ended September 30, 2010.


Page
7


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





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
                    Designated as
                    Hedging
                    Instuments
                  
                  Amount of Gain
                    (Loss)Recognized in
                    OCI onDerivative
                    (EffectivePortion)
                  
                  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)Nine months ended
                    September 30,
                  
                  
                  
                  Nine months ended
                    September 30,
                  
                  
                  
                  Nine months ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  
                  2010
                  
                  
                  2009Foreign
      exchange contracts
                  
                  $
                  1,291
                  
                  
                  
                  1,857
                  
                  Gain
      (loss) on foreign currency
                  
                  $
                  —
                  
                  
                  
                  4,725
                  
                  Gain
      (loss) on foreign currency
                  
                  $
                  (2,725
                  )
                  
                  
                  713





Three
      months ended
                    September
      30,
                  
                  
                  
                  Three
      months ended
                    September
      30,
                  
                  
                  
                  Three
      months ended
                    September
      30,2010
                  
                  
                  2009
                  
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  
                  2010
                  
                  
                  2009Foreign
      exchange contracts
                  
                  $
                  1,291
                  
                  
                  
                  2,295
                  
                  Gain
      (loss) on foreign currency
                  
                  $
                  —
                  
                  
                  
                  1,534
                  
                  Gain
      (loss) on foreign currency
                  
                  $
                  —
                  
                  
                  
                  11





(A) The
amount of gain (loss) recognized in income represents the amount excluded from
the assessment of  hedge effectiveness.





The
following tables present gains and losses in derivatives not designated as
hedges and the location of those gains and losses in the financial statements
(in thousands):




Derivatives Not Designated
                        as Hedging Instruments
                      
                      Location of Gain (Loss)
                        recognized in Income on
                        Derivative
                      
                      Nine months ended
                        September 30, 2010
                      
                      
                      Nine months ended
                        September 30, 2009Interest
      rate swaps
                      
                      Interest
      expense
                      
                      $
                      262
                      
                      
                      $
                      (62
                      )Foreign
      exchange contracts
                      
                      Gain
      (loss) on foreign currency
                      
                      $
                      (85
                      )
                      
                      $
                      29




Derivatives Not Designated
                          as Hedging Instruments
                        
                        Location of Gain (Loss)
                          recognizedin Income on
                          Derivative
                        
                        Three months ended
                          September 30, 2010
                        
                        
                        Three months ended
                          September 30, 2009Interest
      rate swaps
                        
                        Interest
      expense
                        
                        $
                        125
                        
                        
                        $
                        43Foreign
      exchange contracts
                        
                        Gain
      (loss) on foreign currency
                        
                        $
                        (16
                        )
                        
                        $
                        5




Page
8


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





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
accounted for using hedge accounting and not accounted for using hedge
accounting as of September 30, 2010 and December 31, 2009, resulted in an asset
and are included in other current assets on the accompanying balance sheets.
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.




We 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. 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 ASC topic
815-10-10 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
September 30, 2010, we had foreign currency contracts in the form of forward
exchange contracts in the amount of approximately U.S. $57 million and GB
pounds 3 million which all have maturities of less than one
year.





5.
            Goodwill and Other
      Intangible Assets:





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





(In thousands)
                  
                  
                  
                  
                  FairValueMeasurementsatSeptember30,2010Quoted Prices in
                  
                  
                  Significant Other
                  
                  
                  SignificantActive Markets for
                  
                  
                  Observable
                  
                  
                  UnobservableIdentical Assets
                  
                  
                  Inputs
                  
                  
                  InputsTotal
                  
                  
                  (Level1)
                  
                  
                  (Level2)
                  
                  
                  (Level3)DescriptionTrademark
      - Nickel
                  
                  $
                  2,450
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  2,450Goodwill
                  
                  $
                  3,729
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  3,729





Page
9


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





(In thousands)
                    
                    
                    
                    
                    Fair Value Measurements at December 31, 2009Quoted Prices in
                    
                    
                    Significant Other
                    
                    
                    SignificantActive Markets for
                    
                    
                    Observable
                    
                    
                    UnobservableIdentical Assets
                    
                    
                    Inputs
                    
                    
                    InputsTotal
                    
                    
                    (Level1)
                    
                    
                    (Level2)
                    
                    
                    (Level3)DescriptionTrademark
      – Nickel
                    
                    $
                    2,586
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    2,586Goodwill
                    
                    $
                    3,927
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    3,927





The
goodwill and trademarks referred to above relate 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. There was no change to
the carrying amount of the intangible assets referred to above during the nine
month period ended September 30, 2010 other than for the effect of changes in
foreign currency translation rates.





6.
            Accrued
      Expenses:





Accrued expenses include
      approximately $22.1 million and $9.2 million in advertising liabilities as
      of September 30, 2010 and December 31, 2009,
      respectively.





7.
            Share-Based
      Payments:





We
maintain 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 aggregated $0.04 million and $0.05
million during the nine months ended September 30, 2010 and 2009,
respectively. Compensation cost is recognized on a straight-line basis over the
requisite service period for the entire award. It is generally our policy to
issue new shares upon exercise of stock options. The following table sets forth
information with respect to nonvested options for the nine months ended
September 30, 2010:




Number of Shares
                    
                    
                    Weighted Average
                      Grant Date Fair ValueNonvested
      options – beginning of year
                    
                    
                    480,598
                    
                    
                    $
                    3.92Nonvested
      options granted
                    
                    
                    10,500
                    
                    
                    $
                    5.26Nonvested
      options vested or forfeited
                    
                    
                    (16,595
                    )
                    
                    $
                    3.66Nonvested
      options – end of year
                    
                    
                    474,503
                    
                    
                    $
                    3.96





Share-based
payment expense decreased income before income taxes by $0.17 million and $0.65
million for the three and nine month periods ended September 30, 2010,
respectively, as compared to $0.22 million and $0.72 million for the
corresponding periods of the prior year.  Share-based payment expense
decreased income attributable to Inter Parfums, Inc. by $0.10 million and $0.37
million for the three and nine month periods ended September 30, 2010, respectively,
as compared to $0.13 million and $0.41 million for the corresponding periods of
the prior year.  The following table summarizes stock option
information as of September 30, 2010:


Page
10


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





Number of
                              Shares
                            
                            
                            Weighted
                              Average
                              Exercise PriceOutstanding
      at January 1, 2010
                            
                            
                            920,825
                            
                            
                            $
                            11.32Granted
                            
                            
                            10,500
                            
                            
                            
                            14.65Cancelled
                            
                            
                            (6,200
                            )
                            
                            
                            11.27Exercised
                            
                            
                            (226,455
                            )
                            
                            
                            10.00Outstanding
      at September 30, 2010
                            
                            
                            698,670
                            
                            
                            $
                            11.80Options
      exercisable at September 30, 2010
                            
                            
                            224,167
                            
                            
                            $
                            12.49Options
      available for future grants
                            
                            
                            932,025





As of
September 30, 2010, the weighted average remaining contractual life of options
outstanding is 3.29 years (2.56 years for options exercisable), the aggregate
intrinsic value of options outstanding and options exercisable is $4.0 million
and $1.2 million, respectively and unrecognized compensation cost related to
stock options outstanding on Inter Parfums, Inc. stock aggregated $1.2 million.
The amount of unrecognized compensation cost related to stock options
outstanding of our majority-owned subsidiary, Inter Parfums S.A., was €0.31
million. Options under Inter Parfums, S.A. plans vest over a four-year
period.




Cash
proceeds, tax benefits and intrinsic value related to stock options exercised
during the nine months ended September 30, 2010 and September 30, 2009 were as
follows:




(In
      thousands)
                        
                        2010
                        
                        
                        2009Cash
      proceeds from stock options exercised
                        
                        $
                        771
                        
                        
                        $
                        55Tax
      benefits
                        
                        
                        162
                        
                        
                        
                        145Intrinsic
      value of stock options exercised
                        
                        
                        1,195
                        
                        
                        
                        11





The
weighted average fair values of the options granted by Inter Parfums, Inc.
during the nine months ended September 30, 2010 and 2009 were $5.26 and $1.92
per share, respectively, on the date of grant using the Black-Scholes option
pricing model to calculate the fair value of options granted.




The
assumptions used in the Black-Scholes pricing model for the periods ended
September 30, 2010 and 2009 are set forth in the following
table:




September 30,
                    2010
                
                
                September 30,
                    2009Weighted-average
      expected stock-price volatility
                
                
                49
                %
                
                
                46
                %Weighted-average
      expected option life
                
                4.18
      years
                
                
                3.75
      yearsWeighted-average
      risk-free interest rate
                
                
                2.5
                %
                
                
                1.7
                %Weighted-average
      dividend yield
                
                
                2.0
                %
                
                
                2.2
                %




Page
11


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





Expected
volatility is estimated based on historic volatility of our common stock. We use
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 we recently instituted. The risk-free rate is based
on the U.S. Treasury yield curve in effect at the time of the grant of the
option and the dividend yield reflects the assumption that the dividend payout
in place at the time of stock-based award grant would continue with no
anticipated increases.




8.
            Shareholders’
      Equity:





As of
December 31, 2009 we had 300,000 outstanding warrants for the purchase of
300,000 shares of our common stock. In May 2010, we received proceeds of $1.7
million upon the exercise of 150,000 of the warrants and in July 2010 the
remaining 150,000 expired unexercised.





In April
2010, 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 95,744 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 6,782 shares for
payment of certain withholding taxes resulting from his option
exercises.





9.
            Earnings Per
      Share:





Basic
earnings per share is computed using the weighted average number of shares
outstanding during each period. Diluted earnings per share is computed using the
weighted average number of shares outstanding during each period, plus the
incremental shares outstanding assuming the exercise of dilutive stock options
and warrants using the treasury stock method.  The following table
sets forth the computation of basic and diluted earnings per share:




(In thousands)
                  
                  Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Numerator:Net
      income attributable to Inter Parfums, Inc.
                  
                  $
                  8,448
                  
                  
                  $
                  7,262
                  
                  
                  $
                  20,354
                  
                  
                  $
                  16,916Effect
      of dilutive securities of consolidated subsidiary
                  
                  
                  (34
                  )
                  
                  
                  —
                  
                  
                  
                  (51
                  )
                  
                  
                  (18
                  )$
                  8,414
                  
                  
                  $
                  7,262
                  
                  
                  $
                  20,303
                  
                  
                  $
                  16,898Denominator:Weighted
      average shares
                  
                  
                  30,443
                  
                  
                  
                  30,061
                  
                  
                  
                  30,332
                  
                  
                  
                  30,097Effect
      of dilutive securities:Stock
      options and warrants
                  
                  
                  121
                  
                  
                  
                  4
                  
                  
                  
                  109
                  
                  
                  
                  130,564
                  
                  
                  
                  30,065
                  
                  
                  
                  30,441
                  
                  
                  
                  30,098





Not
      included in the above computations is the effect of antidilutive potential
      common shares which consist of outstanding options to purchase 13,500 and
      202,500 shares of common stock for the three and nine month periods ended
      September 30, 2010, and 1.0 million and 1.1 million shares of common stock
      for the three and nine month periods ended September 30, 2009,
      respectively, as well as outstanding warrants to purchase 300,000 shares
      of common stock for both the three and nine month periods ended
      September 30, 2009.


Page
12


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





10.
            Comprehensive
      Income:





(In thousands)
                  
                  Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Comprehensive
      income:Net
      income
                  
                  $
                  11,409
                  
                  
                  $
                  9,611
                  
                  
                  $
                  27,342
                  
                  
                  $
                  22,620Other
      comprehensive income, net of tax:Foreign
      currency translation adjustment
                  
                  
                  27,341
                  
                  
                  
                  9,049
                  
                  
                  
                  (12,423
                  )
                  
                  
                  13,251Change
      in fair value of derivatives
                  
                  
                  968
                  
                  
                  
                  (1,148
                  )
                  
                  
                  1,014
                  
                  
                  
                  (1,919
                  )Net
      gains reclassified into earnings from equity
                  
                  
                  —
                  
                  
                  
                  (751
                  )
                  
                  
                  —
                  
                  
                  
                  (2,329
                  )Comprehensive
      income:
                  
                  
                  39,718
                  
                  
                  
                  16,761
                  
                  
                  
                  15,933
                  
                  
                  
                  31,623Less
      comprehensive income attributable to the noncontrolling
      interest
                  
                  
                  3,198
                  
                  
                  
                  1,832
                  
                  
                  
                  7,273
                  
                  
                  
                  4,620Comprehensive
      income attributable to Inter Parfums, Inc.
                  
                  $
                  36,520
                  
                  
                  $
                  14,929
                  
                  
                  $
                  8,660
                  
                  
                  $
                  27,003





11.
            Net Income
      Attributable to Inter Parfums, Inc. and Transfers From the Noncontrolling
      Interest:





(In thousands)
                  
                  Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Net
      income attributable to Inter Parfums, Inc.
                  
                  $
                  8,448
                  
                  
                  $
                  7,262
                  
                  
                  $
                  20,354
                  
                  
                  $
                  16,916Decrease
      in Inter Parfums, Inc.’s additional paid-in capital for subsidiary share
      transactions
                  
                  
                  (530
                  )
                  
                  
                  (36
                  )
                  
                  
                  (554
                  )
                  
                  
                  (53
                  )Change
      from net income attributable to Inter Parfums, Inc. and transfers from
      noncontrolling interest
                  
                  $
                  7,918
                  
                  
                  $
                  7,226
                  
                  
                  $
                  19,800
                  
                  
                  $
                  16,863





12.
            Segment and Geographic
      Areas:





We
      manufacture and distribute one product line, fragrances and fragrance
      related products and we manage our business in two segments, European
      based operations and United States based operations. The European assets
      are primarily located, and operations are primarily conducted, in France.
      European operations primarily represent the sale of prestige brand name
      fragrances and United States operations primarily represent the sale of
      specialty retail and mass market fragrances. Information on our operations
      by geographical areas is as
follows:


Page
13


INTER
PARFUMS, INC. AND SUBSIDIARIES





Notes
to Consolidated Financial Statements





(In thousands)
                                    
                                    Three months ended
                                      September 30,
                                    
                                    
                                    Nine months ended
                                      September 30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Net
      sales:United
      States
                                    
                                    $
                                    11,645
                                    
                                    
                                    $
                                    13,541
                                    
                                    
                                    $
                                    38,561
                                    
                                    
                                    $
                                    31,150Europe
                                    
                                    
                                    109,208
                                    
                                    
                                    
                                    104,001
                                    
                                    
                                    
                                    309,430
                                    
                                    
                                    
                                    265,405Eliminations
      of intercompany sales
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —$
                                    120,853
                                    
                                    
                                    $
                                    117,542
                                    
                                    
                                    $
                                    347,991
                                    
                                    
                                    $
                                    296,555Net
      income (loss) attributable to Inter Parfums, Inc.:United
      States
                                    
                                    $
                                    (266
                                    )
                                    
                                    $
                                    288
                                    
                                    
                                    $
                                    (444
                                    )
                                    
                                    $
                                    (1,057
                                    )Europe
                                    
                                    
                                    8,714
                                    
                                    
                                    
                                    6,969
                                    
                                    
                                    
                                    20,776
                                    
                                    
                                    
                                    17,941Eliminations
      of intercompany profits
                                    
                                    
                                    —
                                    
                                    
                                    
                                    5
                                    
                                    
                                    
                                    22
                                    
                                    
                                    
                                    32$
                                    8,448
                                    
                                    
                                    $
                                    7,262
                                    
                                    
                                    $
                                    20,354
                                    
                                    
                                    $
                                    16,916September
      30,
                                    
                                    
                                    December
      31,2010
                                    
                                    
                                    2009Total
      Assets:United
      States
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    44,642
                                    
                                    
                                    $
                                    45,580Europe
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    419,537
                                    
                                    
                                    
                                    382,628Eliminations
      of investment in subsidiary
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (9,311
                                    )
                                    
                                    
                                    (9,120
                                    )$
                                    454,868
                                    
                                    
                                    $
                                    419,088





13.
            Entry into Definitive
      Agreements:





Nine
West





In July
2010, we entered into an exclusive worldwide license agreement with Nine West
Development Corporation for the creation, production, marketing and global
distribution of women’s fragrances under the Nine West brand. The agreement,
which runs through December 31, 2016, contains a provision for further
renewal if certain conditions are met. The agreement also provides for direct
sales to Nine West retail stores in the United States, as well as a licensing
component, enabling us to sell women's fragrances to better department stores
and specialty retailers worldwide. Our rights under such license agreement are
subject to certain minimum sales, advertising expenditures and royalty payments
as are customary in our industry.





Betsey
Johnson





In July
2010, we entered into an exclusive worldwide agreement with Betsey Johnson LLC
under which we will design, manufacture and sell fragrance, color cosmetics as
well as other personal care products across a broad retail spectrum. The
agreement, which runs through December 31, 2015 with a five year optional term
if certain conditions are met, encompasses both direct sales to global Betsey
Johnson stores and e-commerce site, as well as a licensing component, enabling
us to sell these fragrance and beauty products to specialty and department
stores as well as other retail outlets worldwide. Our rights under such license
agreement are subject to certain minimum sales, advertising expenditures and
royalty payments as are customary in our industry.


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Item
      2:
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Forward
Looking Information





Statements
in this report which are not historical in nature are forward-looking
statements. Although we believe that our plans, intentions and expectations
reflected in such forward-looking statements are reasonable, we can give no
assurance that such plans, intentions or expectations will be achieved. In some
cases you can identify forward-looking statements by forward-looking words such
as "anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"should," "will" and "would" or similar words. You should not rely on
forward-looking statements because actual events or results may differ
materially from those indicated by these forward-looking statements as a result
of a number of important factors. These factors include, but are not limited to,
the risks and uncertainties discussed under the headings “Forward Looking
Statements” and "Risk Factors" in Inter Parfums' annual report on Form 10-K for
the fiscal year ended December 31, 2009 and the reports Inter Parfums files from
time to time with the Securities and Exchange Commission. Inter Parfums does not
intend to and undertakes no duty to update the information contained in this
report.




Overview





We
operate in the fragrance business, and manufacture, market and distribute a wide
array of fragrances and fragrance related products. We manage our business in
two segments, European based operations and United States based operations. Our
prestige fragrance products are produced and marketed by our European operations
through our 74% owned subsidiary in Paris, Inter Parfums, S.A., which is also a
publicly traded company as 26% 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.





We
produce and distribute our prestige products primarily under license agreements
with brand owners, and prestige product sales represented approximately 89% of
net sales for both nine month periods ended September 30, 2010 and 2009. 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 56% and 58% of
net sales for the nine months ended September 30, 2010 and 2009,
respectively.





Our
specialty retail and mass-market fragrance and fragrance related products are
marketed through our United States operations and represented 11% of sales for
both nine month periods ended September 30, 2010 and 2009. Trademarks used
pursuant to license or other agreements with the brand owners include Gap, Banana Republic, New York &
Company, Brooks Brothers, bebe, Betsey Johnson, Nine WestandJordache
trademarks.





We grow
our business in two distinct ways. First, we grow by adding new brands to our
portfolio, either through new licenses, new specialty retail agreements 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.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





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





As with
any business, many aspects of our operations are subject to influences outside
our control. The economic challenges and uncertainties in a number of
countries where we do business impacted our business in early
2009. However, improving sales trends which began in the second half of
2009 have continued thus far into 2010.




Our
reported net sales are impacted by changes in foreign currency exchange rates. A
stronger U.S. dollar has an adverse impact on our net sales. However, earnings
are less affected by a stronger dollar because in excess of 35% 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





Nine
West





In July
2010, we entered into an exclusive worldwide license agreement with Nine West
Development Corporation for the creation, production, marketing and global
distribution of women’s fragrances under the Nine West brand. The agreement,
which runs through December 31, 2016, contains a provision for further renewal
if certain conditions are met. The agreement also provides for direct sales to
Nine West retail stores in the United States, as well as a licensing component,
enabling us to sell women's fragrances to better department stores and specialty
retailers worldwide. Our rights under such license agreement are subject to
certain minimum sales, advertising expenditures and royalty payments as are
customary in our industry. Plans call for our first Nine West fragrance launch
in 2011.





Betsey
Johnson





In July
2010, we entered into an exclusive worldwide agreement with Betsey Johnson LLC
of New York, NY, under which we will design, manufacture and sell fragrance,
color cosmetics as well as other personal care products across a broad retail
spectrum. The agreement, which runs through December 31, 2015 with a five year
optional term if certain conditions are met, encompasses both direct sales to
global Betsey Johnson stores and e-commerce site, as well as a licensing
component, enabling us to sell these fragrance and beauty products to specialty
and department stores as well as other retail outlets worldwide. Our rights
under such license agreement are subject to certain minimum sales, advertising
expenditures and royalty payments as are customary in our industry. While we
introduced a new twist on a vintage Betsey Johnson fragrance in August 2010,
plans call for our first new Betsey Johnson product launch in
2011.


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INTER
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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.





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 took 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 paid
an upfront entry fee of €1 million for this license, and purchased inventory
from the former licensee which aggregated approximately €2.9 million. Plans call
for our first new Montblanc fragrance launch in 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.





The
judgments used by management in applying critical accounting policies could
be affected by a 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
receivable, 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 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.


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INTER
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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.





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.


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INTER
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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. In prior years, the first step of our goodwill impairment evaluation has
given rise to potential impairment indicators and, as a result, 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. As of
December 31, 2009, we measured fair value of the business 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. No further impairment charges were required
during the nine months ended September 30, 2010.





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. No further impairment charges were required during the
nine months ended September 30, 2010. 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:


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PARFUMS, INC. AND SUBSIDIARIES





Increase (decrease)(In thousands)
                  
                  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.





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.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





In
determining the useful life of our Lanvin brand names and trademarks, we applied
the provisions of ASC topic 350-30-35-3. 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, 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,
which establishes 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
occasionally use derivative financial instruments to hedge certain anticipated
transactions and interest rates, as well as receivables denominated in foreign
currencies.  We do not utilize derivatives for trading or speculative
purposes.  Hedge effectiveness is documented, assessed and monitored by
employees who are qualified to make such assessments and monitor the
instruments.  Variables that are external to us such as social, political
and economic risks may have an impact on our hedging program and the results
thereof.





Income
Taxes





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


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INTER
PARFUMS, INC. AND SUBSIDIARIES





Results
of Operations





Three
and Nine Months Ended September 30, 2010 as Compared to the Three and Nine
Months Ended September 30, 2009





Three months ended
                          September 30,
                        
                        
                        Nine Months Ended
                          September 30,2010
                        
                        
                        2009
                        
                        
                        % Change
                        
                        
                        2010
                        
                        
                        2009
                        
                        
                        % Change($ in millions)European-based
      product sales
                        
                        $
                        109.2
                        
                        
                        $
                        104.0
                        
                        
                        
                        5.0
                        %
                        
                        $
                        309.4
                        
                        
                        $
                        265.4
                        
                        
                        
                        16.6
                        %United
      States-based product sales
                        
                        
                        11.7
                        
                        
                        
                        13.5
                        
                        
                        
                        (14.0
                        )%
                        
                        
                        38.6
                        
                        
                        
                        31.2
                        
                        
                        
                        23.8
                        %$
                        120.9
                        
                        
                        $
                        117.5
                        
                        
                        
                        2.8
                        %
                        
                        $
                        348.0
                        
                        
                        $
                        296.6
                        
                        
                        
                        17.3
                        %





Net sales for the three months ended
September 30, 2010 increased 3% to $120.9 million, as compared to $117.5 million
for the corresponding period of the prior year. At comparable foreign currency
exchange rates, net sales increased 13% for the period. Net sales for the nine
months ended September 30, 2010 increased 17% to $348.0 million, as compared to
$296.6 million for the corresponding period of the prior year. At comparable
foreign currency exchange rates, net sales increased 23% for the period. The
strength of the U.S. dollar relative to the euro in 2010 as compared to the 2009
periods gave rise to the difference between constant dollar and reported net
sales.





Reported European based prestige
product sales increased 5% and 17% for the three and nine months ended
September 30, 2010, respectively, as compared to the corresponding periods
of the prior year. However, in local currency, European based prestige product
sales were up 17% and 21% for the three and nine months ended September 30,
2010, respectively, as compared to the corresponding periods of the prior year.
This continued sales growth was due in great part to the launch and global
rollout of Burberry Sport fragrances for men and
women, as well as the continued strong performance of established Burberry
scents. In local currency, Burberry fragrance sales increased 18% to €149
million for the nine months ended September 30, 2010, as compared to €126
million for the corresponding periods of the prior year. All of our prestige
fragrance brands contributed to sales growth with double digit comparable
increases. Lanvin, our second largest prestige brand, performed very well with
year-to-date sales in local currency aggregating €38.4 million, 31% ahead of
last year lead by the continued strength of Eclat d’Arpègeand Jeanne Lanvin. The 2010
launch of Oriens by Van
Cleef & Arpels boosted that brand’s local currency year to date sales by 33%
to €19.5 million as compared to €14.6 million for the corresponding period of
the prior year.





We
continue to see our European based prestige fragrance business recover in many
geographic markets, especially Asia, South America, the Middle East and Eastern
Europe where comparable local currency year-to-date sales rose 27%, 44%, 19% and
62%, respectively. Western Europe and North America also saw positive results
with local currency year-to-date sales up 13% and 14%
respectively.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





Our plans
for 2010 are far along in their execution. In addition to Burberry Sport fragrances for men and
women which launched during the first quarter of 2010, we have committed capital
to further grow our largest brand through the launch of a cosmetics line for
women in about 30 to 40 shops around the world. The Burberry cosmetics
collection includes nearly 100 products for skin, lips and eyes. The launch of
this cosmetics line, which commenced during the third quarter of 2010, requires
a significant investment in its first year to develop products, build cosmetic
counters, hire and train personnel. While approximately one-third of these
expenses have already been absorbed, we expected the launch to reduce total 2010
net income attributable to Inter Parfums, Inc. by approximately $1.5 million or
$0.05 per diluted share. We believe that this is an essential development
opportunity which will bring Burberry to the next level of
growth.





In 2010, we have also created new
women’s scents for our Lanvin, S.T. Dupont and Paul Smith brands. Oriens, a women’s scent for
Van Cleef & Arpels launched in the first half of 2010 and we debuted a new
men’s fragrance, Midnight in
Paris, for the brand during the third quarter of 2010.





With
respect to our United States specialty retail and mass-market products, net
sales for the three months ended September 30, 2010 declined 14% to $11.7
million, as compared to $13.5 million for the corresponding period of the prior
year. Net sales for the nine months ended September 30, 2010 increased 24% to
$38.6 million, as compared to $31.2 million for the corresponding period of the
prior year. Following the 71% increase in second quarter sales, we experienced
certain inventory shortfalls during the third quarter.  As such,
certain shipments that were planned for the third quarter of 2010 are now
expected to be included in fourth quarter 2010 sales.





International
distribution of specialty retail products suffered in early 2009 as a result of
the global economic recession. In 2010, international distribution benefitted
from the economic recovery which coincided with further expansion of new
products into new territories. In addition, our bebe signature fragrance has
done especially well in overseas markets and we expanded bebe distribution into
additional third party retail outlets throughout the United States.





In 2010,
we introduced two new Gap scents for distribution in Gap and Gap Body stores
nationwide. International distribution of these new Gap scents began in April
2010 and is expected to reach approximately 5,000 doors by the end of 2011.
Additional products for Gap and Banana Republic including ancillary products,
line extensions and holiday gift sets are launching later in 2010.





New
Brooks Brothers fragrances, Madison, a scent for young
women, and a trio of scents, Black Fleece Red, White &
Blue, make their 2010 debut domestically in November and international
distribution is in process. Our bebe signature fragrance
which debuted in bebe stores and several U.S. department stores in 2009, has
also done especially well in overseas markets.  Distribution of the
bebe signature scent
has further expanded into additional third party retail outlets throughout the
U.S.  A similar distribution strategy is being implemented for bebe
Sheer, which was
unveiled this past summer. Several color cosmetic products and holiday gift
sets, are ready for the holiday season.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





We have
been actively pursuing other new business opportunities and in July 2010, we
entered into exclusive worldwide agreement for both the Betsey Johnson and Nine
West brands. For Betsey Johnson we will design, manufacture and sell fragrance,
color cosmetics as well as other personal care products across a broad retail
spectrum. The agreement encompasses both direct sales to global Betsey Johnson
stores and e-commerce site, as well as a licensing component, enabling us to
sell these fragrance and beauty products to specialty and department stores as
well as other retail outlets worldwide. For Nine West, we are charged with the
creation, production, marketing and global distribution of women’s fragrances
under the Nine West brand. The agreement also provides for direct sales to Nine
West retail stores in the United States, as well as a licensing component,
enabling us to sell women's fragrances to better department stores and specialty
retailers worldwide. Plans for both brands call for new fragrance launches in
2011.





Gross margin
                    
                    Three months ended
                      September 30,
                    
                    
                    Nine months ended
                      September 30,(In millions)
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Net
      sales
                    
                    $
                    120.9
                    
                    
                    $
                    117.5
                    
                    
                    $
                    348.0
                    
                    
                    $
                    296.6Cost
      of sales
                    
                    
                    49.6
                    
                    
                    
                    50.4
                    
                    
                    
                    140.3
                    
                    
                    
                    125.7Gross
      margin
                    
                    $
                    71.3
                    
                    
                    $
                    67.1
                    
                    
                    $
                    207.7
                    
                    
                    $
                    170.9Gross
      margin as a percent of net sales
                    
                    
                    59
                    %
                    
                    
                    57
                    %
                    
                    
                    60
                    %
                    
                    
                    58
                    %





Gross
profit margin was 59% and 60% for the three and nine month periods ended
September 30, 2010, as compared to 57% and 58% for the corresponding periods of
the prior year. The gross margin improvement is primarily the result of product
mix within our European based brand assortment.





We are
carefully watching foreign currency exchange rates as a result of the effect
that a stronger U.S. dollar relative to the euro has on our European based
product sales denominated in U.S. dollars. Sales to these customers, while
denominated in dollars, our costs are incurred in euro. Therefore, from a profit
standpoint, a stronger U.S. dollar benefits our gross margin. While the use of
foreign currency forward exchange contracts benefited our gross margins in the
2009 period, the strength of the U.S dollar relative to the euro through
September 30, 2010 has provided a similar benefit so far in 2010. However, as
the dollar began to weaken during the third quarter of 2010 and in an effort to
protect our gross margin for the remainder of 2010, we entered into foreign
currency forward exchange contracts to hedge approximately 90% of our fourth
quarter 2010 European based product sales expected to be invoiced in U.S.
dollars.





Generally,
we do not bill customers for shipping and handling costs and such costs, which
aggregated $1.4 million and $4.0 million for the three and nine months ended
September 30, 2010, respectively, as compared to $1.3 million and $3.7
million for the corresponding periods of the prior year, are included in
selling, general and administrative expenses in the consolidated statements of
income. As such, our Company’s gross profit may not be comparable to other
companies which may include these expenses as a component of cost of goods
sold.





Selling, general and administrative
                    expenses
                  
                  Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,(In millions)
                  
                  2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Selling,
      general and administrative expenses
                  
                  $
                  54.7
                  
                  
                  $
                  53.2
                  
                  
                  $
                  163.6
                  
                  
                  $
                  139.8Selling,
      general and administrative expenses as a percent of net
    sales
                  
                  
                  45
                  %
                  
                  
                  45
                  %
                  
                  
                  47
                  %
                  
                  
                  47
                  %




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INTER
PARFUMS, INC. AND SUBSIDIARIES





Selling, general and administrative
expenses increased 3% and 17% for the three and nine months ended September 30,
2010, respectively, as compared to the corresponding periods of the prior year.
As a percentage of sales, selling, general and administrative expenses were 45%
and 47% of sales for the three and nine month periods ended September 30, 2010
and 2009.





Promotion and advertising included in
selling, general and administrative expenses aggregated $19.2 million and $58.5
million for the three and nine months ended September 30, 2010,
respectively, as compared to $18.4 million and $46.3 million for the
corresponding periods of the prior year. Promotion and advertising represented
16% and 17% of net sales for the three and nine months ended September 30,
2010, as compared to 16% of sales for both of the corresponding periods of the
prior year.





Royalty expense, included in selling,
general and administrative expenses, aggregated $10.8 million and $31.5 million
for the three and nine months ended September 30, 2010, respectively, as
compared to $10.1 million and $26.5 million for the corresponding periods of the
prior year. As a percentage of sales, royalty expense represented approximately
9% of net sales for all income statement periods presented.





Income
from operations increased 19% to $16.6 million for the three months ended
September 30, 2010, as compared to $13.9 million for the corresponding
period of the prior year. Income from operations increased 42% to $44.1 million
for the nine months ended September 30, 2010, as compared to $31.0 million
for the corresponding period of the prior year. Operating margins were 13.7% and
12.7% of net sales for the three and nine months ended September 30, 2010,
respectively, as compared to 11.8% and 10.4% for the corresponding periods of
the prior year.





Interest
expense aggregated $0.5 million and $1.6 million for the three and nine months
ended September 30, 2010, respectively, as compared to $0.5 million and $2.2
million for the corresponding periods of the prior year. We use the credit lines
available to us, as needed, to finance our working capital needs. Loans
payable – banks and long-term debt including current maturities aggregated
$26.0 million as of September 30, 2010, as compared to $34.6 million as of
December 31, 2009 and $55.0 million as of December 31, 2008.





Foreign
currency gains (losses) aggregated $0.5 million and ($2.4) million for the three
and nine months ended September 30, 2010, respectively, as compared to $0.8
million and $4.8 million for the corresponding periods of the prior
year.  We enter into foreign currency forward exchange contracts to
manage exposure related to certain foreign currency commitments. During 2009, we
were party to foreign currency forward exchange contracts to hedge approximately
80% of our 2009 European based product sales expected to be invoiced in U.S.
dollars. Hedge effectiveness excludes the portion of the fair value of the
foreign currency forward exchange contract attributable to the change in
spot-forward difference which is reported in current period earnings and
resulted in most of the gains and losses referred to above.





Our
effective income tax rate was 32.5% and 33.2% for the three and nine months
ended September 30, 2010, respectively, as compared to 33.3% and 34.2% for the
corresponding periods of the prior year. Our effective tax rates differ from
statutory rates due to the effect of state and local taxes and tax rates in
foreign jurisdictions. Our effective tax rate is usually around 35%. The lower
rates achieved during the three and nine months ended September 30, 2010 is due
to losses in our United States segment which carry a higher effective rate due
to state and local taxes. No significant changes in tax rates were experienced
nor were any expected in jurisdictions where we operate.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





Net
income and earnings per share





(In thousands except per share data)
                    
                    Three Months Ended
                      September 30,
                    
                    
                    Nine Months Ended
                      September 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Net
      income
                    
                    $
                    11,409
                    
                    
                    $
                    9,611
                    
                    
                    $
                    27,342
                    
                    
                    $
                    22,620Less:   Net
      income attributable to the noncontrolling interest
                    
                    
                    2,961
                    
                    
                    
                    2,349
                    
                    
                    
                    6,988
                    
                    
                    
                    5,704Net
      income attributable to Inter Parfums, Inc.
                    
                    $
                    8,448
                    
                    
                    $
                    7,262
                    
                    
                    $
                    20,354
                    
                    
                    $
                    16,916Earnings
      per share:Net
      income attributable to Inter Parfums, Inc. common
      shareholders:Basic
                    
                    $
                    0.28
                    
                    
                    $
                    0.24
                    
                    
                    $
                    0.67
                    
                    
                    $
                    0.56Diluted
                    
                    $
                    0.28
                    
                    
                    $
                    0.24
                    
                    
                    $
                    0.67
                    
                    
                    $
                    0.56Weighted
      average number of shares outstanding:Basic
                    
                    
                    30,443
                    
                    
                    
                    30,061
                    
                    
                    
                    30,332
                    
                    
                    
                    30,097Diluted
                    
                    
                    30,564
                    
                    
                    
                    30,065
                    
                    
                    
                    30,441
                    
                    
                    
                    30,098





Net
income increased 19% to $11.4 million for the three months ended September 30,
2010, as compared to $9.6 million for the corresponding period of the prior
year. Net income increased 21% to $27.3 million for the nine months ended
September 30, 2010, as compared to $22.6 million for the corresponding period of
the prior year.





Net
income attributable to the noncontrolling interest aggregated 26% of net income
for both the three and nine months ended September 30, 2010, as compared to 24%
and 25% for the corresponding periods of the prior year. Shares issued by our
French subsidiary Inter Parfums, S.A. pursuant to options exercised in 2010
diluted our ownership from approximately 75% as of December 31, 2009 to 74% as
of September 30, 2010.





Net
income attributable to Inter Parfums, Inc. increased 16% to $8.4 million for the
three months ended September 30, 2010, as compared to $7.3 million for the
corresponding period of the prior year. Net income attributable to Inter
Parfums, Inc. increased 20% to $20.4 million for the nine months ended September
30, 2010, as compared to $16.9 million for the corresponding period of the prior
year.





Diluted
earnings per share were $0.28 and $0.24 for the three months ended
September 30, 2010 and 2009, respectively, and diluted earnings per share
were $0.67 and $0.56 for the nine months ended September 30, 2010 and 2009,
respectively. Weighted average shares outstanding aggregated 30.4 million and
30.3 million for the three and nine months ended September 30, 2010,
respectively, as compared to 30.1 million for the corresponding periods of the
prior year. On a diluted basis, average shares outstanding were 30.6 million and
30.4 million for the three and nine months ended September 30, 2010, as compared
to 30.1 million for both the three and nine months ended September 30, 2009. The
increase in shares outstanding is primarily the result of shares issued pursuant
to option and warrant exercises.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





Liquidity
and Capital Resources





Our
financial position remains strong. At September 30, 2010, working capital
aggregated $205 million and we had a working capital ratio of 2.5 to 1. Cash and
cash equivalents and short-term investments aggregated $111
million.





Cash
provided by operating activities aggregated $31.3 million and $33.6 million for
the nine months ended September 30, 2010 and 2009, respectively. For the nine
months ended September 30, 2010, working capital items used less than $1.0
million in cash from operating activities as increases in inventories and
accounts receivable were offset by increases in accounts payable and accrued
expenses. The $16 million increase in accounts receivable for the nine months
ended September 30, 2010, as shown on the statement of cash flows, reflects
favorable collection activity as days receivable outstanding declined from 111
days sales as of September 30, 2009 to 85 days as of September 30, 2010.
The $24 million increase in inventories for the nine months ended September 30,
2010, as shown on the statement of cash flows, reflects the needed inventory
build to support sales growth and upcoming product launches.





Cash
flows used in investing activities in 2010 reflects net purchases of $68 million
in short-term investments which are certificates of deposit with maturities
greater than three months. We also spent approximately $3.2 million for capital
items. Our business is not capital intensive as we do not own any manufacturing
facilities. However, we typically spend between $2.5 million and $3.5 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. Proceeds from sale of stock of
subsidiary reflect the proceeds from shares issued by our French subsidiary
Inter Parfums, S.A. pursuant to options exercised in 2010, and payment for
acquisition of minority interests represents repurchases of shares of our French
subsidiary Inter Parfums, S.A. in an effort to offset the dilution from options
exercised.





Our
short-term financing requirements are expected to be met by available cash on
hand at September 30, 2010, 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
September 30, 2010, short-term borrowings aggregated $6.5
million.





Our
long-term credit facilities provides for principal and interest to be repaid in
20 quarterly installments. As of September 30, 2010, total long-term debt
including current maturities aggregated $19.4 million.





In
January 2010, the board of directors authorized an approximate 100% increase in
the annual dividend to $0.26 per share. The next quarterly dividend of $0.065
per share will be paid on January 14, 2011 to shareholders of record on December
31, 2010. Dividends paid, including dividends paid once per year to
noncontrolling stockholders of Inter Parfums, S.A., aggregated $7.0 million for
the nine months ended September 30, 2010. The cash dividends for 2010 are not
expected to have any significant impact on our financial
position.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





We believe that funds provided by or
used in operations can be supplemented by our present cash position and
available credit facilities, so that they will provide us with sufficient
resources to meet all present and reasonably foreseeable future operating
needs.





Inflation
rates in the U.S. and foreign countries in which we operate did not have a
significant impact on operating results for the nine month period ended
September 30, 2010.





Contractual
Obligations





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





Contractual Obligations
                    
                    Payments due by periodTotal
                    
                    
                    Less than
                      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.





Item
      3:
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





General





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


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28


INTER
PARFUMS, INC. AND SUBSIDIARIES





Foreign
Exchange Risk Management





We
periodically enter into foreign currency forward exchange contracts to hedge
exposure related to receivables denominated in a foreign currency and to manage
risks related to future sales expected to be denominated in a currency other
than our functional currency. We enter into these exchange contracts for periods
consistent with our identified exposures. The purpose of the hedging activities
is to minimize the effect of foreign exchange rate movements on the receivables
and cash flows of 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 the
dollar began to weaken during the third quarter of 2010 and in an effort to
protect our gross margin for the remainder of 2010, we entered into foreign
currency forward exchange contracts to hedge approximately 90% of our fourth
quarter 2010 European based sales expected to be invoiced in U.S. dollars. At
September 30, 2010, we had foreign currency contracts in the form of forward
exchange contracts in the amount of approximately U.S. $57 million and GB
pounds 3 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.





Interest
Rate Risk Management





We
mitigate interest rate risk by monitoring interest rates, and then determining
whether fixed interest rates should be swapped for floating rate debt, or if
floating rate debt should be swapped for fixed rate debt. We entered into an
interest rate swap in September 2007 on €22 million of debt, effectively
exchanging 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 September 30, 2010 was €8.8 million. This derivative instrument is recorded
at fair value and changes in fair value are reflected in the accompanying
consolidated statements of income.


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INTER
PARFUMS, INC. AND SUBSIDIARIES





Item
      4.
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer have reviewed and evaluated the
effectiveness of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rule 13a-15(e)) as of the end of the period
covered by this quarterly report on Form 10-Q (the “Evaluation
Date”).  Based on their review and evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that as of the Evaluation
Date our Company's disclosure controls and procedures were
effective.





Changes
in Internal Control Over Financial Reporting


There has
been no change in our internal control over financial reporting (as defined in
Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the
quarterly period covered by this report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.





Part
II.  Other Information





Items 1. Legal Proceedings,1A.Risk Factors, 2. Unregistered Sales
of Equity Securities and Use of Proceeds, 3. Defaults Upon Senior Securitiesand 5. Other
Information, are omitted as they are either not applicable or have been
included in Part
I.





Item
6.    Exhibits.





The following documents are filed
herewith:





Exhibit No.
                
                Description
                
                Page
                  Number10.143
                
                Collaboration
      Agreement between Clarins U.S.A., Inc., and Interparfums Luxury Brands
      Inc.(Certain
      confidential information in this Exhibit 10.143 was omitted and filed
      separately with the Securities and Exchange Commission with a request for
      confidential treatment by Inter Parfums, Inc).
                
                3510.144
                
                Contrat
      de Bail Commercialet GEMFI and
      Inter Parfums, S.A. - French original - (Certain confidential information
      in this Exhibit 10.144 was omitted and filed separately with the
      Securities and Exchange Commission with a request for confidential
      treatment by Inter Parfums, Inc.).
                
                5210.144.1
                
                Commercial
      Lease Agreement between GEMFI and Inter Parfums, S.A. - English
      translation- (Certain confidential information in this Exhibit 10.144.1
      was omitted and filed separately with the Securities and Exchange
      Commission with a request for confidential treatment by Inter Parfums,
      Inc.).
                
                9831.1
                
                Certifications
      required by Rule 13a-14(a) of Chief Executive Officer
                
                14431.2
                
                Certifications
      required by Rule 13a-14(a) of Chief Financial Officer
                
                14532.1
                
                Certification
      required by Section 906 of the Sarbanes-Oxley Act of Chief Executive
      Officer
                
                14632.1
                
                Certification
      required by Section 906 of the Sarbanes-Oxley Act of Chief Financial
      Officer
                
                147





Page
30




INTER
PARFUMS, INC. AND SUBSIDIARIES
  SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized on the 9th
day of November 2010.





INTER
      PARFUMS, INC.By:
              /s/ Russell GreenbergExecutive
      Vice President andChief
      Financial Officer


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31