EDGAR 10-K Filing

Company CIK: 822663
Filing Year: 2022
Filename: 822663_10-K_2022_0001753926-22-000273.json

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ITEM 1. BUSINESS
Item 1. Business
General Business Development
Founded in 1982, we operate in the fragrance business, and manufacture, market and distribute a wide array of prestige fragrance, and fragrance related products. Our worldwide headquarters and the office of our wholly-owned United States subsidiaries, Jean Philippe Fragrances, LLC and Inter Parfums USA, LLC, are located at 551 Fifth Avenue, New York, New York 10176, and our telephone number is 212.983.2640. We also have a newly formed, wholly-owned Italian subsidiary, Interparfums Italia srl.
Our consolidated wholly-owned subsidiary, Inter Parfums Holdings, S.A., and its majority-owned subsidiary, Interparfums SA, maintain executive offices at 4 Rond Point des Champs Elysees, 75008 Paris, France. Our telephone number in Paris is 331.5377.0000. Interparfums SA is the sole owner of two (2) distribution subsidiaries: Inter Parfums srl for Italy and Interparfums Luxury Brands, Inc., a Delaware corporation, for distribution of prestige brands in the United States. Interparfums SA is also the majority owner of Parfums Rochas Spain, SL, a Spanish limited liability company, which specializes in the distribution of Rochas fragrances. In addition, Interparfums SA is also the sole owner of Interparfums (Suisse) SARL, a company formed to hold and manage certain brand names, and Interparfums Asia Pacific Pte., Ltd., an Asian sales and marketing office.
Our common stock is listed on The Nasdaq Global Select Market under the trading symbol “IPAR”. The common shares of our subsidiary, Interparfums SA, are traded on the Euronext Exchange.
The Securities and Exchange Commission (“SEC”) maintains an internet site at http://www.sec.gov that contains financial reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We maintain our internet website at www.interparfumsinc.com, which is linked to the SEC internet site. You can obtain through our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, interactive data files, current reports on Form 8-K, beneficial ownership reports (Forms 3, 4 and 5) and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC.
The following information is qualified in its entirety by and should be read together with the more detailed information and audited financial statements, including the related notes, contained or incorporated by reference in this report.
General
We operate in the fragrance business and manufacture, market and distribute a wide array of fragrance and fragrance related products. We manage our business in two segments, European based operations and United States based operations. Certain prestige fragrance products are produced and marketed by our European operations through our 27% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 73% of Interparfums SA shares trade on the NYSE Euronext.
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 product for us and deliver them to one of our distribution centers.
Our fragrance products focus on prestige brands, each with a devoted following. By concentrating in markets where the brands are best known, we have had many successful product launches. We typically launch new fragrance families for our brands every year or two, and more frequently seasonal and limited edition fragrances are introduced as well.
The creation and marketing of each product family is intimately linked with the brand’s name, its past and present positioning, customer base and, more generally, the prevailing market atmosphere. Accordingly, we generally study the market for each proposed family of fragrance products for almost a full year before we introduce any new product into the market. This study is intended to define the general position of the fragrance family and more particularly its scent, bottle, packaging and appeal to the buyer. In our opinion, the unity of these four elements of the marketing mix makes for a successful product.
As with any business, many aspects of our operations are subject to influences outside our control. We believe we have a strong brand portfolio with global reach and potential. As part of our strategy, we plan to continue to make investments behind fast-growing markets and channels to grow market share. We discuss in greater detail risk factors relating to our business in Item 1A of this Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the reports that we file from time to time with the SEC.
European Operations
We produce and distribute our fragrance products primarily under license agreements with brand owners, and fragrance product sales through our European operations represented approximately 75% of net sales for 2021. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T. Dupont and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world.
United States Operations
Prestige brand fragrance products are also produced and marketed through our United States operations, and represented approximately 25% of net sales for the year ended December 31, 2021. These fragrance products are sold under trademarks owned by us or pursuant to license or other agreements with the owners of brands, which include Abercrombie & Fitch, Anna Sui, Dunhill, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Ungaro.
Recent Developments
Salvatore Ferragamo
In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license is effective from October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.
With respect to the management and coordination of activities related to the license agreement, the Company will operate through a wholly-owned Italian subsidiary Interparfums Italia srl, which was acquired from Salvatore Ferragamo on October 1, 2021.
Emanuel Ungaro
In October 2021, we also entered into a 10-year exclusive global licensing agreement a with a 5-year optional term subject to certain conditions, with Emanuel Ungaro Italia srl, for the creation, development and distribution of fragrances and fragrance-related products, under the Emanuel Ungaro brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.
Donna Karan and DKNY
In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2023.
French Tax Settlement
The French authorities had claimed that the existence of Inter Parfums (Suisse) Sarl, a wholly-owned subsidiary of Interparfums SA, our majority owned Paris-based subsidiary, does not, in and of itself, constitute a permanent establishment, and therefore Interparfums SA should pay French taxes on all or part of the profits of that entity.
In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby Interparfums SA paid in December 2021, €2.5 million (approximately $2.9 million) effectively lowering the Lanvin brand royalty rate charged by Inter Parfums (Suisse) Sarl for the periods from 2017 through 2020. Interparfums SA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from Inter Parfums (Suisse) Sarl to Interparfums SA by December 31, 2025.
Land and Building Acquisition - Future Headquarters in Paris
In April 2021, Interparfums SA completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.
The $142 million purchase price includes the complete renovation of the site. As of December 31, 2021, $136.1 million of the purchase price, including approximately $3.1 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet as of December 31, 2021. Approximately $8.8 million of cash held in escrow is included in other assets on the accompanying consolidated balance sheet as of December 31, 2021. In addition, the Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.
The acquisition was financed by a 10-year €120 million (approximately $139 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate of 2%.
This acquisition is a unique opportunity with benefits to be realized over the long-term. Owning our corporate headquarters in a very prestigious part of Paris, and customizing the complex for our European operations, will enhance our reputation, provide an exceptional work environment, as well as a welcoming and productive atmosphere for our suppliers, distributors and licensors.
Anna Sui Corp.
In January 2021, we renewed our license agreement with Anna Sui Corp. for the creation, development and distribution of fragrance products through December 31, 2026, without any material changes in terms and conditions. Our initial 10-year license agreement with Anna Sui Corp. was signed in 2011. The renewal agreement also allows for an additional 5-year term through 2031 at the option of the Company.
Rochas Fashion
Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value.
S.T. Dupont
In January 2021, we renewed our license agreement with S.T. Dupont for the creation, development and distribution of fragrance products through December 31, 2022, without any material changes in terms and conditions. Our initial 11-year license agreement with S.T. Dupont was signed in June 1997 and had previously been extended through December 31, 2021.
Origines-Parfums
In June 2020, the Company through its 73% owned subsidiary, Interparfums SA, and Divabox SAS (“Divabox”), owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired a 25% of Divabox capital for $14.0 million, through a capital increase. In connection with the acquisition, the Company entered into a $13.4 million term loan, which was repaid in full in February 2021. As a website of reference for all selective fragrance brands, Origines-parfums is a key French player in the online beauty market recognized for its customer relationship expertise. This agreement should enhance the introduction of dedicated fragrance lines and products designed to address a specific consumer demand for this distribution channel and accelerate our digital development.
Moncler
In June 2020, the Company entered into an exclusive, 5-year worldwide license agreement with a potential 5-year extension with Moncler for the creation, development and distribution of fragrances under the Moncler brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. Moncler was founded at Monestier-de-Clermont, Grenoble, France, in 1952 and is currently headquartered in Italy. Over the years, the brand has combined style with constant technological research assisted by experts in activities linked to the world of the mountain. The Moncler outerwear collections marry the extreme demands of nature with those of city life. Following a successful prelaunch in late 2021, our first fragrance launch for the Moncler brand is rolling out in the first quarter of 2022.
Fragrance Products
General
We are the owner of the Rochas brand, and the Lanvin brand name and trademark for our class of trade. In addition, we have built a portfolio of licensed prestige brands whereby we produce and distribute our prestige fragrance products under license agreements with brand owners. Under license agreements, we obtain the right to use the brand name, create new fragrances and packaging, determine positioning and distribution, and market and sell the licensed products, in exchange for the payment of royalties. Our rights under license agreements are also generally subject to certain minimum sales requirements and advertising expenditures as are customary in our industry.
As a percentage of net sales, product sales for the Company’s largest brands were as follows:
Year Ended December 31,
Montblanc
%
%
%
Jimmy Choo
%
%
%
Coach
%
%
%
GUESS
%
%
%
Our licenses expire on the following dates:
Brand Name
Expiration Date
Abercrombie & Fitch
Extends until either party terminates on 3 years’ notice
Anna Sui
December 31, 2026, plus one 5-year optional term
bebe Stores
June 30, 2023
Boucheron
December 31, 2025, plus a 5-year optional term if certain sales targets are met
Coach
June 30, 2026
Donna Karan
December 31, 2032*, plus a 5-year optional term if certain sales targets are met
Dunhill
September 30, 2023
Emanuel Ungaro
December 31, 2031, plus a 5-year optional term if certain sales targets are met
French Connection
December 31, 2027, plus a 10-year optional term if certain sales targets are met
Graff
December 31, 2026, plus 3 optional 3-year terms if certain sales targets are met
GUESS
December 31, 2033
Hollister
Extends until either party terminates on 3 years’ notice
Kate Spade
June 30, 2030
Jimmy Choo
December 31, 2031
Karl Lagerfeld
October 31, 2032
MCM
December 31, 2030, plus 4 option years
Moncler
December 31, 2026, plus a 5-year optional term if certain conditions are met
Montblanc
December 31, 2025
Oscar de la Renta
December 31, 2031, plus a 5-year optional term if certain sales targets are met
Repetto
December 31, 2024
Salvatore Ferragamo
December 31, 2031, plus a 5-year optional term if certain sales targets are met
S.T. Dupont
December 31, 2022
Van Cleef & Arpels
December 31, 2024
* License effective date is July 1, 2022.
In connection with the acquisition of the Lanvin brand names and trademarks for our class of trade, we granted the seller the right to repurchase the brand names and trademarks on July 1, 2027 for €70 million (approximately $79 million) in accordance with an amendment signed in 2021. In connection with such amendment, we also granted a license to the seller to develop and sell cosmetics other than fragrances.
Fragrance Portfolio
Abercrombie& Fitch - In 2014, we entered into a worldwide license to create, produce and distribute new fragrances and fragrance related products under the Abercrombie & Fitch brand name. We distribute these fragrances in specialty stores, department stores and duty free shops, and in the U.S., in select Abercrombie & Fitch retail stores. Our initial men’s scent, First Instinct was launched in 2016 followed by a women’s version in 2017. Since that time, we unveiled several new fragrances most notably the Authentic and Away duos as well as brand extensions.
Abercrombie & Fitch Co. is a leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids. The iconic Abercrombie & Fitch brand was born in 1892 and aims to make every day feel as exceptional as the start of a long weekend.
Anna Sui-In 2011, we entered into an exclusive worldwide fragrance license to create, produce and distribute fragrances and fragrance related products under the Anna Sui brand. Anna Sui is one of New York’s most accomplished fashion designers known for creating contemporary clothing inspired by vintage style that capture the brand’s very sweet feminine girly aspect, combined with touch hipness and rock-and-roll. Today, Anna Sui has over 50 boutiques and her collection and products are sold in 300 stores in over 30 countries, but her brand is by far most popular and well received throughout Asia. Over the past decade, we have worked in partnership Anna Sui and her creative team to build upon the brand’s customer appeal and develop and market a family of fragrances including Fantasia, Sui Dreams and the newest scent, Sky, which was ranked as the second best perfume launch of 2021 by WWD Japan.
Boucheron- In 2010, we entered into an exclusive 15-year worldwide license agreement for the creation, development and distribution of fragrances under the Boucheron brand. For over a century, since becoming the first jeweler to open a boutique on Place Vendôme in 1893, Boucheron has embodied very high-end creation, luxury and French know-how. The mysterious and seductive collection of Boucheron fragrances unquestionably continues this prestigious.
Boucheron legacy scents, Femme and Homme, and the legendary Jaipur perfume form the foundation of brand sales. Our team has enriched the portfolio with Quatre for men and women, along with several special editions, a growing collection of unique scents aptly named, La Collection, and Serpent Boheme. We have a new Boucheron men’s fragrance in the works for 2022, as well as still another addition to our Boucheron Collection. Currently Boucheron operates through over 66 boutiques worldwide as well as an e-commerce site.
Coach- In 2015, we entered into an exclusive 11-year worldwide license to create, produce and distribute new men’s and women’s fragrances and fragrance related products under the Coach brand name. We distribute these fragrances globally to department stores, specialty stores and duty free shops, as well as in Coach retail stores.
Founded in 1941, Coach is the ultimate American leather goods brand and has always been renowned for its quality craftsmanship. Now the luxury brand that best embodies New York’s casual elegance, Coach also offers collections of ready-to-wear, lifestyle accessories and fragrances. Its contemporary approach to luxury combines authenticity and innovation, exported worldwide thanks to its thoroughly American non-conformist vision.
In 2016, we launched our first Coach fragrance, a women’s signature scent, and in 2017, a men’s scent, both of which became and remain top selling prestige fragrances. Subsequent flankers and extensions have enlarged the Coach fragrance enterprise as have entirely new collections, including Coach Dreams which debuted in early 2020, and its sister scent, Dreams Sunset, debuting in 2021. For 2022, we have a new pillar for men unveiling, and new edition to the Coach women’s line. Coach is part of the Tapestry house of brands.
Donna Karan- In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands, which takes effect on July 1, 2022. The Donna Karan and DKNY brands, which draw from the energy and attitude of New York City, are powerhouses in fashion and fragrance. These global lifestyle brands will make excellent additions to our portfolio. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. Upon joining our portfolio, these brands will rank among our largest. We are planning to launch new fragrances under these brands in 2023. Donna Karan and DKNY are part of the G-III house of brands.
Dunhill-Since 2012, we have been the exclusive fragrance licensee whereby we create, produce and distribute fragrances and fragrance related products under the Dunhill brand.
Founded by Alfred Dunhill in 1893 in London, the brand evolved from a leather harness business to creating accessories for the first motorists. For over 100 years the brand has been recognized as the destination for leather and men’s luxury goods. Dunhill today continues to create exquisitely designed luxury products - fashion and ingenious accessories for the modern man. The exquisite products are made with the highest level of craftsmanship for the most discerning clients.
The Dunhill fragrance family encompasses a wide array of men’s scents and related brand extensions including Century, Icon and Driven. A new fragrance dynasty was born with the Dunhill Signature Collection which since its debut in 2019 has added several new members. Dunhill is currently owned by Richemont Holdings Limited.
Emanuel Ungaro- In October 2021, we also entered into a 10-year exclusive global licensing agreement with Emanuel Ungaro for the creation, development and distribution of fragrances and fragrance-related products, under the Emanuel Ungaro brand. Founded in 1965 in Paris, the house Emanuel Ungaro is an icon of French refinement and haute couture. Its unique style is expressed through unquestioning sensuality, purity of silhouette, flamboyant prints, and exquisite attention to details. Season after season, Emanuel Ungaro dared to be different, combining unexpected yet sensual clashes of bright colors and prints with beautiful draping. Today Ungaro fragrances uphold the same values of audacity and elegance, and the brand is best known and most prized internationally, and such presence will remain our sales focus as we continue to produce and distribute the brand’s legacy scents, notably Diva. Beginning in 2023, we plan to unveil a new fragrance incorporating disruptive design, driven by creativity, sustainability and authenticity.
Graff- In 2018, we entered into an exclusive, 8-year worldwide license agreement with London-based Graff for the creation, development and distribution of fragrances under the Graff brand. The 8-year agreement has three 3-year automatic renewal options, potentially extending the license until December 31, 2035.
Since Laurence Graff OBE founded the company in 1960, Graff has been dedicated to sourcing and crafting diamonds and gemstones of untold beauty and rarity and transforming them into spectacular pieces of jewelry that move the heart and stir the soul. Throughout its rich history, Graff has become the world leader for diamonds of rarity, magnitude and distinction. Each jewelry creation is designed and manufactured in Graff’s London atelier, where master craftsmen employ techniques to emphasize the beauty of each individual stone. The company remains a family business, overseen by Francois Graff, Chief Executive Officer.
For Graff, a six-scent collection for women, Lesedi La Rona, debuted exclusively at Harrods beginning in March 2020, which we further extended through 2020 as a result of the mandatory store closings throughout that year. In 2021, a select market rollout began in the Middle East, with limited luxury distribution to only the most exclusive, upmarket retail outlets. In 2021, we added two new scents for the Lesedi La Rona collection.
GUESS- In 2018, we entered into an exclusive, 15-year worldwide license agreement with GUESS?, Inc. for the creation, development and distribution of fragrances under the GUESS brand.
Established in 1981, GUESS began as a jeans company and has since successfully grown into a global lifestyle brand. GUESS?, Inc. designs, markets, distributes and licenses a lifestyle collection of contemporary apparel, denim, handbags, watches, footwear and other related consumer products. GUESS products are distributed through branded GUESS stores as well as better department and specialty stores around the world.
We began selling GUESS legacy scents in 2018. In 2019 the GUESS brand quickly became the largest within our U.S. operations, with legacy fragrances dominating the sales mix. In 2019, we began shipments of 1981 Los Angeles and Seductive Noir, both flankers of established scents, which accelerated brand growth.
Nearly three years in the making, our first new blockbuster scent, Bella Vita, debuted for the GUESS brand both domestically and internationally in 2021. In addition, Effect, a new men’s grooming line and fragrance collection was launched in 2021. Uomo, a new men’s fragrance for GUESS, comes to market in 2022.
Hollister- In 2014, we entered into a worldwide license to create, produce and distribute new fragrances and fragrance related products under the Hollister brand name. We distribute these fragrances in specialty stores, department stores and duty free shops, as well as select Hollister retail stores in the U.S. In 2016 we launched our first men’s and women’s fragrance duo, Wave which led to flankers and extensions as did subsequent fragrance families Festival and Canyon Escape.
The quintessential apparel brand of the global teen consumer, Hollister Co. celebrates the liberating spirit of the endless summer inside everyone. Inspired by California’s laidback attitude, Hollister’s clothes are designed to be lived in and made your own, for wherever life takes you.
Jimmy Choo- In 2009, we entered into an exclusive 12-year worldwide license agreement for the creation, development and distribution of fragrances and fragrance related products under the Jimmy Choo brand, and in 2017, we extended the license agreement which now runs through December 31, 2031.
Jimmy Choo encompasses a complete luxury accessories brand. Women’s shoes remain the core of the product offering, alongside handbags, small leather goods, scarves, eyewear, belts, fragrance and men’s shoes. Jimmy Choo has a global store network encompassing more than 200 stores and is present in the most prestigious department and specialty stores worldwide. Jimmy Choo is part of the Capri Holdings Limited luxury fashion group.
Our initial Jimmy Choo fragrance was launched in 2011, a signature scent for women. In the decade that followed, Jimmy Choo has grown to become our second largest brand with new pillars and flankers debuting regularly, both for men and women. Our newest women’s fragrance, I Want Choo, was launched in 2021 and for 2022, we have a new Jimmy Choo Man flanker as well as one for I Want Choo.
Karl Lagerfeld- In 2012, we entered into a 20-year worldwide license agreement with Karl Lagerfeld B.V., the internationally renowned haute couture fashion house, to create, produce and distribute fragrances under the Karl Lagerfeld brand.
Under the creative direction of the late Karl Lagerfeld, one of the world’s most influential and iconic designers, the Lagerfeld Portfolio represents a modern approach to distribution, an innovative digital strategy and a global 360 degree vision that reflects the designer’s own style and soul. Karl Lagerfeld created the first fragrance that bears his name in 1978, and that legacy has expanded to include several growing multi-scent collection, Les Parfums Matières and most recently, Karl Cities, a new collection featuring entries for New York, Paris, Hamburg and Tokyo. was unveiled.
Kate Spade- In 2019, we entered into an exclusive, 11-year worldwide license agreement with Kate Spade to create, produce and distribute new perfumes and fragrance related products under the Kate Spade brand which we distribute globally to department and specialty stores and duty free shops, as well as in Kate Spade retail stores. Our first original scent, Kate Spade New York, debuted in January 2021 and for 2022, we are adding a flanker to our line.
Since its launch in 1993 with a collection of six essential handbags, Kate Spade has always stood for optimistic femininity. Today, the brand is a global life and style house with handbags, ready-to-wear, jewelry, footwear, gifts, home décor and more. Polished ease, thoughtful details and a modern, sophisticated use of color-Kate Spade’s founding principles define a unique style synonymous with joy. Under the vision of its creative director, the brand continues to celebrate confident women with a youthful spirit. Kate Spade is part of the Tapestry house of brands.
Lanvin- In 2007, we acquired the worldwide rights to the Lanvin brand names and international trademarks listed in Class 3, our class of trade. A synonym of luxury and elegance, the Lanvin fashion house, founded in 1889 by Jeanne Lanvin, expanded into fragrances in the 1920s.
Lanvin fragrances occupy an important position in the selective distribution market in France, Eastern Europe and Asia, and we have several lines currently in distribution, including Éclat d’Arpège, Lanvin L’Homme, Jeanne Lanvin, Modern Princess and A Girl in Capri. The Éclat d’Arpège line accounts for almost 50% of brand sales. Les Fleurs de Lanvin, a new floral fragrance collection, was released during the second half 2021. For 2022, we have a new extension unveiling for our Éclat d’Arpège line.
MCM- In 2019, we entered into an exclusive, 10-year worldwide license agreement with German luxury fashion house MCM for the creation, development and distribution of fragrances under the MCM brand. The agreement has a 4-year automatic renewal option, potentially extending the license until December 31, 2034.
MCM is a luxury lifestyle goods and fashion house founded in 1976 with an attitude defined by the cultural Zeitgeist and its German heritage with a focus on functional innovation, including the use of cutting-edge techniques. Today, through its association with music, art, travel and technology, MCM embodies the bold, rebellious and aspirational. Always with an eye on the disruptive, the driving force behind MCM centers on revolutionizing classic design with futuristic materials. MCM’s millennial and Gen Z audience is genderless, ageless, empowered and unconstrained by rules and boundaries.
Following through on our plan to develop extraordinary fragrances that capture the creative spirit of MCM, our first new fragrance, MCM, was released during the first quarter of 2021 to great, and somewhat unexpected success. A flanker is in the pipeline for 2022 along with a limited edition called Graffiti. Our distribution strategy encompasses MCM stores, high-end department stores and prestige beauty retailers, with a geographic focus on Asia, the Americas and Europe.
Moncler- In June 2020, we entered into an exclusive, 5-year worldwide license agreement with a potential 5-year extension with Moncler for the creation, development and distribution of fragrances under the Moncler brand. Moncler was founded at Monestier-de-Clermont, Grenoble, France, in 1952 and is currently headquartered in Italy. Over the years, the brand has combined style with constant technological research assisted by experts in activities linked to the world of the mountain. The Moncler outerwear collections marry the extreme demands of nature with those of city life.
Our first fragrance for the Moncler brand has a revolutionary LED design, and the flask-shaped bottles of Moncler Pour Femme and Moncler Pour Homme forge a powerful bond with the House Moncler’s alpine roots and pioneering spirit. This playful and unique innovation enables its owner to write a personalized note that scrolls in red letters on the screen of the mirror bottle. Our first fragrance was pre-launched in 250 select outlets in the second half of 2021, and was met with an excellent response. A full rollout to approximately 3,000 doors began in early 2022.
Montblanc-In 2010, we entered into an exclusive license agreement to create, develop and distribute fragrances and fragrance related products under the Montblanc brand. In 2015, we extended the agreement which now runs through December 31, 2025.
Montblanc has achieved a world-renowned position in the luxury segment and has become a purveyor of exclusive products, which reflect today’s exacting demands for timeless design, tradition and master craftsmanship. Through its leadership positions in writing instruments, watches and leather goods, promising growth outlook in women’s jewelry, international retail footprint through its network of more than 600 boutiques, high standards of product design and quality, Montblanc has grown to be our largest fragrance brand.
In 2011, we launched our first new Montblanc fragrance, Legend, which quickly became our best-selling men’s line and has given rise to a plethora of flankers including Legend Night and Legend Spirit. In 2014, we launched our second men’s line, Emblem and like its predecessor, Emblem gave rise to brand extensions. In 2019, we unveiled Montblanc Explorer, which has added flankers, most recently Montblanc Explorer Ultra Blue. The Legend continues, as in 2022, we will be introducing a new flanker, Montblanc Legend Red.
Oscar de la Renta- In 2013, we entered into an exclusive worldwide license to create, produce and distribute fragrances and fragrance related products under the Oscar de la Renta brand. In 2019, the agreement was extended through December 31, 2031, with an additional five-year option potentially extending the agreement through December 31, 2036. After taking over distribution of the brand’s legacy fragrances in 2014, we introduced Extraordinary the following year. Oscar de la Renta Bella Blanca debuted in 2018, followed by Bella Rosa and Bella Essence and soon to join them, Bella Bouquet. Debuting in 2021 was an entirely new fragrance pillar, Alibi which will welcome a sister scent in 2022.
Oscar de la Renta is one of the world’s leading luxury goods firms. The New York-based company was established in 1965, and encompasses a full line of women’s accessories, bridal, children’s wear, fragrance, beauty and home goods, in addition to its internationally renowned signature women’s ready to wear collection. Oscar de la Renta products are sold globally in fine department and specialty stores, www.oscardelarenta.com and through wholesale channels.
Rochas- In 2015, we acquired the Rochas brand from The Procter & Gamble Company. Founded by Marcel Rochas in 1925, the brand began as a fashion house and expanded into perfumery in the 1950s under Hélène Rochas’ direction.
Our first new fragrance for Rochas, Mademoiselle Rochas, had a successful launch in 2017 in its traditional markets of France and Spain. Over the next few years, we debuted flankers for legacy scents Eau de Rochas and Mademoiselle Rochas, plus others and in 2018 we launched our first new men’s line, Rochas Moustache. Byzance debuted in early 2020 and Rochas Girl in 2021, and the first flanker for both will come to market in 2022 as well as one for L’Homme Rochas.
Salvatore Ferragamo- In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide 10-year license was granted for the production and distribution of Ferragamo brand perfumes, with a 5-year optional term if certain conditions are met. Salvatore Ferragamo S.p.A. is the parent company of the Salvatore Ferragamo Group, one of the world’s leaders in the luxury industry and whose origins date back to 1927. Named after its founder, the brand still represents and lives by the original values of Salvatore Ferragamo.The uniqueness and exclusivity of its creations, along with the perfect blend of style, creativity and innovation enriched by the quality and superior craftsmanship of the ‘Made in Italy’ tradition, have always been the hallmarks of the Salvatore Ferragamo’s products notably shoes, leather goods, apparel, silk products and other accessories for men and women.
The current fragrance lineup includes Storie di Seta, a new collection of four refined, luminous olfactory works of art. Each fragrance is made with rare, sustainable raw materials, and can be worn alone or in combination, creating a personalized multifaceted scent. The genderless collection is comprised of four fragrances in four colors. Four exclusive motifs drawn from the House’s textile heritage adorn each flacon. Established scents in the Ferragamo portfolio include Ferragamo, a collection of fragrances for men, Signoria, a collection of fragrances for women, the Tuscan Creations series, the Amo series and the Uomo series.
S.T. Dupont- In 1997, we signed an exclusive worldwide license agreement with S.T. Dupont for the creation, manufacture and distribution of S.T. Dupont fragrances. The license agreement had been renewed several times and is now renewed annually, without any material changes in terms and conditions. S.T. Dupont is a French luxury goods house founded in 1872, which is known for its fine writing instruments, lighters and leather goods. S.T. Dupont fragrances include S.T. Dupont pour Femme, S.T. Dupont pour Homme, Pure and S.T. Dupont Collection.
Van Cleef & Arpels- In 2018, we renewed its license agreement for an additional six years with Van Cleef & Arpels for the creation, development, and distribution of fragrance products through December 2024. Our initial 12-year license agreement with Van Cleef & Arpels was signed in 2006.
Van Cleef & Arpels fragrances in current distribution include: First and Collection Extraordinaire. Sales of the Collection Extraordinaire line have experienced continued growth since its debut. We continue to introduce new additions to the Van Cleef & Arpels Collection Extraordinaire assortment annually, including Oud Blanc, in 2020 and Réve de Matiere in 2021. Patchouli Blanc is the new additions to the Collection Extraordinaire, scheduled for 2022. Founded in 1896, Van Cleef & Arpels is a French luxury jewelry company owned by Richemont Holdings Limited.
Business Strategy
Focus on prestige beauty brands. Prestige beauty brands are expected to contribute significantly to our growth. We focus on developing and launching quality fragrances utilizing internationally renowned brand names. By identifying and concentrating in the most receptive market segments and territories where our brands are known, and executing highly targeted launches that capture the essence of the brand, we have had a history of successful launches. Certain fashion designers and other licensors choose us as a partner, because our Company’s size enables us to work more closely with them in the product development process as well as our successful track record.
Grow portfolio brands through new product development and marketing. We grow through the creation of fragrance family extensions within the existing brands in our portfolio. Every year or two, we create a new family of fragrances for each brand in our portfolio. We frequently introduce seasonal and limited edition fragrances as well. With new introductions, we leverage our ability and experience to gauge trends in the market and further leverage the brand name into different product families in order to maximize sales and profit potential. We have had success in introducing new fragrance families (sub-brands, flanker brands or flankers) within our brand franchises. Furthermore, we promote the performance of our prestige fragrance operations through knowledge of the market, detailed analysis of the image and potential of each brand name, and a highly professional approach to international distribution channels.
Continue to add new brands to our portfolio, through new licenses or acquisitions. Prestige brands are the core of our business, and we intend to add new prestige beauty brands to our portfolio. Over the past 30 years, we have built our portfolio of well-known prestige brands through acquisitions and new license agreements. We intend to further build on our success in prestige fragrances and pursue new licenses and acquire new brands to strengthen our position in the prestige beauty market. To that end, in 2020, we signed a new license for the Moncler brand. We also acquired a minority interest in Divabox, which owns the Origines-parfums online platform. As a website of reference for all selective fragrance brands, Origines-parfums is a key French player in the online beauty market recognized for its customer relationship expertise. This acquisition enhances the introduction of dedicated fragrance lines and products designed to address a specific consumer demand for this distribution channel and accelerate our digital development. During 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. In 2021, we also entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. This exclusive license becomes effective on July 1, 2022. As of December 31, 2021, we had cash, cash equivalents and short-term investments of approximately $320 million, which we believe should assist us in entering new brand licenses or out-right acquisitions. We identify prestige brands that can be developed and marketed into a full and varied product families and, with our technical knowledge and practical experience gained over time, take licensed brand names through all phases of concept, development, manufacturing, marketing and distribution.
Expand existing portfolio into new categories. We selectively broaden our product offering beyond the fragrance category and offer other fragrance related products and personal care products under some of our existing brands. We believe such product offerings meet customer needs and further strengthen customer loyalty.
Continue to build global distribution footprint. Our business is a global business, and we intend to continue to build our global distribution footprint. In order to adapt to changes in the environment and our business, in addition to our arrangements with third party distributors globally, we are operating distribution subsidiaries or divisions in the major markets of the United States, France and Spain for distribution of prestige fragrances. We may look into future joint arrangements or acquire distribution companies within other key markets to distribute certain of our prestige brands. While building a global distribution footprint is part of our long-term strategy, we may need to make certain decisions based on the short-term needs of the business. We believe that in certain markets, vertical integration of our distribution network may be one of the keys to future growth of our Company, and ownership of such distribution should enable us to better serve our customers’ needs in local markets and adapt more quickly as situations may determine.
Production and Supply
The stages of the development and production process for all fragrances are as follows:
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Simultaneous discussions with perfume designers and creators (includes analysis of esthetic and olfactory trends, target clientele and market communication approach)
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Concept choice
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Produce mock-ups for final acceptance of bottles and packaging
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Receive bids from component suppliers (glass makers, plastic processors, printers, etc.) and packaging companies
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Choose suppliers
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Schedule production and packaging
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Issue component purchase orders
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Follow quality control procedures for incoming components; and
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Follow packaging and inventory control procedures.
Suppliers who assist us with product development include, but are not limited to:
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Independent perfumery design companies (Aesthete, Carré Basset, PI Design, Cent Degres)
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Perfumers (IFF, Givaudan, Firmenich, Robertet, Takasago, Mane) which create a fragrance consistent with our expectations and, that of the fragrance designers and creators
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Fillers (Voyant, CPFPI, Omega Packaging, Societe de Diffusion de Produits de Parfumerie, TSM Brands)
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Bottle manufacturers (Pochet du Courval, Verescence, Verreries Brosse, Bormioli Luigi, Stoelzle Masnières, Heinz), caps (Qualipac, ALBEA, RPC, Codiplas, LF Beauty, Texen Group, S.A.R.L. J3P SBG Packaging Group), Pumps (Silgan Dispensing Systems Thomaston Corp, Rexam) or boxes (Autajon, MMPP, Nortier, Draeger)
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Production specialists who carry out packaging (CCI, Edipar, Jacomo, Societe de Diffusion de Produits de Parfumerie, MF Productions, Biopack) or logistics (Bansard and Bolloré Logistics for storage, order preparation and shipment)
Suppliers’ accounts for our European operations are primarily settled in euro and for our United States operations, suppliers’ accounts are primarily settled in U.S. dollars. For our European operations components for our prestige fragrances are purchased from many suppliers around the world and are primarily manufactured in France.
For United States operations, components for our prestige fragrances are sourced from many suppliers around the world and are primarily manufactured in the United States. Additionally, we occasionally utilize third party manufacturers in France, China and Turkey.
Environmental and Social Governance
Both our U.S. operations and our European operations are good corporate citizens and take our responsibilities seriously. We comply with all applicable laws, rules and regulations in general, and in particular with regard to chemicals and hazardous materials. From procurement of components to distribution of finished products, we act as a good corporate citizen and monitor and comply with all legal requirements.
Interparfums SA, our European operations with their headquarters in Paris, has improved its rating in 2021 as the result of improvements in the 2021 Gaïa Index over the past three years:
Year
ESG Rating
This index assesses the Environmental and Social Governance (“ESG”) performance of the top small and medium enterprises for French companies with revenue between €150-500 million.
Interparfums SA also applies a comprehensive approach addressing issues of corporate, environmental and social responsibility and transparency. Interparfums SA complies with IS 22716, International Standards for Good Manufacturing Practices, with all aspects of the manufacturing process, including receiving of raw materials and packaging materials, production and quality control. In this regulatory environment, regular audit campaigns are carried out for all packaging plants by the quality department based on the ISO 22716 standard in place. The ultimate purpose of these audits is to ensure that packaging service providers maintain a good level of traceability for their activities. All plant activities were reviewed: receiving process for raw materials and packaging materials, manufacturing, packaging and quality controls. These reports demonstrated that Interparfums SA’s subcontractors comply with ISO 22716 Good Manufacturing Practices and in particular traceability requirements for all perfume production operations. It is also in compliance with EU directive entitled Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), which governs and regulates the safe use of chemicals. Although not a manufacturer, per se, Interparfums SA has taken the initiative and monitors its suppliers for compliance with REACH, and has commitments from each of them concerning “Substances of Very High Concern” as listed in appendix XIV of REACH. No supplier of Interparfums SA has advised it of any such hazardous materials in any of Interparfums products to date.
Interparfums SA monitors the outsourcing of the entire production process of its manufacturing partners with expertise and accountable leadership in their respective areas. These include producers of juice, glass, caps and cardboard boxes and packaging companies. We take environmental issues into account at each of these phases, and in particular regarding the choice of materials used for components, waste management and reducing the carbon footprint.
In addition, Interparfums SA has been equipped with a high environmental quality warehouse since 2011. Its supply chain and operations department is integrating a more “optimized eco-design” dimension into its product development process. This process will increase the use of more environmentally friendly materials, reduce weight and size of glass, cardboard and plastics, and replace certain materials with recycled or bio-sourced materials. Interparfums SA intends to build a comprehensive approach based upon the framework provided by the widely used UN Sustainable Development Goals. With these goals in mind, Interparfums SA has established a Corporate Social Responsibility (“CSR”) Executive Committee, which is currently working on a strategy in this area that will include 3 or 4 major issues and company related goals.
In the U.S. we are also a good corporate citizen. Like our French subsidiary, we are not a true manufacturer, but we regularly monitor our subcontractors, suppliers and fillers for their compliance. In addition, our subcontractors and fillers are subject to inspection and audit from our various licensors for compliance with all aspects of law. One of our largest pump manufacturers is the recipient of a 2021 Gold Medal from EcoVadis for Sustainability and a 2020 Bronze Medal from EcoVadis for its corporate social responsibility rating, and a large glass bottle manufacturer was awarded gold metals from EcoVadis for its corporate social responsibility rating two years in a row. In addition in 2021, a large glass bottle manufacturer received an “A” rating for leadership in corporate sustainability by a global environmental non-profit group, ranking ‘A’ for tackling water security and ‘A-’ for leading effort against climate change.
In our U.S. operations, we do not use any banned ingredients or components and use sustainable ingredients where practicable. Some componentry (glass/folding cartons) is also recyclable where practicable. For example, our Abercrombie & Fitch Away fragrance uses glass and folding cartons that are 100% recyclable, and the carton liner is 100% recyclable and biodegradable. We are also licensed to use the “Green Dot” logo on our packaging, and that licensing fee goes towards packaging recycling efforts of consumer goods. Lastly, our product development team works with our fragrance houses - all very sustainable in their own right - to incorporate sustainably sourced ingredients in the fragrance oils used.
In addition to our production operations complying with applicable law, our managers, supervisors and traffic coordinators in our New Jersey distribution center undergo the following training in order for us to comply with Dangerous Goods Regulations. Compliance requires training and certification to deal in hazardous materials to prevent damage to the environment. The two main certifications are:
International Maritime Dangerous Goods (IMDG) Dangerous Goods Training - 3 year Certification for Ocean Shipment and International Air Transport Association (IATA) Dangerous Goods Training - 2 year Certification for Global Air Shipments.
Further, our distribution center in New Jersey has in-rack sprinklers to accommodate our hazardous material products. Our fragrances, Class 9 - Consumer Commodity ID8000, are registered with American Chemistry Council, Inc. (known in the chemicals industry as Chemtrec). Chemtrec has a 24/7 hazardous materials emergency communications center, which provides immediate assistance for incidents involving hazardous materials of any kind.
Marketing and Distribution
Our products are distributed in over 120 countries around the world through a selective distribution network. For our international distribution, we either contract with independent distribution companies specializing in luxury goods or distribute prestige products through our distribution subsidiaries. In each country, we designate anywhere from one to three distributors on an exclusive basis for one or more of our name brands. We also distribute our products through a variety of duty free operators, such as airports and airlines and select vacation destinations.
As our business is a global one, we intend to continue to build our global distribution footprint. For distribution of brands within our European based operations we operate through our distribution subsidiaries or divisions in the major markets of the United States, France, Italy and Spain, in addition to our arrangements with third party distributors globally. Our third party distributors vary in size depending on the number of competing brands they represent. This extensive and diverse network together with our own distribution subsidiaries provides us with a significant presence in over 120 countries around the world.
Over 50% of our European based prestige fragrance net sales are denominated in U.S. dollars. We address 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.
The business of our European operations has become increasingly seasonal due to the timing of shipments by our distribution subsidiaries and divisions to their customers, which are weighted to the second half of the year.
For our United States operations, we distribute product to retailers and distributors in the United States as well as internationally, including duty free and other travel-related retailers. We utilize our in-house sales team to reach our third party distributors and customers outside the United States. In addition, the business of our United States operations has become increasingly seasonal as shipments are weighted toward the second half of the year.
Competition
The market for prestige fragrance products is highly competitive and sensitive to changing preferences and demands. The prestige fragrance industry is highly concentrated around certain major players with resources far greater than ours. We compete with an original strategy, regular and methodical development of quality fragrances for a growing portfolio of internationally renowned brand names.
Inventory
We purchase raw materials and component parts from suppliers based on internal estimates of anticipated need for finished goods, which enables us to meet production requirements for finished goods. We generally ship product to customers within 72 hours of the receipt of their orders. 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 or directly to one of those third party fillers, which manufacture the finished products for us and then deliver them to one of our distribution centers.
Product Liability
Our United States operations maintain product liability coverage in an amount of $10.0 million, and our European operations maintain product liability coverage in an amount of €20 million (approximately $22.7 million). Based upon our experience, we believe this coverage is adequate and covers substantially all of the exposure we may have with respect to our products. We have never been the subject of any material product liability claims.
Government Regulation
A fragrance is defined as a “cosmetic” under the Federal Food, Drug and Cosmetics Act. A fragrance must comply with the labeling requirements of this FDC Act as well as the Fair Packaging and Labeling Act and its regulations. In addition, various jurisdictions prohibit the use of certain ingredients in fragrances and cosmetics.
Our fragrance products that are manufactured or sold in Europe are subject to certain regulatory requirements of the European Union, such as Regulation number 1223/2009 on cosmetic products, and products sold in the United Kingdom are also subject to United Kingdom cosmetic regulation, but as of the date of this report, we have not experienced any material difficulties in complying with such requirements.
Trademarks
The market for our products depends to a significant extent upon the value associated with our trademarks and brand names. We have licenses or other rights to use, or own, the material trademark and brand name rights used in connection with the packaging, marketing and distribution of our major products both in the United States and in other countries where such products are principally sold. Therefore, trademark and brand name protection are important to our business. Although most of the brand names we license, use or own are registered in the United States and in certain foreign countries in which we operate, we may not be successful in asserting trademark or brand name protection. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and brand names may be substantial.
Under various license and other agreements, we have the right to use certain registered trademarks throughout the world for fragrance products. These registered trademarks include:
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Abercrombie & Fitch
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Anna Sui
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bebe
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Boucheron
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Coach
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Dunhill
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Emanuel Ungaro
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French Connection
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Graff
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GUESS
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Hollister
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Jimmy Choo
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Kate Spade
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Lily Aldridge
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Karl Lagerfeld
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MCM
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Moncler
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Montblanc
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Oscar de la Renta
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Salvatore Ferragamo
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S.T. Dupont
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Van Cleef & Arpels
In addition, we are the registered owner of several trademarks for fragrance and beauty products, including:
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Rochas
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Lanvin
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Intimate
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Aziza
Human Capital
As of January 1, 2022, we had 467 full-time employees worldwide. Of these, 298 are full-time employees of our European operations, with 120 employees engaged in sales activities and 178 in administrative, production and marketing activities. Our United States operations have 169 employees, and of these, 22 were engaged in sales activities and 149 in administrative, production and marketing activities. Other than for the employees of our new wholly-owned subsidiary, Interparfums Italia srl, we do not have collective bargaining agreements relating to any of our employees, and we believe the collective bargaining agreement for our employees of Interparfums Italia Srl will not have a material adverse effect on our operations. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment and, believe that our relationship with our employees is good.
Our employees are one of our most valuable assets, and fostering long-term relationships are beneficial to the continuity of our business. After experience and expertise in the respective fields of employment, we look for dedication and loyalty among our employees, as we believe having long-term staff members benefits our company. All of our executive officers have been with us for more than twenty years, and we have several senior and upper level staff members, who have also been with us long term. These long-term executives and employees believe that our company and their co-workers are an extended family. Their efforts and dedication are what allow our company to prosper.
The safety of our employees is of paramount importance to us. In the early stages of the COVID-19 pandemic we experienced brief closures at all of our locations, and adapted to working remotely. Upon reopening, we implemented prevention protocols to minimize the spread of COVID-19 in our workplaces. These protocols, which remain in place, are in compliance with the Centers for Disease Control guidelines and state requirements.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
You should carefully consider these material risk factors before you decide to purchase or sell shares of our common stock. These factors could cause our future results to differ materially from those expressed or implied in forward-looking statements made by us. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
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Fragrance Business, Brand Names and Intellectual Property
We are dependent upon the continuation and renewal of various licenses and other agreements for a significant portion of our sales, and the loss of one or more licenses or agreements could have a material adverse effect on us.
All of our rights relating to prestige fragrance brands, other than Lanvin and Rochas, are derived from licenses or other agreements from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses and other agreements on terms favorable to us. Each license or agreement is for a specific term and may have additional optional terms. Generally, each license is subject to us making required royalty payments (which are subject to certain minimums), minimum advertising and promotional expenditures and meeting minimum sales requirements. Other agreements are generally subject to meeting minimum sales requirements. Just as the loss of a license or other significant agreement may have a material adverse effect on us, a renewal on less favorable terms may also negatively impact us.
If we are unable to acquire or license additional brands or obtain the required financing for these agreements and arrangements, then the growth of our business could be impaired.
Our future expansion through acquisitions or new product license or distribution arrangements, if any, will depend upon the capital resources and working capital available to us. Further, we may be unable to obtain financing or credit that we may require for additional licenses, acquisitions or other transactions. We may be unsuccessful in identifying, negotiating, financing and consummating such acquisitions or arrangements on terms acceptable to us, or at all, which could hinder our ability to increase revenues and build our business. Just as the loss of a license or other significant agreement may have a material adverse effect on us, our failure to acquire rights to new brands may also negatively impact us.
We may engage in future acquisitions that we may not be able to successfully integrate or manage. These acquisitions may dilute our stockholders and cause us to incur debt and assume contingent liabilities.
We continuously review acquisition prospects that would complement our current product offerings, increase our size and geographic scope of operations or otherwise offer growth and operating efficiency opportunities. The financing, if available, for any of these acquisitions could significantly dilute our stockholders and/or result in an increase in our indebtedness. We may acquire or make investments in businesses or products in the future, and such acquisitions may entail numerous integration risks and impose costs on us, including:
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difficulties in assimilating acquired operations or products, including the loss of key employees from acquired businesses
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diversion of management’s attention from our core business
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adverse effects on existing business relationships with suppliers and customers
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risks of entering markets in which we have no or limited prior experience
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dilutive issuances of equity securities
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incurrence of substantial debt
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assumption of contingent liabilities
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incurrence of significant amortization expenses related to intangible assets and the potential impairment of acquired assets and
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incurrence of significant immediate write-offs.
Our failure to successfully complete the integration of any acquired business could have a material adverse effect on our business, financial condition and operating results.
Joint arrangements or strategic alliances in geographic markets in which we have limited, or no prior experience may expose us to additional risks.
We review, and from time to time may establish, arrangements and strategic alliances that we believe would complement our current product offerings, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. These business relationships may require us to rely on the local expertise of our partners with respect to market development, sales, local regulatory compliance and other matters. Further, there may be challenges with ensuring that such arrangements or strategic alliances implement the appropriate internal controls to ensure compliance with the various laws and regulations applicable to us as a U.S. public company. Accordingly, in addition to commercial and operational risk, these arrangements and strategic alliances may entail risks such as reputational risk and regulatory compliance risk. In addition, there can be no assurance that we will be able to identify suitable alliance or candidates, that we will be able to consummate any such alliances or arrangements on favorable terms, or that we will realize the anticipated benefits of entering into any such alliances or arrangements.
If we are unable to protect our intellectual property rights, specifically trademarks and brand names, our ability to compete could be negatively impacted.
The market for our products depends to a significant extent upon the value associated with trademarks and brand names that we license, use or own. We have licenses or other rights to use, or own the material trademark and brand name rights in connection with the packaging, marketing and distribution of our major products both in the United States and in other countries where such products are principally sold. Therefore, trademark and brand name protection are important to our business. Although most of the brand names we license, use or own are registered in the United States and in certain foreign countries in which we operate, we may not be successful in asserting trademark or brand name protection. In addition, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our trademarks and brand names may be substantial.
If our intangible assets, such as trademarks and licenses, become impaired, we may be required to record a significant non-cash charge to earnings which would negatively impact our results of operations.
Under United States generally accepted accounting principles, we review our intangible assets, including our trademarks and licenses, for impairment annually in the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate the carrying value of our intangible assets may not be fully recoverable. The carrying value of our intangible assets may not be recoverable due to factors such as reduced estimates of future cash flows, including those associated with the specific brands to which intangibles relate, or slower growth rates in our industry. Estimates of future cash flows are based on a long-term financial outlook of our operations and the specific brands to which the intangible assets relate. However, actual performance in the near-term or long-term could be materially different from these forecasts, which could impact future estimates and the recorded value of the intangibles. Any significant impairment to our intangible assets would result in a significant charge to earnings in our financial statements during the period in which the impairment is determined to exist.
The illegal distribution and sale by third parties of counterfeit versions of the Company’s products or the unauthorized diversion by third parties of the Company’s products could have an adverse effect on the Company’s revenues and a negative impact on the Company’s reputation and business.
Third parties may illegally distribute and sell counterfeit versions of the Company’s products. These counterfeit products may be inferior in terms of quality and other characteristics compared to the Company’s authentic products and/or the counterfeit products could pose safety risks that the Company’s authentic products would not otherwise present to consumers. Consumers could confuse counterfeit products with the Company’s authentic products, which could damage or diminish the image, reputation and/or value of the Company’s brands and cause consumers to refrain from purchasing the Company’s products in the future. In addition, the sale of the Company’s prestige products through non-authorized “grey market” channels could damage or diminish the image, reputation and/or value of the Company’s brands and could adversely affect the Company’s revenues and have a negative impact on the Company’s reputation.
Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of other parties.
Our commercial success depends at least in part on our ability to operate without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of others. However, we cannot be certain that the conduct of our business does not and will not infringe, misappropriate or otherwise violate such rights. Many companies have employed intellectual property litigation as a way to gain a competitive advantage, and to the extent we gain greater visibility and market exposure, we may also face a greater risk of being the subject of such litigation. For these and other reasons, third parties may allege that our products, services or activities infringe, misappropriate or otherwise violate their trademark, patent, copyright or other proprietary rights. Defending against allegations and litigation could be expensive, take significant time, divert management’s attention from other business concerns, and delay getting our products to market. In addition, if we are found to be infringing, misappropriating or otherwise violating third party trademark, patent, copyright or other proprietary rights, we may need to obtain a license, which may not be available on commercially reasonable terms or at all, or redesign or rebrand our products, which may not be possible. We may also be required to pay substantial damages or be subject to a court order prohibiting us and our customers from selling certain products or engaging in certain activities. Our inability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of others could therefore have a material adverse effect on our business, financial condition and results of operations.
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COVID-19 Pandemic and Economic Downturn
Although in 2021 we have weathered the COVID-19 pandemic and its effects to date, if the pandemic continues or worsens, it may have a material adverse effect on our business, results of operations, financial condition and cash flows.
The public health crisis caused by the COVID-19 pandemic and the measures being taken by governments, businesses, including us, our suppliers, our distributors, retailers and the public, to limit COVID-19’s spread, have had and we expect will continue to have, certain negative impacts on our business including, but not limited to, the following:
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In 2020, we experienced an overall decrease in sales of our products in markets around the world that have been affected by the COVID-19 pandemic. In particular, sales of our products were negatively affected by shelter-in-place regulations and closings of retailers around the world. We believe the most significant impact occurred in the second quarter of 2020, as we generated sales increases in the third and fourth quarter as compared to the second quarter of 2020, and had a record year for sales in 2021. However, to date we have experienced issues in our supply chain caused by the COVID-19 pandemic and government imposed mandates. Also, estimates of future sales, even in the short term may be difficult to determine due to the uncertainty created by the COVID-19 variants. In several major markets, such as the United States, the European Union and the United Kingdom, we have seen spikes in infections and increases in hospitalizations, which resulted in governments reimposing certain restrictions on the public. If the COVID-19 pandemic further intensifies, its negative impacts on our sales could be more prolonged and may become more severe.
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Deteriorating economic and political conditions in many of our major markets affected by the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns could cause a decrease in demand for our products.
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We may be required to record significant impairment charges with respect to noncurrent assets, including trademarks, licenses and other intangible assets whose fair values may be negatively affected by the effects of the COVID-19 pandemic on our operations.
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As a result of the COVID-19 pandemic, in all jurisdictions in which we operate we are following guidance as well as requirements from authorities and health officials in allowing our teams to gradually return to our offices, including, requiring personnel to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitization routines at our offices and distribution centers. However, we may experience reductions in productivity and disruptions to our business routines while such guidance and restrictions remain in place.
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Considerable uncertainty remains regarding this pandemic, including measures being taken by various authorities and others in response to the pandemic. As we continue to monitor COVID-19 developments, including the impacts on our consumers, customers and suppliers, we have taken and will continue to take further measures. Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of COVID-19.
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Actions we have taken or may take, or decisions on potential actions that we did not take, as a consequence of the COVID-19 pandemic may result in claims or litigation against us.
Consumers may reduce discretionary purchases of our products as a result of a general economic downturn.
We believe that a high degree of global economic uncertainty could have a further negative effect on consumer confidence, demand and spending. In addition, we believe that consumer spending on beauty products is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience sustained periods of declines in sales during periods of economic downturn as it may affect consumer purchasing patterns. In addition, a further general economic downturn may result in further reduced traffic in our customers’ stores which may, in turn, result in reduced net sales to our retail store customers. Any further material reduction in our sales could have a material adverse effect on our business, financial condition and operating results.
An outbreak of any other disease, epidemic or pandemic, or similar public health threat on the scope of COVID-19, could have a material adverse impact on the Company’s business, operating results and financial condition.
An outbreak of disease, epidemic or pandemic, or similar public threat on the scope of COVID-19, or fear of such an event, that negatively impacts consumer spending on our products could have a material adverse impact on the Company’s business, financial condition and operating results. Like most companies doing business around the globe, ours is being impacted by the coronavirus. There are many unknowns as to the duration and severity of the situation which we are closely monitoring. As a result of the trends starting in 2020 and continuing through today that we have seen, there has been solely a modest increase in air travel and consumer traffic in key shopping and tourist areas from the 2020 pandemic caused lockdowns. The extent and potential short and long-term impact of the coronavirus on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak, our customers’ willingness to travel and purchase our products, and the impact on our supply chain and the financial markets, all of which are highly uncertain and cannot be predicted.
●
Global Operations
We are subject to risks related to our foreign operations, and a disruption in our operations or supply chain could adversely affect our business and financial results.
We operate on a global basis, with a substantial portion of our net sales and net income generated outside the United States, and we anticipate for the foreseeable future that a substantial portion of our net sales and net income will be generated outside the United States. A substantial portion of our cash, cash equivalents and short-term investments that result from these earnings remain outside the United States. As a company engaged in manufacturing and distribution on a global scale, we are subject to many risks and uncertainties, including:
●
changes in foreign laws, regulations and policies, including restrictions on trade, import and export license requirements, and tariffs and taxes, as well as changes in United States laws and regulations relating to foreign trade and investment; and
●
industrial accidents, environmental events, strikes and other labor disputes, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, as well as natural disasters, adverse weather conditions, social, economic and geopolitical conditions, such as terrorist attacks, war or other military action and other external factors over which we have no control.
These risks could have a material adverse effect on our business, prospects, results of operations and financial condition.
Terrorist attacks, acts of war or military actions, other civil unrest or natural disasters may adversely affect territories in which we operate, and therefore affect our business, financial condition and operating results.
Terrorist attacks such as those that have occurred in Paris, France where we have our European headquarters, amongst other locations, and attempted terrorist attacks, military responses to terrorist attacks, other military actions, or governmental action in response to or in anticipation of a terrorist attack, or civil unrest as occurring in the Middle East, Ukraine and Africa or natural disasters, may adversely affect prevailing economic conditions. These events could result in work stoppages, reduced consumer spending or reduced demand for our products. These developments subject our worldwide operations to increased risks and, depending on their magnitude, could reduce net sales and therefore could have a material adverse effect on our business, financial condition and operating results.
The loss of or disruption in our distribution facilities could have a material adverse effect on our business, financial condition and operating results.
We currently have several distribution facilities in Europe, China and the United States. The loss of any of those facilities, as well as the inventory stored in those facilities, would require us to find replacement facilities and assets. In addition, acts of God, such as extreme weather conditions, natural disasters and the like or terrorist attacks, could disrupt our distribution operations. If we cannot replace our distribution capacity and inventory in a timely, cost-efficient manner, then such failure could have a material adverse effect on our business, financial condition and operating results.
Changes in foreign tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our profitability and cash flows.
In addition to being subject to taxation in the United States, we are subject to income and other taxes in other foreign jurisdictions. Our effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. From time to time, tax proposals are introduced or considered by the United States Congress or the legislative bodies in foreign jurisdictions that could also affect our tax rate, the carrying value of our deferred tax assets, or our other tax liabilities. Our tax liabilities are also affected by the amounts we charge for inventory, services, licenses, funding, cross-jurisdictional transfer pricing, and other items in intercompany transactions. A negative determination or ultimate disposition in any tax audit, changes in tax laws or tax rates, or the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods.
The international character of our business renders us subject to fluctuation in foreign currency exchange rates and international trade tariffs, barriers and other restrictions.
A substantial portion of our European operations’ net sales (over 50%) are sold in U.S. dollars. In an effort to reduce our exposure to foreign currency exchange fluctuations, we engage in a controlled program of risk management that includes the use of derivative financial instruments for all major currencies with which we operate. Despite such actions, fluctuations in foreign currency exchange rates for the U.S. dollar, particularly with respect to the euro, could have a material adverse effect on our operating results. Possible import, export, tariff and other trade barriers, which could be imposed by the United States, the European Union or other countries might also have a material adverse effect on our operating results.
Changing political conditions could adversely impact our business and financial results.
Changes in the political conditions in markets in which we manufacture, sell or distribute our products may be difficult to predict and may adversely affect our business and financial results. In addition, results of elections, referendums or other political processes in certain markets in which our products are manufactured, sold or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, the movement of goods, services, capital and people between countries and other matters. The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, tariffs, trade barriers and market contraction, could adversely affect the Company’s business and financial results.
●
Operational Risks
We are dependent upon Messrs. Jean Madar and Philippe Benacin, and the loss of their services could harm our business.
Jean Madar, our Chief Executive Officer, and Philippe Benacin, our President, and Chief Executive Officer of Interparfums SA, are responsible for day-to-day operations as well as major decisions. Termination of their relationships with us, whether through death, incapacity or otherwise, could have a material adverse effect on our operations, and we cannot assure you that qualified replacements can be found.
Our reliance on third party manufacturers could have a material adverse effect on us.
We rely on outside sources to manufacture our fragrances and cosmetics. The failure of such third party manufacturers to deliver either compliant, quality components or finished goods on a timely basis could have a material adverse effect on our business. Although we believe there are alternate manufacturers available to supply our requirements, we cannot assure you that current or alternative sources will be able to supply all of our demands on a timely basis. We do not intend to develop our own manufacturing capacity. As these are third parties over whom we have little or no control, the failure of such third parties to provide components or finished goods on a timely basis could have a material adverse effect on our business, financial condition and operating results.
Our reliance on third party distributors could have a material adverse effect on us.
We sell a substantial percentage of our prestige fragrances through independent distributors specializing in luxury goods. Given the growing importance of distribution, we have modified our distribution model by owning a controlling interest in certain of our distributors within key markets. However, we have little or no control over third party distributors and the failure of such third parties to provide services on a timely basis could have a material adverse effect on our business, financial condition and operating results. In addition, if we replace existing third party distributors with new third party distributors or with our own distribution arrangements, then transition issues could have a material adverse effect on our business, financial condition and operating results.
Our business is subject to governmental regulation, which could impact our operations.
Fragrance products must comply with the labeling requirements of the Federal Food, Drug and Cosmetics Act as well as the Fair Packaging and Labeling Act and their regulations. In addition, various jurisdictions prohibit the use of certain ingredients in fragrances and cosmetics.
Our fragrance products that are manufactured or sold in Europe are subject to certain regulatory requirements of the European Union and the United Kingdom, such as the EU Regulation number 1223/2009 on cosmetic products and United Kingdom cosmetic regulations, but as of the date of this report, we have not experienced any material difficulties in complying with such requirements.
However, we cannot assure you that, should we use proscribed ingredients in our fragrance products that we develop or market, or develop or market fragrance products with different ingredients, or should existing regulations or requirements be revised, we would not in the future experience difficulty in complying with such requirements, which could have a material adverse effect on our results of operations.
Our business could be negatively impacted by social impact and sustainability matters.
There has been continues to be an increased focus from certain investors, customers, consumers, employees, and other stakeholders concerning social impact and environmental matters. From time to time, we may announce certain initiatives, including goals and commitments, regarding environmental matters, packaging, responsible sourcing and corporate social responsibility. We could fail, or be perceived to fail, in our achievement of such initiatives, or in accurately reporting our progress on such initiatives. Such failures could be due to changes in distribution channels, new licenses or other acquisitions. Moreover, the standards by which corporate social responsibility are measured are developing and evolving, and certain areas are subject to assumptions that could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any of such matters could have a material adverse effect on our business.
Our business is subject to seasonal variability.
Our business is somewhat seasonal due to the timing of shipments to our customers, which are weighted to the second half of the year. Accordingly, our financial performance, sales, working capital requirements, cash flow and borrowings generally experience variability during the third and fourth quarters.
●
Fragrance Markets
The success of our products is dependent on public taste.
Our revenues are substantially dependent on the success of our products, which depends upon, among other matters, pronounced and rapidly changing public tastes, factors which are difficult to predict and over which we have little, if any, control. In addition, we have to develop successful marketing, promotional and sales programs in order to sell our fragrances and fragrance related products. If we are not able to develop successful marketing, promotional and sales programs, then such failure will have a material adverse effect on our business, financial condition and operating results.
We are subject to extreme competition in the fragrance industry.
The market for fragrance products is highly competitive and sensitive to changing market preferences and demands. Many of our competitors in this market are larger than we are and have greater financial resources than are available to us, potentially allowing them greater operational flexibility. Our success in the prestige fragrance industry is dependent upon our ability to continue to generate original strategies and develop quality products that are in accord with ongoing changes in the market.
If there is insufficient demand for our existing fragrance products, or if we do not develop future strategies and products that withstand competition or we are unsuccessful in competing on price terms, then we could experience a material adverse effect on our business, financial condition and operating results.
Changes in laws, regulations and policies that affect our business could adversely affect our financial results.
Our business is subject to numerous laws, regulations and policies. Changes in the laws, regulations and policies, including the interpretation or enforcement thereof, that affect, or will affect, our business, including changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, or increased cosmetics regulation, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result could adversely affect our financial results.
●
General Risk Factors
Our success depends, in part, on the quality and safety of our products.
Our success depends, in part, on the quality and safety of our products. If our products are found to be defective or unsafe, or if they otherwise fail to meet our consumers’ standards, then our relationships with customers or consumers could suffer, the appeal of one or more of our brands could be diminished, and we could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition.
Our failure to protect our reputation, or the failure of our partners to protect their reputations, could have a material adverse effect on our brand images.
Our ability to maintain our reputation is critical to our various brand images. Our reputation could be jeopardized if we fail to maintain high standards for merchandise quality and integrity or if we, or the third parties with whom we do business, do not comply with regulations or accepted practices. Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure to comply with ethical, social, product, labor and environmental standards, or related political considerations, such as animal testing, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts. Failure to comply with local laws and regulations, including applicable U.S. trade sanctions, to maintain an effective system of internal controls or to provide accurate and timely financial statement information could also hurt our reputation. We are also dependent on the reputations of our brand partners and licensors, which can be affected by matters outside of our control. Damage to our reputation or the reputations of our brand partners or licensors or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, financial condition and cash flows, as well as require additional resources to rebuild our reputation.
Our information systems and websites may be susceptible to outages, hacking and other risks.
We have information systems that support our business processes, including product development, production, marketing, order processing, sales, distribution, finance and intra-company communications. We also have Internet websites in the United States and Europe. These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, hacking and similar events. Despite the implementation of network security measures, our systems may be vulnerable to computer viruses, hacking and similar disruptions from unauthorized tampering. The occurrence of these or other events could disrupt or damage our information systems and adversely affect our business and results of operations.
The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our earnings or other financial performance.
Our business planning process is designed to maximize our long-term strength, growth and profitability, not to achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of our Company and our stockholders. At the same time, however, we recognize that it may be helpful to provide investors with guidance as to our forecast of annual net sales and diluted earnings per share. Accordingly, we provide guidance as to our expected annual net sales, and diluted earnings per share, which is updated as appropriate throughout the year. While we generally provide updates to our guidance when we report our results each fiscal quarter if called for, we assume no responsibility to update any of our forward-looking statements at such times or otherwise. In addition, longer-term guidance that we may from time to time provide is based on goals that we believe, at the time guidance is given, are reasonably attainable.
In all of our public statements when we make, or update, a forward-looking statement about our sales and/or earnings expectations or expectations regarding other initiatives, we accompany such statements directly, or by reference to a public document, with a list of factors that could cause our actual results to differ materially from those we expect. Such a list is included, among other places, in our earnings press releases (by reference to our periodic filings with the Securities and Exchange Commission) and in our periodic filings with the Securities and Exchange Commission (e.g., in our reports on Form 10-K and Forms 10-Q). These and other factors may make it difficult for outside observers, such as research analysts, to predict what our earnings will be in any given fiscal quarter or year.
Outside analysts and investors have the right to make their own predictions of our financial results for any future period. Outside analysts, however, have access to no more material information about our results or plans than any other public investor, and we do not endorse or adopt their predictions as to our future performance. Nor do we assume any responsibility to correct the predictions of outside analysts or others when they differ from our own internal expectations. If and when we announce actual results that differ from those that outside analysts or others have been predicting, the market price of our securities could be affected. Investors who rely on the predictions of outside analysts or others when making investment decisions with respect to our securities do so at their own risk. We take no responsibility for any losses suffered as a result of such changes in the prices of our securities.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties
United States Operations
We maintain our corporate headquarters and United States operations in approximately 32,000 square feet with a term that expires on December 31, 2029, and have been at the same location in New York City since 1992. We also have a 140,000 square foot distribution center in New Jersey, and this lease expires on October 31, 2025. In addition, we maintain office space in Hong Kong with a lease that expires in June 2023. In August 2019 we opened a small distribution center in Shanghai, China that expires in July 2022, and in October 2021 we leased office space in Florence, Italy with a 6 year term with an option for an additional 6 years for Interparfums Italia srl.
European Operations
Our European operations maintain their corporate headquarters on the Champs Elysees in Paris France, with leases for various units that expire from March 2022 to September 2026. We are presently seeking to sublease these offices, due to the planned relocation to the new Paris headquarters in March 2022 as discussed below. Our European operations also maintains a studio and operations departments at a second location in Paris with a lease that now expires on March 31, 2022. United States distribution operations for European operations maintain their headquarters in New York City, with a lease that expires in May 2029. A small office is located Singapore for Asia-Pacific distribution by European operations.
In April 2021, Interparfums SA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards and consists of approximately 40,000 total sq. ft. Interparfums SA intends to relocate its operations to its new headquarters by the end of March 2022.
European operations maintain an approximately 333,700 square foot distribution center located in Criquebeuf sur Seine, France, with a seven year term that expires May 2027 and an option to extend the term for an additional two years.
Interparfums SA has several agreements for warehousing and distribution services which are renewed on an annual basis. Fees payable are partially calculated based upon a percentage of sales, which is customary in the industry.
We believe our office and warehouse facilities are satisfactory for our present needs and those for the foreseeable future.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We are not a party to any material lawsuits.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Market for Our Common Stock
Our Company’s common stock, $.001 par value per share, is traded on The Nasdaq Global Select Market under the symbol “IPAR”. The following table sets forth in dollars, the range of high and low closing prices for the past two fiscal years for our common stock.
Fiscal 2021
High Closing Price
Low Closing Price
Fourth Quarter
106.90
75.89
Third Quarter
79.42
67.55
Second Quarter
77.95
69.96
First Quarter
76.75
59.17
Fiscal 2020
High Closing Price
Low Closing Price
Fourth Quarter
61.08
36.63
Third Quarter
49.40
36.46
Second Quarter
51.68
37.63
First Quarter
75.00
34.20
As of February 8, 2022, the number of record holders, which include brokers and broker nominees, etc., of our common stock was 32. We believe there are approximately 15,700 beneficial owners of our common stock.
Corporate Performance Graph
The following graph compares the performance for the periods indicated in the graph of our common stock with the performance of the Nasdaq Market Index and the average performance of a group of the Company’s peer corporations consisting of: CCA Industries, Inc., Colgate-Palmolive Co., Estée Lauder Companies, Inc., Inter Parfums, Inc., Kimberly Clark Corp., Natural Health Trends Corp., Procter & Gamble Co., Revlon, Inc., Stephan Co., Summer Infant, Inc. and United Guardian, Inc. The graph assumes that the value of the investment in our common stock and each index was $100 at the beginning of the period indicated in the graph, and that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Inter Parfums, Inc., the NASDAQ Composite Index,
and a Peer Group
*$100 invested on 12/31/16 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Below is the list of the data points for each year that corresponds to the lines on the above graph.
12/16
12/17
12/18
12/19
12/20
12/21
Inter Parfums, Inc.
100.00
135.07
207.10
233.46
195.51
349.98
NASDAQ Composite
100.00
129.64
125.96
172.17
249.51
304.85
Peer Group
100.00
117.42
116.63
160.22
186.70
225.46
Dividends
In October 2019, our Board of Directors authorized a 20% increase in the annual dividend to $1.32 per share on an annual basis. In April 2020, as a result of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the annual cash dividend. In February 2021, our Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly. In February 2022, our Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share. The next quarterly cash dividend of $0.50 per share is payable on March 31, 2022, to shareholders of record on March 15, 2022.
Sales of Unregistered Securities
In December 2021, our non-employee directors exercised stock options to purchase an aggregate of 2,500 shares of restricted common stock. These transactions were exempt from the registration requirements of Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities Act. Each option holder agreed that, if the option is exercised, the option holder would purchase his or her common stock for investment and not for resale to the public. Also, we provide all option holders with all reports we file with the SEC and press releases issued by us.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We operate in the fragrance business, and manufacture, market and distribute a wide array of fragrances and fragrance related products. We manage our business in two segments, European based operations and United States based operations. Certain prestige fragrance products are produced and marketed by our European operations through our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 27% of Interparfums SA shares trade on the NYSE Euronext.
We produce and distribute our European based fragrance products primarily under license agreements with brand owners, and European based fragrance product sales represented approximately 75%, 78% and 76% of net sales for 2021, 2020 and 2019, respectively. We have built a portfolio of prestige brands, which include Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lanvin, Moncler, Montblanc, Rochas, S.T. Dupont and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world.
Through our United States operations, we also market fragrance and fragrance related products. United States operations represented 25%, 22% and 24% of net sales in 2021, 2020 and 2019, respectively. These fragrance products are sold primarily pursuant to license or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Dunhill, Ferragamo, Graff, GUESS, Hollister, MCM, Oscar de la Renta and Ungaro brands.
Substantially all of our prestige fragrance brands are licensed from unaffiliated third parties, and our business is dependent upon the continuation and renewal of such licenses. With respect to the Company’s largest brands, we license the Montblanc, Jimmy Choo, Coach and GUESS brand names.
As a percentage of net sales, product sales for the Company’s largest brands were as follows:
Year Ended December 31,
Montblanc
%
%
%
Jimmy Choo
%
%
%
Coach
%
%
%
GUESS
%
%
%
Quarterly sales fluctuations are influenced by the timing of new product launches as well as the third and fourth quarter holiday season. In certain markets where we sell directly to retailers, seasonality is more evident. We primarily sell directly to retailers in France and the United States.
We grow our business in two distinct ways. First, we grow by adding new brands to our portfolio, either through new licenses or other arrangements or out-right acquisitions of brands. Second, we grow through the introduction of new products and by supporting new and established products through advertising, merchandising and sampling, as well as by phasing out underperforming products, so we can devote greater resources to those products with greater potential. The economics of developing, producing, launching and supporting products influence our sales and operating performance each year. The introduction of new products may have some cannibalizing effect on sales of existing products, which we take into account in our business planning.
Our business is not capital intensive, and it is important to note that we do not own manufacturing facilities. We act as a general contractor and source our needed components from our suppliers. These components are received at one of our distribution centers and then, based upon production needs, the components are sent to one of several third party fillers, which manufacture the finished product for us and then deliver them to one of our distribution centers.
As with any global business, many aspects of our operations are subject to influences outside our control. We believe we have a strong brand portfolio with global reach and potential. As part of our strategy, we plan to continue to make investments behind fast-growing markets and channels to grow market share.
Our reported net sales are impacted by changes in foreign currency exchange rates. A strong U.S. dollar has a negative impact on our net sales. However, earnings are positively affected by a strong dollar, because over 50% of net sales of our European operations are denominated in U.S. dollars, while almost all costs of our European operations are incurred in euro. Conversely, a weak U.S. dollar has a favorable impact on our net sales while gross margins are negatively affected. We address certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments, and primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.
Impact of COVID-19 Pandemic
A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the United States and France. In March 2020, the World Health Organization declared COVID-19 a pandemic.
In response to the COVID-19 pandemic various national, state, and local governments where we, our suppliers, and our customers operate initially issued decrees prohibiting certain businesses from continuing to operate and certain classes of workers from reporting to work. In all jurisdictions in which we operate, we have been following guidance from authorities and health officials.
The effects of the COVID-19 pandemic on the beauty industry began in early March 2020. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill and caused a significant unfavorable impact on our results of operations in 2020.
Business significantly improved in the second half of 2020 and continued to improve throughout 2021, as retail stores reopened, and consumers increased online purchasing. While we expect this trend to continue, as the luxury fragrance industry has shown continued resilience, the introduction of variants of COVID-19 in various parts of the world has caused the temporary re-implementation of governmental restrictions to prevent further spread of the virus. In addition, international air travel has remained curtailed in many jurisdictions due to both governmental restrictions and consumer health concerns. While COVID-19 has significantly restricted international travel in the near-term, we continue to believe that global travel retail will once again be a growth opportunity for the long-term. Lastly, the improved economy has put significant strains on our supply chain causing disruptions affecting the procurement of components, the ability to transport goods, and related cost increases. These disruptions have come at a time when demand for our product lines has never been stronger or more sustained. We have been addressing this issue since the beginning of 2021, by ordering well in advance of need and in larger quantities. Going forward, we aim to carry more inventory overall, source the same components from multiple suppliers and when possible, manufacture products closer to where they are sold. We do not expect the supply chain bottlenecks to begin lifting until later in 2022. Therefore, despite recent business improvement, the impact of the COVID-19 pandemic may have a material adverse effect on our results of our operations, financial position and cash flows through at least the end of 2022.
Recent Important Events
Salvatore Ferragamo
In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. The license became effective in October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.
With respect to the management and coordination of activities related to the license agreement, the Company operates through a wholly-owned Italian subsidiary based in Florence, that was acquired from Salvatore Ferragamo on October 1, 2021. The acquisition together with the license agreement was accounted for as an asset acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on October 1, 2021. All amounts have been translated to U.S. dollars at the October 1, 2021 exchange rate.
(In thousands)
Inventories
$
17,805
Trademarks and licenses
15,880
Other assets
3,033
Assets acquired
36,718
Liabilities assumed
(958
)
$
35,760
Emanuel Ungaro
In October 2021, we also entered into a 10-year exclusive global licensing agreement a with a 5-year optional term subject to certain conditions, with Emanuel Ungaro Italia S.r.l, for the creation, development and distribution of fragrances and fragrance-related products, under the Emanuel Ungaro brand. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry.
Donna Karan and DKNY
In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. Our rights under this license are subject to certain minimum advertising expenditures and royalty payments as are customary in our industry. With this agreement, we are gaining several well-established and valuable fragrance franchises, most notably Donna Karan Cashmere Mist and DKNY Be Delicious, as well as a significant loyal consumer base around the world. In connection with the grant of license, we issued 65,342 shares of Inter Parfums, Inc. common stock valued at $5.0 million to the licensor. The exclusive license is effective July 1, 2022, and we are planning to launch new fragrances under these brands in 2023.
French Tax Settlement
The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not, in and of itself, constitute a permanent establishment and therefore Interparfums SA should pay French taxes on all or part of the profits of that entity.
In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby Interparfums SA paid in December 2021, €2.5 million (approximately $2.9 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. Interparfums SA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to Interparfums SA by December 31, 2025.
Land and Building Acquisition - Future Headquarters in Paris
In April 2021, Interparfums SA, completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.
The $142 million purchase price includes the complete renovation of the site. As of December 31, 2021, $136.1 million of the purchase price, including approximately $3.1 million of acquisition costs, is included in property, equipment and leasehold improvements on the accompanying balance sheet as of December 31, 2021. Approximately $8.8 million of cash held in escrow is included in other assets on the accompanying balance sheet as of December 31, 2021. In addition, the Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.
The acquisition was financed by a 10-year €120 million (approximately $136 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum.
Anna Sui Corp.
In January 2021, we renewed our license agreement with Anna Sui Corp. for the creation, development and distribution of fragrance products through December 31, 2026, without any material changes in terms and conditions. Our initial 10-year license agreement with Anna Sui Corp. was signed in 2011. The renewal agreement also allows for an additional 5-year term through 2031 at the option of the Company.
Rochas Fashion
Effective January 1, 2021, we entered into a new license agreement modifying our Rochas fashion business model. The new agreement calls for a reduction in royalties to be received. As a result, in the first quarter of 2021, we took a $2.4 million impairment charge on our Rochas fashion trademark. The new license also contains an option for the licensee to buy-out the Rochas fashion trademarks in June 2025 at its then fair market value.
S.T. Dupont
In January 2021, we renewed our license agreement with S.T. Dupont for the creation, development and distribution of fragrance products through December 31, 2022, without any material changes in terms and conditions. Our initial 11-year license agreement with S.T. Dupont was signed in June 1997 and had previously been extended through December 31, 2021.
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. Management of the Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Board of Directors.
Long-Lived Assets
We evaluate 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 indicate that the carrying value of an indefinite-lived intangible asset may not be recoverable. When testing indefinite-lived intangible assets for impairment, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. The fair values used in our evaluations are estimated based upon discounted future cash flow projections using a weighted average cost of capital of 7.47%. 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. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment charge is recorded.
We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable. However, if future actual results do not meet our expectations, we may be required to record an impairment charge, the amount of which could be material to our results of operations.
At December 31, 2021 indefinite-lived intangible assets aggregated $119.7 million. The following table presents the impact a change in the following significant assumptions would have had on the calculated fair value in 2021 assuming all other assumptions remained constant:
$ in millions
Increase (decrease)
Change to fair value
Weighted average cost of capital +10
% $ (11.9 )
Weighted average cost of capital -10 % $ 14.0
Future sales levels +10
% $ 13.3
Future sales levels -10 % $ (13.3 )
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. In those cases where we determine that the useful life of long-lived assets should be shortened, we would amortize 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. We believe that the assumptions we have made in projecting future cash flows for the evaluations described above are reasonable.
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 originally in 2025 and amended to 2027, 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.
Quantitative Analysis
During the three-year period ended December 31, 2021, we have not made any material changes in our assumptions underlying these critical accounting policies or to the related significant estimates. The results of our business underlying these assumptions have not differed significantly from our expectations.
While we believe the estimates we have made are proper and the related results of operations for the period are presented fairly in all material respects, other assumptions could reasonably be justified that would change the amount of reported net sales, cost of sales, and selling, general and administrative expenses as they relate to the provisions for anticipated sales returns, allowance for doubtful accounts and inventory obsolescence reserves. For 2021, had these estimates been changed simultaneously by 5% in either direction, our reported gross profit would have increased or decreased by approximately $0.6 million and selling, general and administrative expenses would have changed by approximately $0.1 million. The collective impact of these changes on 2021 operating income, net income attributable to Inter Parfums, Inc., and net income attributable to Inter Parfums, Inc. per diluted share would be an increase or decrease of approximately $0.6 million, $0.3 million and $0.01, respectively.
Results of Operations
Net Sales Years ended December 31,
(in millions) % Change % Change
European based product sales $ 663.2 57 % $ 422.9 (22 )% $ 542.1
United States based product sales 216.4 86 % 116.1 (32 )% 171.4
Total net sales $ 879.6 63 % $ 539.0 (24 )% $ 713.5
Net sales rebounded significantly in 2021, as compared to 2020 for both European and United States based operations. Even more gratifying, 2021 net sales for European based operations and United States based operations increased 22% and 26%, respectively, as compared to 2019. At comparable foreign currency exchange rates, net sales increased 62% in 2021, as compared to 2020 and decreased 26 % in 2020, as compared to 2019. Net sales in 2020 reflected the negative impacts of the COVID-19 pandemic on the beauty industry. Retail store closings, event cancellations and a shutdown of international air travel brought our sales to a virtual standstill in early 2020. In the second half of 2020, business began rebounding thanks to retail stores reopening and a robust e-commerce business conducted by our retail customers. However, international travel has remained largely curtailed globally due to both government restrictions and consumer health concerns that continue to adversely impact consumer traffic in most travel retail locations. As 2020 was an outlier for our sales due to the COVID-19 pandemic and its effects as discussed above, below are sales comparisons for our largest brands in 2021 with 2019.
For European based operations, our largest brands, Montblanc, Jimmy Choo and Coach grew 2021 sales by 7%, 34% and 41%, respectively, as compared to 2019. There were also significant gains made by our mid-sized brands, including Van Cleef & Arpels and Karl Lagerfeld. We also welcomed first time sales by our newest brands, notably Kate Spade and Moncler.
In 2021, GUESS became our fourth brand with sales exceeding $100 million. GUESS brand sales increased 41% in 2021, as compared to 2019, contributing to the overall increase in 2021 net sales within U.S. based operations. There were also significant gains made by our mid-sized brands, especially Abercrombie & Fitch, Hollister and Oscar de la Renta. We also welcomed first time sales by our newest brands, MCM and Ferragamo.
A more detailed discussion relating to our sales for 2020 as compared to 2019 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 2020.
We are confident in our future as 2022 has begun on a strong note. We have completed the integration of the Ferragamo and Ungaro brands and our new Italian subsidiary is now staffed and fully operational. We have a solid line-up of new product launches in the pipeline for many of our other brands. This includes the roll out of the first Moncler fragrance line in a series of selective points of sale that faithfully respect the brand’s image. An entirely new men’s collection for GUESS is scheduled for introduction in the spring. Extensions of the Montblanc Legend, Jimmy Choo Man and Jimmy Choo’s I Want Choo, debut in the first, second and third quarters, respectively. Also, in the third quarter, we will unveil new men’s lines for Coach and Boucheron. Brand extensions and flankers are in the works for MCM, Abercrombie & Fitch, Hollister, Anna Sui, and Oscar de la Renta. In addition, we will be adding the Donna Karan and DKNY fragrance brands to our portfolio come this summer. In sum, 2022 has all the earmarks of another superb year as the growth catalysts currently far outweigh the headwinds, most notably limited travel retail business and supply chain disruptions.
As in the past, we hope to benefit from our strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee. However, we cannot assure you that any new license or acquisition agreements will be consummated.
Net Sales to Customers by Region
Years ended December 31,
(in millions)
North America $ 354.1 $ 193.5 $ 235.5
Western Europe 202.0 147.1 185.5
Asia 128.0 79.7 110.9
Eastern Europe 69.7 33.1 55.2
Middle East 61.0 46.8 72.6
Central and South America 56.4 32.5 46.2
Other 8.4 6.3 7.6
$ 879.6 $ 539.0 $ 713.5
As we did with sales for our largest brands, we are discussing net sales to customers by region using comparisons in 2021 with 2019, as the result of the effects of the COVID-19 pandemic in 2020. Our largest market, North America achieved sales growth of 50% in 2021 compared to 2019, while Western Europe and Asia grew sales by 9% and 15% in 2021, respectively, compared to 2019. Latin America and Eastern Europe also achieved top line growth of 22% and 26% in 2021, respectively, and only the Middle East had a decline in sales compared to 2019. As of the date of this report, international travel has remained largely curtailed globally due to both government restrictions and consumer health concerns that continue to adversely impact consumer traffic in most travel retail locations.
The impact of the COVID-19 pandemic broadly impacted all regions in 2020, with the steepest declines in the Middle East and Eastern Europe. Travel retail accounted for much of the decline in the Middle East and Asian markets.
Gross Margins
Years ended December 31,
(in millions)
European operations:
Net sales $ 663.2 $ 422.9 $ 542.1
Cost of sales 221.2 152.3 186.2
Gross margin $ 442.0 $ 270.6 $ 355.9
Gross margin, as a percent of net sales 66.7 % 64.0 % 65.7 %
United States operations:
Net sales $ 216.3 $ 116.1 $ 171.4
Cost of sales 101.4 56.0 81.4
Gross margin $ 114.9 $ 60.1 $ 90.0
Gross margin, as a percent of net sales 53.1 % 51.8 % 52.5 %
For European based operations, gross profit margin as a percentage of net sales was 66.6%, 64.0% and 65.7% in 2021, 2020 and 2019, respectively. Distribution in the United States for European based operations is handled by a 100% owned subsidiary of Interparfums SA. Therefore, sales are made at a wholesale price rather than at an ex-factory price, resulting in higher gross margins. Net sales of our U.S. distribution subsidiary increased 86% in 2021, as compared to 2020, giving rise to the increase in gross margin in 2021 over both 2020 and 2019. We carefully monitor movements in foreign currency exchange rates as over 50% of our European based operations net sales is denominated in U.S. dollars, while most of our costs are incurred in euro. From a margin standpoint, a strong U.S. dollar has a positive effect on our gross margin while a weak U.S. dollar has a negative effect. The average dollar/euro exchange rate was 1.18 in 2021, 1.15 in 2020, and 1.12 in 2019. The weaker dollar in 2021 partially mitigated the increase in margin referred to above and resulted in a small decline in our gross margins in 2020. Gross margin in 2020 for European operations also included a charge of approximately $2.0 million relating to the assumption of a return liability for products sold by the former licensee of a brand license acquired in 2019.
For United States operations, gross profit margin was 53.1%, 51.8% and 52.5% in 2021, 2020 and 2019, respectively. With a decline in sales in 2020, certain expenses such as depreciation of tools and molds together with the distribution of point-of-sale materials exaggerated the decline in gross margin for the year as a percentage of sales. With U.S. based operations net sales up 86% in 2021, as compared to 2020, no such effect was seen in 2021.
Costs relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $37.6 million, $26.4 million and $38.9 million in 2021, 2020 and 2019, respectively, and represented 4.3%, 4.9% and 5.5% of net sales, respectively.
Generally, we do not bill customers for shipping and handling costs and such costs, which aggregated $10.1 million, $5.0 million and $7.7 million in 2021, 2020 and 2019, respectively, are included in selling, general and administrative expenses in the consolidated statements of income. As such, our Company’s gross margins may not be comparable to other companies, which may include these expenses as a component of cost of goods sold.
Selling, General & Administrative Expenses
Years ended December 31,
(in millions)
European Operations
Selling, general & administrative expenses $ 327.5 $ 210.6 $ 275.3
Selling, general & administrative expenses as a percent of net sales 49.4 % 49.8 % 50.8 %
United States Operations
Selling, general & administrative expenses $ 79.0 $ 50.1 $ 65.9
Selling, general & administrative expenses as a percent of net sales 36.5 % 43.1 % 38.5 %
For European operations, selling, general and administrative expenses increased 55.5% in 2021 and declined 23.6% in 2020, as compared to the corresponding prior year period, and represented 49.4%, 49.8% and 50.8% of sales in 2021, 2020 and 2019, respectively. As discussed in more detail below, the fluctuations which are in line with the fluctuations in sales for European operations, are primarily from variations in promotion and advertising expenditures.
Our operating cost structure, of which variable costs typically account for over two-thirds, had enabled us to minimize the impact of reduced net sales on our bottom line. Due to the effects of the COVID-19 pandemic, a substantial portion of the reduction in selling, general and administrative expenses in 2020 were attributable to the postponement of advertising and promotional expenses to 2021, as nearly all major new product launches were postponed until 2021. In addition, we also undertook several actions with an eye toward minimizing fixed expenses.
For United States operations, selling, general and administrative expenses increased 57.8% in 2021 and decreased 24.1% in 2020, as compared to the corresponding prior year period and represented 36.5%, 43.1% and 38.5% of sales in 2021, 2020 and 2019, respectively. Our U.S. operations are significantly smaller than those of our European operations and carry higher fixed costs that could not be leveraged as efficiently as those of our European operations with the decline in 2020 net sales. However, with an 86% increase in 2021 net sales, the opposite effect was realized, and we were able to achieve significant leverage on fixed costs during the year.
Promotion and advertising included in selling, general and administrative expenses aggregated $171.8 million, $91.7 million and $144.6 million in 2021, 2020 and 2019, respectively. Promotion and advertising as a percentage of sales represented 19.5%, 17.0% and 20.3% of net sales in 2021, 2020 and 2019, respectively. Promotion and advertising programs were cut significantly in 2020 in response to market conditions. Throughout 2021, sales rebounded far more rapidly than anticipated causing us to play catchup with promotional and adverting programs and missing our target spend of 21% of annual sales. Promotion and advertising are integral parts of our industry, and we continue to invest heavily in promotional spending to support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have had a beneficial effect on online net sales, causing then to continue to grow strongly on a global basis. All of our brands have benefitted from newly launched and enhanced e-commerce sites in existing markets in collaboration with our retail customers on their e-commerce sites. We also continue to develop and implement omnichannel concepts, the way brick-and-mortar stores and a business’ online operations work in tandem, and compelling content to deliver an integrated consumer experience. We anticipated that on a full year basis, future promotion and advertising expenditures will aggregate approximately 21% of net sales, which is in line with historical averages.
Royalty expense included in selling, general and administrative expenses aggregated $69.0 million, $41.1 million and $53.0 million in 2021, 2020 and 2019, respectively. Royalty expense as a percentage of sales represented 7.8%, 7.6% and 7.4% of net sales in 2021, 2020 and 2019, respectively. The increases in 2021 and 2020, as a percentage of sales, are directly related to new licenses and increased royalty-based product sales. As a result of the COVID-19 pandemic, we reached agreements with most of our licensors to waive or significantly reduce minimum guaranteed royalties for 2020.
Service fees, which are fees paid within our European operations to third parties relating to the activities of our distribution subsidiaries, aggregated $9.4 million, $6.8 million and $7.5 million in 2021, 2020 and 2019, respectively. The 2021 and 2020 amounts are in line with and directly related to fluctuations in sales within our U.S. distribution subsidiary.
Income from Operations
As a result of the above analysis regarding net sales, gross profit margins and selling, general and administrative expenses, our operating margins aggregated 16.8%, 13.1% and 14.7% for the years ended December 31, 2021, 2020 and 2019, respectively. Lower than expected promotion and adverting expense drove the increase in our operating margin in 2021, while strong cost controls in 2020 enabled us to minimize the impact of the sudden drop in sales resulting from the COVID-19 pandemic.
Other Income and Expenses
Traditionally, interest expense was primarily related to the financing of brand and licensing acquisitions. However, in April 2021, we completed the acquisition of the future headquarters of Interparfums SA. The acquisition was financed by a 10-year €120 million (approximately $136 million) bank loan which bears interest at one-month Euribor plus 0.75%. Also in 2021, approximately €80 million of the variable rate debt was swapped for fixed interest rate debt. Long-term debt including current maturities aggregated $148.8 million, $24.7 million and $23.1 million as of December 31, 2021, 2020 and 2019, respectively.
We enter into foreign currency forward exchange contracts to manage exposure related to receivables from unaffiliated third parties denominated in a foreign currency and occasionally to manage risks related to future sales expected to be denominated in a foreign currency. Gains and losses on foreign currency transactions have not been significant.
Interest and dividend income represents interest earned on cash and cash equivalents and short-term investments. In 2021, short-term investments include approximately $24.5 million of marketable equity securities of other companies in the luxury goods sector. Interest and dividend income includes approximately $1.8 million of unrealized gains on marketable equity securities.
Income Taxes
Our effective income tax rate was 27.1%, 27.9% and 27.7% in 2021, 2020 and 2019, respectively.
Income tax expense represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation and the taxation of foreign income including tax settlements. Our effective tax rate will change from year-to-year based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, the tax impact of share-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions.
Our effective income tax rate for European operations was 30.6%, 29.7% and 30.7% in 2021, 2020 and 2019, respectively.
The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA, does not, in and of itself, constitute a permanent establishment and therefore Interparfums SA should pay French taxes on all or part of the profits of that entity. In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby Interparfums SA agreed to pay €2.5 million (approximately $3.0 million) effectively lowering the Lanvin brand royalty rate charged by IP Suisse for the periods from 2017 through 2020. Interparfums SA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to Interparfums SA by December 31, 2025.
In addition, pursuant to an action plan released by the French Prime Minister, beginning in 2020, the French corporate income tax rate is expected to be cut from approximately 33% to 25% over a three-year period.
Our effective income tax rate for U.S. operations was 15.6%, 16.7% and 17.0% in 2021, 2020 and 2019, respectively.
The Company has determined that it has no tax liability related global intangible low-taxed income (“GILTI”) as of December 31, 2021, 2020 and 2019. The Company also estimated the effect of its foreign derived intangible income (“FDII”) and recorded a tax benefit of $0.6 million, $0.3 million and $0.9 million as of December 31, 2021, 2020 and 2019, respectively. Share-based compensation resulted in a discrete tax benefit of $1.3 million, $0.4 million and $0.7 million in 2021, 2020 and 2019, respectively.
Net Income
Year ended December 31,
(In thousands)
Net income attributable to European operations
$
80,670
$
41,990
$
56,660
Net income attributable to United States operations
29,357
7,978
19,410
Net income
110,027
49,968
76,070
Less: Net income attributable to the noncontrolling interest
22,616
11,749
15,821
Net income attributable to Inter Parfums, Inc.
$
87,411
$
38,219
$
60,249
Net income attributable to European operations was $80.7 million, $42.0 million and $56.7 million in 2021, 2020 and 2019, respectively, while net income attributable to United States operations was $29.4 million, $8.0 million and $19.4 million in 2021, 2020 and 2019, respectively. The fluctuations in net income for both European operations and United States operations are directly related to the previous discussions concerning changes in sales, gross profit margins, selling, general and administrative expenses, most of which were caused by the effects of the COVID-19 pandemic beginning in 2020 and the recovery in 2021.
The noncontrolling interest arises primarily from our 73% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 27% of Interparfums SA shares trade on the NYSE Euronext. Net income attributable to the noncontrolling interest is directly related to the profitability of our European operations and aggregated 28.0% of European operations net income in 2021 and 28.1% in 2020 and 2019. Net margins attributable to Inter Parfums, Inc. aggregated 9.9%, 7.1% and 8.4% in 2021, 2020 and 2019, respectively.
Liquidity and Capital Resources
Our conservative financial tradition has enabled us to amass significant cash balances. As of December 31, 2021, we had $320 million in cash, cash equivalents and short-term investments, most of which are held in euro by our European operations and are readily convertible into U.S. dollars. We have not had any liquidity issues to date, and do not expect any liquidity issues relating to such cash and cash equivalents and short-term investments. As of December 31, 2021, short-term investments include approximately $24.5 million of marketable equity securities.
As of December 31, 2021, working capital aggregated $465 million, and we had a working capital ratio of 2.9 to 1. Approximately 82% of the Company’s total assets are held by European operations including approximately $171 million of trademarks, licenses and other intangible assets.
The Company is party to a number of license and other agreements for the use of trademarks and rights in connection with the manufacture and sale of its products expiring at various dates through 2033. In connection with certain of these license agreements, the Company is subject to minimum annual advertising commitments, minimum annual royalties and other commitments. See Item 8. Financial Statements and Supplementary Data - Note 12 - Commitments in this annual report on Form 10-K. Future advertising commitments are estimated based on planned future sales for the license terms that were in effect at December 31, 2021, without consideration for potential renewal periods and do not reflect the fact that our distributors share our advertising obligations.
The Company hopes to continue to benefit from its strong financial position to potentially acquire one or more brands, either on a proprietary basis or as a licensee. In September 2021, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances and fragrance-related products under the Donna Karan and DKNY brands. This new license takes effect July 1, 2022.
In October 2021, we closed on a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license was granted for the production and distribution of Ferragamo brand perfumes. The license became effective in October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions. With respect to the management and coordination of activities related to the license agreement, the Company is operating through a wholly-owned Italian subsidiary based in Florence, that was acquired from Salvatore Ferragamo on October 1, 2021. The acquisition together with the license agreement was accounted for as an asset acquisition. The total cost of the assets acquired net of liabilities assumed aggregated approximately $35.8 million. In connection with this acquisition, we agreed to pay $17.0 million in equal annual installments of $1.7 million including interest imputed at 2.0%.
Opportunities for external growth are regularly examined, with the priority of maintaining the quality and homogeneous nature of our portfolio. However, we cannot assure you that any new license or acquisition agreements will be consummated.
Cash provided by operating activities aggregated $119.6 million, $65.0 million, and $76.5 million in 2021, 2020 and 2019, respectively. In 2021, working capital items used $13.7 million in cash from operating activities, as compared to $7.3 million in 2020 and $16.6 million in 2019. Although, from a cash flow perspective, accounts receivable is up approximately 37% from year-end 2020, the balance is reasonable based upon fourth quarter 2021 record sales levels and reflects strong collection activity as day’s sales outstanding decreased to 61 days in 2021, as compared to 86 days and 69 days in 2020 and 2019, respectively. From a cash flow perspective, inventory levels are up 31% from year-end 2020. However, inventory days on hand declined significantly to 208 days in 2021, as compared to 277 days in 2020, and 224 days in 2019. Although inventories include product needed to support new product launches, the overall balance is lower than historic levels due primarily to the aforementioned supply chain disruptions.
Cash flows used in investing activities reflect the purchase and sales of short-term investments. These investments consist of certificates of deposit with maturities greater than three months marketable equity securities and other contracts. At December 31, 2021, approximately $45 million of certificates of deposit contain penalties where we would forfeit a portion of the interest earned in the event of early withdrawal.
Our business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we generally spend less than $5.0 million on capital expenditures including tools and molds needed to support our new product development calendar. Capital expenditures also include amounts for office fixtures, computer equipment and industrial equipment needed at our distribution centers.
In April 2021, Interparfums SA completed the acquisition of its future headquarters at 10 rue de Solférino in the 7th arrondissement of Paris from the property developer. This is an office complex combining three buildings connected by two inner courtyards, and consists of approximately 40,000 total sq. ft.
The $142 million purchase price is in line with market value and includes the complete renovation of the site. As of December 31, 2021, $136.1 million of the purchase price, including approximately $3.1 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of December 31, 2021. Approximately $8.8 million of cash held in escrow is included in other assets on the accompanying balance sheet as of December 31, 2021. In addition, the Company borrowed $17.0 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the $17.0 million VAT credit was reimbursed by the French Tax Authorities and the loan was repaid.
The acquisition was financed by a 10-year €120 million (approximately $136 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately €80 million of the variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum.
In June 2020, the Company and Divabox, owner of the Origines-parfums e-commerce platform for beauty products, signed a strategic agreement and equity investment pursuant to which we acquired 25% of Divabox capital for $14 million through a capital increase. In connection with the acquisition, the Company entered into a $13.4 million term loan, which was repaid in full in February 2021.
Our short-term financing requirements are expected to be met by available cash on hand at December 31, 2021, cash generated by operations and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 2021 consist of a $20.0 million unsecured revolving line of credit provided by a domestic commercial bank and approximately $28 million in credit lines provided by a consortium of international financial institutions. There were no balances due from short-term borrowings as of December 31, 2021 and 2020.
In October 2019, our Board authorized a 20% increase in the annual dividend to $1.32 per share. In April 2020, as a result of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the quarterly cash dividend. In February 2021, our Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly and in February 2022, our Board authorized a 100% increase in the annual dividend to $2.00 per share. The next quarterly cash dividend of $0.50 per share is payable on March 31, 2022, to shareholders of record on March 15, 2022. Dividends paid, including dividends paid once per year to noncontrolling stockholders of Interparfums SA, aggregated $41.5 million, $21.1 million and $44.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. The cash dividends to be paid in 2022 are not expected to have any significant impact on our financial position.
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 year ended December 31, 2021.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
General
We address certain financial exposures through a controlled program of risk management that primarily consists of the use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts in order to reduce the effects of fluctuating foreign currency exchange rates. We do not engage in the trading of foreign currency forward exchange contracts or interest rate swaps.
Foreign Exchange Risk Management
A general discussion relating to our policies on foreign exchange risk management can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 2020.
As of December 31, 2021, we had foreign currency contracts in the form of forward exchange contracts with notional amounts of approximately U.S. $64.5 million and GB £3.5 million which all have maturities of less than one year. We believe that our risk of loss as the result of nonperformance by any of such financial institutions is remote.
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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The required financial statements commence on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e)) as of the end of the period covered by this annual report on Form 10-K (the “Evaluation Date”). Based on their review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the Evaluation Date, our Company’s disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Inter Parfums, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13(a)-15(f) under the Securities Exchange Act of 1934. With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021.
Our independent auditor, Mazars USA LLP, a registered public accounting firm, has issued its report on its audit of our internal control over financial reporting. This report appears on page.
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 fourth quarter of 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
As of the date of this report, our executive officers and directors were as follows:
Name
Position
Jean Madar
Chairman of the Board, Chief Executive Officer of Inter Parfums, Inc. and Director General of Interparfums SA
Philippe Benacin
Vice Chairman of the Board, President of Inter Parfums, Inc. and Chief Executive Officer of Interparfums SA
Russell Greenberg
Director, Executive Vice President and Chief Financial Officer
Philippe Santi
Director, Executive Vice President and Chief Financial Officer, Interparfums SA
François Heilbronn
Director
Robert Bensoussan
Director
Patrick Choël
Director
Michel Dyens
Director
Veronique Gabai-Pinsky
Director
Gilbert Harrison
Director
Frederic Garcia-Pelayo
Executive Vice President and Chief Operating Officer of Interparfums SA
Our directors will serve until the next annual meeting of stockholders and thereafter until their successors shall have been elected and qualified. Messrs. Jean Madar and Philippe Benacin have a verbal agreement or understanding to vote their shares and the shares of their respective holding companies in a like manner.
With the exception of Mr. Benacin, the officers are elected annually by the directors and serve at the discretion of the board of directors. There are no family relationships between executive officers or directors of our Company.
Board of Directors
Our board of directors has the responsibility for establishing broad corporate policies and for the overall performance of our Company. Although certain directors are not involved in day-to-day operating details, members of the board of directors are kept informed of our business by various reports and documents made available to them. Our board of directors held 21 meetings (or executed consents in lieu thereof), including meetings of committees of the full board of directors during 2021, and all of the directors attended at least 75% of the meetings (or executed consents in lieu thereof) of the full board of directors and committees of which they were a member. Our board of directors presently consists of ten (10) directors.
We have adopted a Code of Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, as well as other persons performing similar functions, and we agree to provide to any person without charge, upon request, a copy of our Code of Business Conduct. Any person who requests a copy of our Code of Business Conduct should provide their name and address in writing to: Inter Parfums, Inc., 551 Fifth Avenue, New York, NY 10176, Att.: Shareholder Relations. In addition, our Code of Conduct is also maintained on our website, at www.interparfumsinc.com.
During 2021, our board of directors had the following standing committees:
●
Audit Committee - The Audit Committee has the sole authority and is directly responsible for, the appointment, compensation and oversight of the work of the independent accountants employed by our company which prepare or issue audit reports for our company. During 2021, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. The charter of the Audit Committee is posted on our company’s website.
The Company does not have an “audit committee financial expert” within the definition of the applicable Securities and Exchange Commission rules. Finding qualified nominees to serve as a director of a public company without substantial financial resources has been challenging. In addition, despite the applicable Securities and Exchange Commission rule which states that being named as the audit committee financial expert does not impose any greater duty, obligation or liability, our company has been met with resistance from both present and former directors to being named as such, primarily due to potential additional personal liability. However, as the result of the background, education and experience of the members of the Audit Committee, our board of directors believes that such committee members are fully qualified to fulfill their obligations as members of the Audit Committee.
●
Executive Compensation and Stock Option Committee - The Executive Compensation and Stock Option Committee oversees the compensation of our company’s executives and administers our company’s stock option plans. During 2021, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. The charter of the Executive Compensation and Stock Option Committee is posted on our company’s website.
●
Nominating Committee - During 2021, this committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky. The purpose of the Nominating Committee is to determine and recommend qualified persons to the Board of Directors who will be put forth as management’s slate of directors for vote of the Corporation’s stockholders, as well as to fill vacancies in the Board of Directors. The charter of the Nominating Committee is posted on our company’s website.
We have adopted a board diversity policy, which provides that the selection of candidates for appointment to our board will be based on an overriding emphasis on merit, but the Nominating Committee will seek to fill board vacancies by considering candidates that bring a diversity of background and industry or related expertise to our board. The Nominating Committee is to consider an appropriate level of diversity having regard for factors such as skills, business and other experience, education, gender, age, ethnicity and geographic location. A copy of the board diversity policy is posted on our company’s website. In addition, Nasdaq has adopted a Board Diversity Rule, which will require Nasdaq listed companies to publicly disclose board-level diversity statistics using a standardized template commencing on the later of August 8, 2022 or the date the filing of a listed company’s proxy statement for its 2022 annual meeting. In addition, in the following year, we will be required to disclose whether or not we have one director that is diverse under the applicable Nasdaq rule, and if not, then why not. By the 2025 annual meeting, we will be required to disclose whether or not we have two directors that are diverse under the applicable Nasdaq rule, and if not, then why not. We do not foresee any issue in complying with Nasdaq Board Diversity Rule at this time.
Business Experience
The following sets forth biographical information as to the business experience of each executive officer and director of our company for at least the past five years.
Jean Madar
Jean Madar, age 61, a Director, has been the Chairman of the Board since our company’s inception, and is a co-founder of our company with Mr. Philippe Benacin. From inception until December 1993 he was the President of our company; in January 1994, he became Director General of Interparfums SA, our company’s subsidiary; and in January 1997, he became Chief Executive Officer of our company. Mr. Madar was previously the managing director of Interparfums SA, from September 1983 until June 1985. At such subsidiary, he had the responsibility of overseeing the marketing operations of its foreign distribution, including market research analysis and actual marketing campaigns. Mr. Madar graduated from The French University for Economic and Commercial Sciences (ESSEC) in 1983. We believe that Mr. Madar’s skills in guiding, leading and determining the strategic direction of our company since its inception together with Mr. Benacin, in addition to his contacts in the fragrance and cosmetic industry, render him qualified to serve as a member of our board of directors.
Philippe Benacin
Mr. Benacin, age 63, a Director, is President of our Company and the Chief Executive Officer of Interparfums SA, has been the Vice Chairman of the Board since September 1991, and is a co-founder of our company with Mr. Madar. He was elected the Executive Vice President in September 1991, Senior Vice President in April 1993, and President of the Company in January 1994. In addition, he has been the President of our Company and Chief Executive Officer of Interparfums SA for more than the past five years. Mr. Benacin graduated from The French University for Economic and Commercial Sciences (ESSEC) in 1983. In June 2014 Mr. Benacin was elected as a member of the Supervisory Board of Vivendi, and Chairman of its Corporate Governance, Nominations and Remuneration Committee. We believe that Mr. Benacin’s skills in guiding, leading and determining the strategic direction of our company since its inception together with Mr. Madar, in addition to his contacts in the fragrance and cosmetic industry, render him qualified to serve as a member of our board of directors.
Russell Greenberg
Mr. Greenberg, age 65, the Chief Financial Officer, was Vice-President, Finance when he joined the Company in June 1992; became Executive Vice President in April 1993; and was appointed to our board of directors in February 1995. He is a certified public accountant licensed in the State of New York, and is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. After graduating from The Ohio State University in 1980, he was employed in public accounting until he joined our company in June 1992. We believe that Mr. Greenberg’s skills in accounting and tax, as well as his knowledge of the fragrance industry and our Company’s operations, render him qualified to serve as a member of our board of directors.
Philippe Santi
Philippe Santi, age 59, and a Director since December 1999, is the Executive Vice President and Chief Financial Officer of Interparfums SA. Mr. Santi, who is a Certified Accountant and Statutory Auditor in France, has been the Chief Financial Officer of Interparfums SA since February 1995. Prior to February 1995, Mr. Santi was the Chief Financial Officer for Stryker France and an Audit Manager for Ernst and Young. We believe that Mr. Santi’s skills in accounting and tax, as well as his knowledge of the fragrance industry and our Company’s European operations, render him qualified to serve as a member of our board of directors.
Francois Heilbronn
Mr. Heilbronn, age 60, a Director since 1988, an independent director and a member of the Audit Committee, Nominating Committee and the Executive Compensation and Stock Option Committee, is a graduate of Harvard Business School with a Master of Business Administration degree and is currently the managing partner of the consulting firm of M.M. Friedrich, Heilbronn & Fiszer. He was formerly employed by The Boston Consulting Group, Inc. from 1988 through 1992 as a manager. Mr. Heilbronn graduated from Institut d’ Etudes Politiques de Paris in June 1983. From 1984 to 1986, he worked as a financial analyst for Lazard Freres & Co. In addition, during 2009, Mr. Heilbronn became an Associate Professor in Business Strategy at Sciences Po, Paris, France. As the result of his business and financial acumen, as well as his experience as managing partner of a business consulting firm in the area of mergers and acquisitions of large international companies in retail, consumer goods and consumer services throughout the world, we believe Mr. Heilbronn is qualified to serve as a member of our board of directors.
Robert Bensoussan
Robert Bensoussan, age 63, has been a Director since March 1997, and is also an independent director. Mr. Bensoussan is the founder of Sirius Equity Consultants, a retail and branded luxury goods Investment Company. To date, Mr. Bensoussan remains as an investor in C.A.R.O.L, the AI driven fitness equipment, Hapy Sweet Bee Ltd, natural health food products, Eaglemoss Ltd, UK part-works publisher and Patchwork, a Parisian co-working company.
He was previously Chairman of Camaïeu, the French retail conglomerate, a board member of Celio International, the French retail conglomerate and Vivarte representing the GLG hedge fund. In the latter part of 2019, Mr. Bensoussan resigned after 6 years as the only non-North American board member of lululemon athletica Inc. Following the successful sale in 2021, Mr. Bensoussan stepped down from the board of Feelunique.com one of Europe’s largest online beauty retailer’s after serving 9 years.
He is also a member of the Advisory Board of Pictet Bank Premium Brands Fund and sits on the board of Pronovias, the worldwide leader of wedding dresses owned by BC Partners, Yonderland, Europe’s largest premium outdoor retailer, SNS, a prominent aspirational streetwear and entertainment hub and Internet Fusion Group, a leading e-commerce site for niche lifestyle products.
Previously Mr. Bensoussan was as director of, and had an indirect ownership interest J. Choo Limited until July 2011, and was CEO from 2001 to 2007, and was a member of the Board of Jimmy Choo Ltd, a privately held luxury shoe wholesaler and retailer, from 2001 to 2011.
We believe Mr. Bensoussan is qualified to serve as a member of our board of directors due to his business and financial acumen, as well as his experience in the retail and branded luxury goods market.
Patrick Choël
Mr. Choël, age 78, was appointed to the board of directors in June 2006 as an independent director, and is a member of the Audit Committee, Nominating Committee and the Executive Compensation and Stock Option Committee. Mr. Choël is a director of our majority-owned subsidiary, Interparfums SA, a publicly held company, and Christian Dior and Guerlain, both privately held companies. He is also the manager of Université 82, a business consultant and advisor. For approximately 10 years, through March 2004, Mr. Choël was the President and CEO of two divisions of LVMH Moet Hennessy Louis Vuitton S.A., first Parfums Christian Dior, a leading world-wide prestige beauty/fragrances business, and later, the LVMH Perfumes and Cosmetics Division, which included such well-known brands as Parfums Christian Dior, Guerlain, and Parfums Givenchy, among others. Prior to such time, for approximately 30 years, he held various executive positions at Unilever, including President and CEO of Elida Fabergé France and President and CEO of Chesebrough Pond’s USA. Because of this experience, especially in the prestige beauty business, we believe that Mr. Choël is qualified to serve as a member of our board of directors.
Michel Dyens
Michel Dyens, age 81 and an independent director, is the Founder, Chairman and Chief Executive Officer of Michel Dyens & Co., which he founded over 25 years ago. With headquarters in New York and Paris, Michel Dyens & Co. is a leading independent investment banking firm focused on mergers and acquisitions. Michel Dyens & Co. has vast experience in luxury goods, beauty, spirits and other premium branded consumer goods in which it has concluded numerous landmark deals. Michel Dyens & Co. has advised in such deals as the sale of the Grey Goose ultra-premium vodka brand to Bacardi, the acquisition of the luxury Swiss watchmaker Hublot by LVMH, the sale of the Harry Winston to Aber Diamond Corporation and Boucheron to Kering. Michel Dyens & Co. represented the owners of Liaigre, the luxury furniture brand, in the sale to Symphony International and Navis Capital, and Casa Dragones, the ultra-premium tequila, in the sale to BDT Partners (Byron Trott).
Michel Dyens & Co. recently represented the owners of Buly, the luxury French fragrance and beauty brand, in the sale to LVMH and the owners of Blissim, the French leader in beauty subscription e-commerce, and online beauty retail for an investment by Raise Investissement. In addition, he has just sold We11done, the Korean contemporary fashion and lifestyle brand, to Sequoia Capital.
Michel Dyens & Co. was the exclusive advisor to Creed in the sale of the ultra-luxury fragrance company Creed BlackRock Long Term Private Capital, and represented Mr. ChinWook Lee, the founder and CEO of Dr. Jart+, in the sale of Have & Be Co. Ltd. to The Estée Lauder Companies. Michel Dyens & Co. also advised the owner of the ultra-luxury fragrance brand By Kilian, in the sale to Estée Lauder. Michel Dyens & Co. advised the shareholders of the largest independent hair color and hair care company in Brazil, Niely Cosmeticos in the sale of the company to L’Oréal, as well as the owner of the super-premium liqueur St-Germain in the sale of the brand to Bacardi, the Colomer Group (American Crew and CND/Shellac brands) in its sale to Revlon, and Sidney Frank Importing Company in the sale of the company to Jaegermeister. Other transactions include the sale of the Essie cosmetics business to L’Oréal, the sale of TIGI (BedHead and Catwalk brands) to Unilever, the luxury hair care brand Christophe Robin to The Hut Group, the thinning hair brand NIOXIN Research Laboratories to Procter & Gamble, John Frieda Professional Hair Care and Molton Brown to the Kao Corporation, the Svedka vodka brand to Constellation Brands and Chambord liqueur to Brown-Forman.
In the mission-driven field, Michel Dyens & Co. recently represented ClimateCare, a prominent UK carbon-offset business, in the sale to Averna Capital and represented the founders of Caboo Paper Products a Vancouver, Canada-based tree-free household paper products brand, for an investment by sustainability-focused venture capital firm Renewal Funds. Among other recent transactions, Michel Dyens & Co. recently represented the Fairtrade and organic coffee brand Ethical Bean Coffee in the sale to Kraft Heinz, and as well as Alter Eco Americas, a leading organic chocolate brand, which we sold to NextWorld Evergreen.
In healthy and premium food, Michel Dyens & Co. represented the Fairtrade and organic coffee brand Ethical Bean Coffee in the sale to Kraft Heinz, and as well as Alter Eco Americas, a leading organic chocolate brand, which it sold to NextWorld Evergreen.
From April 2004 to September 2014, Mr. Dyens was an independent director of Interparfums SA. We believe Mr. Dyens is qualified to serve as a member of our board of directors thanks to his knowledge of our company’s luxury business, his business and financial acumen, as well as his experience in the luxury goods market.
Veronique Gabai-Pinsky
Ms. Gabai-Pinsky, age 56, was elected for the first time to our board in September 2017. She became a director of Interparfums SA in April 2017. She is currently operating a startup specialty fragrance business, and a director of Lifetime Brands (Nasdaq: LCUT), which is in the home goods business. She was President of Vera Wang Group from January 2016 through June 2018, after a year of consulting with the company and she oversaw all product categories and markets. Prior to joining Vera Wang, from 2006 to December 2014 Ms. Gabai-Pinsky was the Global President for Aramis and Designers Fragrances as well as Beauty Bank and Idea Bank at The Estée Lauder Companies, reporting to the Chief Executive Officer of such company. During her tenure, Ms. Gabai-Pinsky developed and ensured the growth of several beauty and skin care brands, including Lab Series for Men. She was highly instrumental in the evolution of the fragrance category for such company, as she improved its overall business model, globally grew brands such as Donna Karan and Michael Kors, evolved and harmonized the portfolio, divested dilutive brands and brought in Tory Burch, Zegna and Marni under licenses. She ultimately actively participated in the acquisitions of Le Labo, Frederic Malle, and By Kilian and assisted in the transformation of the long-term strategic direction of such company.
In the earlier years of her career, Ms. Gabai-Pinsky served as Vice President of Marketing and Communication for Guerlain, a division of LVMH Moet Hennessy Louis Vuitton S.A., where she led the successful re-launch of Shalimar, the introduction of Aqua Allegoria, and contributed to the re-focus of the beauty category around its pillars, Terracotta, Meteorites and Issima, while redesigning all communication strategies and content. She started her career at L’Oréal, and was also Vice President of Marketing for Giorgio Armani, where she was instrumental in the overall development of its fragrance business by developing the successful Acqua di Gio for men and introducing the Emporio Armani franchise. A graduate from ESSEC Business School in Paris, France, she has received several awards, including Marketer of the Year by Women’s Wear Daily in December 2013.
Ms. Gabai-Pinksy is an independent director, and is a member of the Audit Committee, Executive Compensation and Stock Option Committee and the Nominating Committee of our company. We believe Ms. Gabi-Pinsky is qualified to serve as a member of our board of directors due to her more than 25 years of experience in the luxury, fashion, beauty and fragrance fields, success as a brand builder, creative thinker, business acumen, and a broad understanding of consumers, brands and business models.
Gilbert Harrison
Mr. Harrison, age 81, an independent director, was appointed to our board in April 2018. Mr. Harrison has more than 50 years of experience in corporate finance and strategic transactions, specializing in the consumer products space. He began his career in 1965 practicing corporate and securities law in New York and Philadelphia. In 1971 he founded Financo, which he grew to become one of the leading independent middle market transaction firms in the country. In 1985, Financo was acquired by Lehman Brothers, where the firm’s primary efforts were focused on increasing its expertise in retail, apparel and other merchandising transactions of all types. At Lehman, Mr. Harrison was Chairman of the Merchandising Group and on the firm’s Investment Banking Operating Committee while continuing as Chairman of Financo, which was renamed the Middle Market Group of Lehman. In 1989, he re-acquired Financo from Lehman, re-establishing Financo as one of the leading investment banking firms handling transactions and providing strategic advice in connection with merchandising companies. Mr. Harrison retired as Chairman of Financo in December of 2017, after which he formed the Harrison Group, a firm that provides consulting and financial advisory services to merchandising and products companies.
Mr. Harrison’s other activities include his membership on the Advisory Council of the World Retail Congress, Shoptalk and the Financial Times Business of Luxury Summit. Additionally, he has created a course on mergers and acquisitions at The Wharton School and has published various articles and academic studies on the state of retailing and mergers and acquisitions, including a chapter in the book entitled, “The Mergers and Acquisitions Handbook.” Mr. Harrison lectures throughout the country, including chairing seminars for Retail Week as well as for the International Council of Shopping Centers, the National Retail Federation, Young President’s Center, The Wharton Aresty Institute of Executive Education and The President’s Association of the American Management Association. He also appears frequently on Bloomberg TV and CNBC as an expert on retail and apparel.
Mr. Harrison received a Bachelor of Science in Economics from The Wharton School of The University of Pennsylvania in 1962 and his Juris Doctor from The University of Pennsylvania Law School in 1965. He is also Chairman of the Fashion Division of UJA, Treasurer and a Board member of the Southampton Hospital, Director of the Peggy Guggenheim Collection, and former Board member of the Wharton School of the University of Pennsylvania. We believe Mr. Harrison is qualified to serve as a member of our board of directors due to his tremendous depth and breadth of knowledge about the merchandising and consumer industry, and he has a long track record of facilitating value-creating transactions for companies in this sector. Mr. Harrison just finished his autobiography, Deal Junky, which was published in January 2022.
Frederic Garcia-Pelayo
Frederic Garcia-Pelayo, age 60, has been with Interparfums SA for more than the past 20 years. He is currently the Executive Vice President and Chief Operating Officer of Interparfums SA, and was previously the Director of its Luxury and Fashion division beginning in March 2005. He was also previously the Director of Marketing and Distribution for Perfume and Cosmetics and was first named Executive Vice President in 2004.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and any amendments to such forms furnished to us, and written representations from various reporting persons furnished to us, we are not aware of any reporting person who has failed to file the reports required to be filed under Section 16(a) of the Securities Exchange Act of 1934 on a timely basis.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Compensation Discussion and Analysis
General
The executive compensation and stock option committee of our board of directors is comprised entirely of independent directors and oversees all elements of compensation (base salary, annual bonus, long-term incentives and perquisites) of our company’s executive officers and administers our company’s stock option plans, other than the non-employee directors stock option plan, which is self-executing.
The objectives of our compensation program are designed to strike a balance between offering sufficient compensation to either retain existing or attract new executives on the one hand, and maintaining compensation at reasonable levels on the other hand. We do not have the resources comparable to the cosmetic giants in our industry, and, accordingly, cannot afford to pay excessive executive compensation. In furtherance of these objectives, our executive compensation packages generally include a base salary, as well as annual incentives tied to individual performance and long-term incentives tied to our operating performance.
Mr. Madar, the Chairman and Chief Executive Officer, takes the initiative after discussions with Mr. Russell Greenberg, Executive Vice President, Chief Financial Officer and a Director, and recommends executive compensation levels for executives for United States operations. Mr. Benacin, the Chief Executive Officer of Interparfums SA, takes the initiative after discussions with Philippe Santi, the Chief Financial Officer of Interparfums SA, and recommends executive compensation levels for executives for European operations. The recommendations are presented to the compensation committee for its consideration, and the compensation committee makes a final determination regarding salary adjustments and annual award amounts to executives, including Jean Madar and Philippe Benacin. Messrs. Madar and Benacin are not present during deliberations or determination of their executive compensation by the compensation committee. Further, Messrs. Madar and Benacin, in addition to being executive officers and directors, are our largest beneficial shareholders, and therefore, their interests are aligned with our shareholder base in keeping executive compensation at a reasonable level.
The compensation committee was pleased that the most recent shareholder advisory vote on executive compensation held at our last annual meeting of shareholders in October 2021 overwhelmingly approved the compensation policies and decisions of the compensation committee. The compensation committee has determined to continue its present compensation policies in order to determine similar future decisions.
Our compensation committee believes that individual executive compensation is at a level comparable with executives in other companies of similar size and stage of development that operate in the fragrance industry, and takes into account our company’s performance as well as our own strategic goals. Further, the compensation committee believes that its present policies to date, with its emphasis on rewarding performance, has served to focus the efforts of our executives, which in turn has permitted our company to weather the pandemic and economic and political turmoil in certain parts of the world, which resulted in the Company’s record results for 2021.
During 2021, the members of such committee consisted of Messrs. Heilbronn and Choël, and Ms. Gabai-Pinsky.
Elements of Compensation
General
The compensation of our executive officers is generally comprised of base salaries, including a fee paid to the holding companies of each of Messrs. Madar and Benacin, annual cash bonuses and long-term equity incentive awards. In determining specific components of compensation, the compensation committee considers individual performance, level of responsibility, skills and experience, other compensation awards or arrangements and overall company performance. The compensation committee reviews and approves all elements of compensation for all of our executive officers taking into consideration recommendations from the Chief Executive Officer of our company and the Chief Executive Officer of Interparfums SA, as well as information regarding compensation levels at competitors in our industry.
Our named executive officers have all been with the company for more than the past ten (10) years, with Messrs. Madar and Benacin being founders of the company. As Messrs. Madar and Greenberg for United States operations, and Benacin and Santi for European operations, are most familiar with the individual performance, level of responsibility, skills and experience of each executive officer in their respective operating segments, the compensation committee relies upon the information provided by such executive officers in determining individual performance, level of responsibility, skills and experience of each executive officer.
The compensation committee views the competitive marketplace very broadly, which would include executive officers from both public and privately held companies in general, including fashion and beauty companies, but not limited to the peer companies contained in the corporate performance graph contained in our annual report. Generally, rather than tie the compensation committee’s determination of compensation proposals to any specific peer companies, the members of our committee have used their business experience, judgment and knowledge to review the executive compensation proposals recommended to them by Mr. Madar for United States operations and Mr. Benacin for European operations. As such, as a general rule the compensation committee did not determine the need to “benchmark” of any material item of compensation or overall compensation. However, in connection with the salary increase to Mr. Madar that occurred in February 2020, surveys of both peer companies and companies with comparable market capitalizations were used by the compensation committee as one of the factors in reaching such determination.
The members of the compensation committee have extensive experience and business acumen and are well qualified in determining the appropriateness of executive compensation levels. Mr. Heilbronn is a managing partner of a business consulting firm in the area of mergers and acquisitions of large international companies in retail, consumer goods and consumer services throughout the world. Mr. Choël is presently a business consultant and advisor, who previously worked as President and Chief Executive Officer of two divisions of LVMH Moet Hennessy Louis Vuitton S.A., which included such well-known brands as Parfums Christian Dior, Guerlain, and Parfums Givenchy. Mr. Choël has also been President and CEO of both Elida Fabergé France and Chesebrough Ponds USA. Ms. Gabai-Pinsky, the final committee member, has executive experience as the former President of Vera Wang Group, as well as the Global President for Aramis and Designers Fragrances in addition to Beauty Bank and Idea Bank at The Estée Lauder Companies.
Base Salary
Base salaries for executive officers are initially determined by evaluating the responsibilities of the position held and the experience of the individual, and by reference to the competitive marketplace for executive talent. Base salaries for executive officers are reviewed on an annual basis, and adjustments are determined by evaluating our operating performance, the performance of each executive officer, as well as whether the nature of the responsibilities of the executive has changed.
As stated above, as Messrs. Madar and Greenberg for United States operations, and Benacin and Santi for European operations, are most familiar with the individual performance, level of responsibility, skills and experience of each executive officer in their respective segments, the committee relies upon the information provided by such executive officers in determining individual performance, level of responsibility, skills and experience of each executive officer.
For executive officers of United States operations, the bulk of their annual compensation is in base salary including a fee paid to the holding company for Mr. Madar for services rendered outside the United States. However, for executive officers of European operations base salary comprises a smaller percentage of overall compensation. We have paid a lower percentage of overall compensation in the form of base salary to executive officers of European operations for several years, principally because European operations historically have had higher profitability than United States operations, and European operations are run differently from United States operations by the Chief Executive Officer of European operations, Mr. Benacin. As the result of this historically higher profitability, European operations have had the ability to pay higher bonus compensation in addition to base salary. As bonus compensation is and has historically been discretionary, no targets were set in order to maintain flexibility. Further, if results of operations for European operations were not satisfactory (again, no target amounts were set to maintain flexibility), then bonus compensation, as well as overall compensation could be lowered without otherwise affecting base salary. Finally, by keeping annual bonus compensation at a higher percentage of overall compensation and base salary at a lower percentage, our company benefits because the base amount for annual salary adjustments would be smaller.
COVID-19 Impact
It is important to note that 2020 salary increases and 2019 bonus compensation awards were determined prior to the full impact the global COVID-19 pandemic, the imposition of worldwide governmental lockdowns, and the resultant negative impact on the Company’s operations. During the balance of the pandemic and related impacts through December 31, 2020, no employees were terminated or furloughed from United States operations. Interparfums SA did avail itself of a small French government plan for unemployment insurance for its employees. For 2020, there were no reductions or deferrals in salaries of any executive officers or employees. For 2021, as the result of the continuing impacts of the COVID-19 pandemic, after the recommendations of Messrs. Madar and Benacin, the compensation committee determined that no executive officer would receive any increase in base salary. In addition, there were no increases in the fees paid to the respective holding companies of Messrs. Madar and Benacin.
For 2021, although Mr. Benacin received the same base salary as he did in 2020, his salary was affected by foreign currency conversion rates and was $804,000 for 2021. For 2020, Mr. Benacin received a modest increase in base salary of $14,000 to $789,000, which is comparable to the modest increase in base salary of $13,000 in 2019. Mr. Benacin’s base salary includes $250,000 paid by the Company’s United States operations to Mr. Benacin’s holding company for each of the past three years, in accordance with the consulting agreement with Mr. Benacin’s holding company, which provides for review on an annual basis of the amount of compensation payable to such company.
The compensation committee considered the following salient factors in authorizing payment to Mr. Benacin’s holding company- services rendered to United States operations for several years by Mr. Benacin in connection with licensing and distribution of international brands, as well as future services to be performed by Mr. Benacin internationally relating to licensing and distribution of international brands for United States operations.
As Mr. Benacin values the services of two named executive officers of Interparfums SA, Mr. Philippe Santi, Executive Vice President and the Chief Financial Officer, and Mr. Frederic Garcia-Pelayo, Executive Vice President and Chief Operating Officer, equally, their base salaries, as well as their bonus compensation discussed below, have been in lockstep. For 2021, the base salary of each of Messrs. Santi and Garcia-Pelayo was €408,000, as no executive officer received any increase in base salary due the continuing impact of the COVID-19 pandemic. However, the base salaries of Messrs. Santi and Garcia-Pelayo in 2021 were affected by foreign currency conversion rates and were both $483,000 for 2021. For 2020, each of Messrs. Santi and Garcia-Pelayo received an increase in base salary of $14,000 to $470,000. Each of Messrs. Santi and Garcia-Pelayo had received an increase of $13,000 in 2019. Increases in prior years were awarded primarily to reward these two executive officers for their contributions in European Operations achieving increases in both the sales and earnings. The compensation committee considered the recommendations of Mr. Benacin, results of operations for the year, as well as the services performed for European operations by Messrs. Santi and Garcia-Pelayo in authorizing these salary levels.
A different approach is taken for United States operations as that segment is smaller and less profitable. A more significant base salary is paid in order to attract and retain employees with the skills and talents needed to run the operation with a lesser emphasis placed on bonuses. Neither of the executive officers for United States operations have employment agreements (although Mr. Madar’s personal holding company has a consulting agreement that provides for review on an annual basis of the amount of compensation payable to such company), as we believe that having flexibility in structuring annual base salary is a benefit, which permits us to act quickly to meet a changing economic environment.
As previously reported, from 2013 until 2019 the annual aggregate base salary paid to Mr. Madar individually and fees paid to his holding company remained unchanged at $630,000, which was substantially below the amounts indicated by two surveys of chief executive officer salaries for 2019 (collectively the “CEO Salary Surveys”). The CEO Salary Surveys indicated that the annual and median average CEO salaries for peer companies (excluding the Madar salary) were $2,854,656 and $1,540,000, respectively, and $2,604,346 and $1,750,000 for comparable market capitalization companies, respectively. In recognition of the efforts of Mr. Madar and his holding company as one of the prime causes for our substantial increase in net sales and net income, as well as market capitalization from 2014 through 2019, thus substantially increasing shareholder value, on February 4, 2020 the Committees jointly authorized the aggregate annual increase in Mr. Madar’s base salary by $600,000 to $1.23 million effective as of January 1, 2020. For 2021, Mr. Madar did not receive any increase in base salary.
Russell Greenberg, the Executive Vice President and Chief Financial Officer, also did not have any salary increase for 2021, and his base salary remained at $720,000. Previously, he had received the same $30,000 increase in base salary for 2020 and 2019. In connection with the previous increases in salary, the Compensation Committee considered the following material factors in granting Mr. Greenberg his salary increases: his individual performance, level of responsibility, skill and experience, as well as the recommendation of the Chief Executive Officer.
Bonus Compensation/Annual Incentives
As discussed above, we have paid a higher percentage of overall compensation in the form of bonus compensation to executive officers of European operations for several years, principally because European operations historically have had higher profitability than United States operations. As the result of this historically higher profitability, European operations have had the ability to pay higher bonus compensation in addition to base salary. As bonus compensation is discretionary, no targets were set in order to maintain flexibility. Further, if results of operations for European operations were not satisfactory (again, no target amounts were set to maintain flexibility), then bonus compensation, as well as overall compensation could be lowered without otherwise affecting base salary. Individual performance, level of responsibility, skill and experience, were the salient factors considered by the Compensation Committee in awarding bonus compensation described below.
In recognition of the Company’s turnaround from the effects of the COVID-19 pandemic and record results in 2021, and after the recommendations of Messrs. Madar and Benacin, the compensation committee determined that Mr. Benacin receive a bonus of $166,000. For 2020 Mr. Benacin, the chief decision maker for European operations, proposed and the compensation committee concurred in the payment of discretionary bonus compensation of $131,000. For his performance in 2019 Mr. Benacin was paid discretionary bonus compensation of $110,000. The discretionary bonus compensation for Mr. Benacin has been approximately 30% of his base salary in 2021, 17%, of his base salary in 2020 and approximately 14% in 2019. In addition, bonus compensation for Messrs. Santi and Garcia-Pelayo have remained in lockstep, and each was awarded a discretionary bonus of $378,000 in 2021 or 78% of their base salary. This compares to $296,000 and $324,000 in 2020 and 2019, respectively, or approximately 63% and 73% of their base salaries for services performed in 2020 and 2019, respectively.
A different approach is taken for United States operations as that segment is smaller and less profitable. As discussed above, a more significant base salary is paid in order to attract and retain employees with the skills and talents needed to run United States operations with a lesser emphasis placed on bonuses. In 2021, although Mr. Greenberg did not receive any increase in base salary due to the continuing impact of the COVID-19 pandemic, he did receive a discretionary bonus of $70,000 based upon the recommendation of the Chief Executive Officer. Mr. Greenberg was paid a discretionary bonus of $35,000 in 2020 and $50,000 in 2019. The Compensation Committee considered the following material factors in granting Mr. Greenberg his bonuses: his individual performance, level of responsibility, skill and experience, as well as the recommendation of the Chief Executive Officer.
Mr. Madar, the Chief Executive Officer has not received any cash bonus in the past three years.
As required by French law, Interparfums SA maintains its own profit sharing plan for all French employees who have completed three months of service, including executive officers of our European operations other than Mr. Benacin, the Chief Executive Officer of Interparfums SA. Benefits are calculated based upon a percentage of taxable income of Interparfums SA and allocated to employees based upon salary. The maximum amount payable per year per employee is approximately $34,940.
Calculation of the total annual benefits contribution is made according to the following formula:
67% of (Interparfums SA net income, less 2.5% of shareholders’ equity without net income for the year) times a fraction, the numerator of which is wages, and the denominator of which is net income before tax + wages + taxes (other than income tax) + valuation allowances + amortization expenses + interest expenses.
Contribution to individual employees is then made pro rata based upon their individual salaries for the year.
Long-Term Incentives
Stock Options. In prior years, we have linked long-term incentives with corporate performance through the grant of stock options. However, no options were granted in 2021 or 2020 to either employees of United States operations or European operations, but the compensation committee may choose to do so in the future as part of a review of the executive compensation strategy.
Interparfums SA Stock Compensation Plan
2019 Plan - In December 2018, Interparfums SA approved a plan to grant an aggregate of 26,600 shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2022. Under this plan in June 2022, Messrs. Benacin, Madar, Garcia Pelayo and Santi are estimated to receive 4,000 shares each, all subject to adjustment for stock splits.
In June 2020, the performance conditions were modified effecting 96 employees. As of December 31, 2021, the number of shares to be distributed, after forfeited shares and adjusted for stock splits, increased to 172,343. The increase in shares anticipated to be distributed were transferred from treasury shares at the Interparfums SA level. The modification resulted in a revised cost of the grant to approximately $4.6 million.
In connection with the 2019 Plan referred to above, an incentive plan was established by Interparfums SA for certain employees of Interparfums Luxury Brands, Inc. (“IPLB”), Interparfums Singapore (“IP Singapore”) and Inter Parfums, Inc. The proposed incentive plan would not provide shares but rather, would give a cash payment or bonus (“incentive” or “award”) that mirrors the shares that Interparfums SA employees will receive. An aggregate of 42,140 “phantom” shares have been awarded with Mr. Greenberg being awarded 1,000 of such “phantom” shares, all subject to adjustment for stock splits.
Stock Appreciation Rights
Our stock option plans authorize us to grant stock appreciation rights, or SARs. A SAR represents a right to receive the appreciation in value, if any, of our common stock over the base value of the SAR. To date, we have not granted any SARs under our plans. While the compensation committee currently does not plan to grant any SARs under our plans, it may choose to do so in the future as part of a review of the executive compensation strategy.
Restricted Stock
We have not in the past, and we do not have any future plans to grant restricted stock to our executive officers. However, while the compensation committee currently does not plan to authorize any restricted stock plans, the compensation committee may choose to do so in the future as part of a review of the executive compensation strategy. Our French operating subsidiary, Interparfums, SA, however, has instituted its 2019 Stock Compensation Plans as discussed above.
Other Compensation
For 2021, each of Messrs. Benacin and Garcia-Pelayo received an automobile allowance of $12,774.
No Stock Ownership Guidelines
We do not require any minimum level of stock ownership by any of our executive officers. As stated above, Messrs. Madar and Benacin, are our largest beneficial shareholders, which aligns their interests with our shareholder base in keeping executive compensation at a reasonable level.
Retirement and Pension Plans
We maintain a 401(k) plan for United States operations. Commencing in 2021 we started matching the first $6,000 of contribution for each employee, as we have determined that base compensation together with annual bonuses, are sufficient incentives to retain talented employees. Our European operations maintain a pension plan for its employees as required by French law. For each of 2021. 2020 and 2019, each of Messrs. Benacin, Santi and Garcia-Pelayo received an increase of $17,773, $17,500, and $16,789, respectively, in their value of deferred compensation earnings.
Compensation Committee Report
We have reviewed and discussed with management the Compensation Discussion and Analysis provisions to be included in this Annual Report on Form 10-K for fiscal year ended December 31, 2021 and the proxy statement for the upcoming annual meeting of shareholders. Based on this review and discussion, we recommend to the board of directors that the Compensation Discussion and Analysis referred to above be included in this Annual Report on Form 10-K as well as the proxy statement for the upcoming annual meeting of shareholders.
Francois Heilbronn
Patrick Choël and
Veronique Gabai-Pinsky
The following table sets forth a summary of all compensation awarded to, earned by or paid to our “named executive officers,” who are our principal executive officer, our principal financial officer, and each of the three most highly compensated executive officers of our company. This table covers all such compensation during fiscal years ended December 31, 2021, December 31, 2020 and December 31, 2019. For all compensation related matters disclosed in the summary compensation table, and elsewhere where applicable, all amounts paid in euro have been converted to U.S. dollars at the average rate of exchange in each year.
SUMMARY COMPENSATION TABLE
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)(1)
Non-Equity
Incentive Plan Compensation
($)(2)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)(3)
Total
($)
Jean Madar,
1,230,000
1,230,000
Chairman and
1,230,000
1,230,000
Chief Executive Officer
630,000
138,320
353,092
1,121,412
Russell Greenberg,
720,000
70,000
790,000
Chief Financial Officer and
720,000
35,000
755,000
Executive Vice President
690,000
50,000
34,580
353,092
1,127,672
Philippe Benacin, President Inter
803,504
165,578
17,733
12,774
999,589
Parfums, Inc., Chief Executive
788,808
130,673
17,500
12,434
949,415
Officer of Interparfums SA
760,583
109,731
138,320
353,092
16,789
12,093
1,390,608
Philippe Santi, Executive Vice
482,542
378,464
17,733
878,739
President and Chief Financial
469,730
295,596
17,500
782,826
Officer, Interparfums SA
443,401
323,593
138,320
141,237
34,028
16,789
1,097,368
Frédéric Garcia-Pelayo,
482,542
378,464
17,733
12,774
891,513
Executive Vice President and
469,730
295,596
17,500
8,980
791,806
Chief Operating Officer Interparfums SA
443,401
323,593
138,320
141,237
34,028
16,789
8,734
1,106,102
Amounts reflected under Option Awards represent the grant date fair values in 2021, 2020 and 2019 based on the fair value of stock option awards using a Black-Scholes option pricing model. The assumptions used in this model are detailed in Footnote 13 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 and filed with the SEC.
As required by French law, Interparfums SA maintains its own profit sharing plan for all French employees who have completed three months of service, including executive officers of our European operations other than Mr. Benacin, the Chief Executive Officer of Interparfums SA. Benefits are calculated based upon a percentage of taxable income of Interparfums SA and are allocated to employees based upon salary. The maximum amount payable per year is approximately $34,940.
Calculation of total annual benefits contribution is made according to the following formula:
67% of (Interparfums SA net income, less 2.5% of shareholders’ equity without net income for the year) times a fraction, the numerator of which is wages, and the denominator of which is net income before tax + wages + taxes (other than income tax) + valuation allowances + amortization expenses + interest expenses.
Contribution to individual employees is then made pro rata based upon their individual salaries for the year.
The following table identifies (i) perquisites and other personal benefits provided to our named executive officers in fiscal 2021, and quantifies those required by SEC rules to be quantified and (ii) all other compensation that is required by SEC rules to be separately identified and quantified.
Name and Principal Position
Perquisites
and other
Personal
Benefits
($)
Personal
Automobile
Expense
($)
Lodging
Expense
($)
Total
($)
Jean Madar, Chairman
Chief Executive Officer
Russell Greenberg, Chief Financial
Officer and Executive Vice
President
Philippe Benacin, President of Inter
Parfums, Inc. and Chief Executive
Officer of Interparfums SA
12,774
12,774
Philippe Santi,
Executive Vice President and Chief
Financial Officer, Interparfums SA
Frédéric Garcia-Pelayo,
Executive Vice President and
Chief Operating Officer,
Interparfums SA
12,774
12,774]
Plan Based Awards
No stock options were granted to the executive officers of our company listed in the Summary Compensation Table during the past fiscal year.
Interparfums SA Stock Compensation Plan.
No options were granted by Interparfums SA to the executive officers of our company listed in the Summary Compensation Table during the past fiscal year.
Interparfums SA Profit Sharing Plan
Also as discussed above and required by French law, Inter Parfums, SA maintains its own profit sharing plan for all French employees who have completed three months of service, including executive officers of our European operations other than Mr. Benacin, the Chief Executive Officer of Inter Parfums, SA. Benefits are calculated based upon a percentage of taxable income of Interparfums SA and allocated to employees based upon salary. The maximum amount payable per year per employee is approximately $34,940.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information relating to outstanding equity awards of our Company held by the executive officers listed in the Summary Compensation Table as of December 31, 2021.
Option Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(1)
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Jean Madar
19,000
32.825
12/30/22
20,000 (2)
5,000 (2)
43.80
12/29/23
15,000 (2)
10,000 (2)
65.25
12/30/24
10,000 (2)
15,000 (2)
73.09
12/30/25
Russell Greenberg
25,000
32.825
12/30/22
20,000
5,000
43.80
12/29/23
15,000
10,000
65.25
12/30/24
10,000
15,000
73.09
12/30/25
Philippe Benacin
19,000
32.825
12/30/22
20,000 (2)
5,000 (2)
43.80
12/29/23
15,000 (2)
10,000 (2)
65.25
12/30/24
10,000 (2)
15,000 (2)
73.09
12/30/25
Philippe Santi
1,200
32.825
12/30/22
1,200
1,200
43.80
12/29/23
1,600
46.903
1/18/24
2,000
4,000
65.25
12/30/24
2,000
6,000
73.09
12/30/25
Frédéric Garcia-Pelayo
1,200
32.825
12/30/22
1,200
1,200
43.80
12/29/23
1,600
46.903
1/18/24
2,000
4,000
65.25
12/30/24
2,000
6,000
73.09
12/30/25
[Footnotes from table above]
All options expire 6 years from the date of grant, and vest 20% each year commencing one year after the date of grant.
Options are held in the name of personal holding company.
The following table sets certain information relating to outstanding equity awards granted by Interparfums SA, our majority-owned French subsidiary which has its shares traded on the NYSE Euronext, held by the executive officers of our company listed in the Summary Compensation Table as of the end of the past fiscal year.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OF INTERPARFUMS SA
Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options (#) Exercisable)
Number of Securities Underlying Unexercised Options (#) Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
Option
Exercise
Price ($)
Option Expiration
Date
Number of Shares or Units of Stock that Have Not Vested (#)(1)
Market Value of Shares or Units of Stock that Have Not Vested ($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($)
Jean Madar
N/A
NA
Russell Greenberg
N/A
NA
Philippe Benacin
N/A
5,324
443,202
NA
Philippe Santi
N/A
5,324
443,202
NA
Frédéric Garcia-Pelayo
N/A
5,324
443,202
NA
Estimated number of shares are to be issued only to the extent that the performance conditions have been met.
As of December 31, 2021, the closing price of Interparfums SA as reported by Euronext was 73.50 euros, and the exchange rate was 1.1326 U.S. dollars to 1 euro.
Option Exercises and Stock Vested
The following table sets forth certain information relating to each option exercise affected during the past fiscal year, and each vesting of stock, including restricted stock, restricted stock units and similar instruments of our company during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table.
OPTION EXERCISES AND STOCK VESTED
Option Awards
Stock Awards
Name
Number
of Shares
Acquired on
Exercise
(#)
Value
Realized on
Exercise
($)1
Number
of Shares
Acquired on
Vesting
(#)
Value
Realized On
Vesting
($)
Jean Madar
19,000
1,375,915
Russell Greenberg
25,000
1,460,464
Philippe Benacin
19,000
1,277,297
Philippe Santi
16,000
440,577
Frédéric Garcia-Pelayo
16,000
452,342
[Footnotes from table above]
Total value realized on exercise of options in dollars is based upon the difference between the fair market value of the common stock on the date of exercise, and the exercise price of the option.
Regarding Interparfums SA, our majority-owned French subsidiary which has its shares traded on the Euronext, no options were exercised during the past fiscal year, and there was no vesting of stock, including restricted stock, restricted stock units and similar instruments during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table.
Pension Benefits
The following table sets forth certain information relating to payment of benefits in connection with retirement plans during the past fiscal year, for the executive officers of our company listed in the Summary Compensation Table.
PENSION BENEFITS
Name
Plan Name
Number
of Years
Credited
Service
(#)
Present
Value of
Accumulated
Benefit*
($)
Payments
During
Last Fiscal
Year
($)
Jean Madar
NA
NA
Russell Greenberg
NA
NA
Philippe Benacin
Inter Parfums SA Pension Plan
NA
315,233
17,733
Philippe Santi
Inter Parfums SA Pension Plan
NA
305,233
17,733
Frédéric Garcia-Pelayo
Inter Parfums SA Pension Plan
NA
305,233
17,733
* Does not include any contributions made by prior employers, or individually by the recipients as such information is confidential under French law.
Interparfums SA maintains a pension plan for all of its employees, including all executive officers. The calculation of commitments for severance benefits involves estimating the probable present value of projected benefit obligations. This projected benefit obligations are then prorated to take into account seniority of the employees of Interparfums SA on the calculation date.
In calculating benefits, the following assumptions were applied:
- voluntary retirement at age 65;
- a rate of 45% for employer payroll contributions for all employees;
- a 4% average annual salary increase;
- an annual rate of turnover for all employees under 55 years of age and nil above;
- the TH 00-02 mortality table for men and the TF 00-02 mortality table for women;
- a discount rate of 2.0%.
The normal retirement age is 65 years, but employees, including Messrs. Benacin, Santi and Garcia-Pelayo, can collect reduced benefits if they retire at age 62.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our mean employee and the annual total compensation of Mr. Jean Madar, Chief Executive Officer (the “CEO”):
For 2021, our last completed fiscal year:
● Our median employee’s compensation was $69,673
● Our Chief Executive Officer’s total 2021 compensation was $2,605,915
● Accordingly, our 2021 CEO to Median Employee Pay Ratio was 37.4 to 1
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records. We identified our median employee using our total employee population as of December 31, 2021 by applying a consistently applied compensation measure across our global employee population. For our consistently applied compensation measure, we used all compensation, including actual base salary, bonuses, commissions, and any overtime paid during the 12-month period ending December 31, 2021. We did not use any material estimates, assumptions, adjustments or statistical sampling to determine the worldwide median employee.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Employment and Consulting Agreements
As part of our acquisition in 1991 of the controlling interest in Interparfums SA, now a subsidiary, we entered into an employment agreement with Philippe Benacin. The agreement provides that Mr. Benacin will be employed as Vice Chairman of the Board and President and Chief Executive Officer of Inter Parfums Holdings and its subsidiary, Interparfums SA. The initial term expired on September 2, 1992, and has subsequently been automatically renewed for additional annual periods. The agreement provides for automatic annual renewal terms, unless either party terminates the agreement upon 120 days’ notice. For 2021, Mr. Benacin received an annual salary of approximately $804,000, and automobile expenses of approximately $12,774 which are subject to increase at the discretion of the board of directors. The agreement also provides for indemnification and a covenant not to compete for one year after termination of employment.
In 2014, we entered into a consulting agreement with Mr. Benacin’s holding company, Philippe Benacin Holding SAS, which provides for review on an annual basis of the amount of compensation payable to such company. The agreement also provides for indemnification for Mr. Benacin and his holding company and a covenant not to compete for one year after termination of the agreement. The agreement was for one year, with automatic one year renewals unless either party terminates on 120 days’ notice or Mr. Benacin ceases to be the President of our company. For 2019 through 2021 Mr. Benacin’s personal holding company received $250,000 each year for services rendered outside of the United States by Mr. Benacin in his capacity as President. In addition, in December 2018 and December 2019, we granted options to purchase 25,000 shares for the benefit of Mr. Benacin, which were granted to his personal holding company instead of Mr. Benacin directly.
In 2013, we enter into a consulting agreement with Mr. Madar’s holding company, Jean Madar Holding SAS, which provides for review on an annual basis of the amount of compensation payable to such company. The agreement also provides for indemnification for Mr. Madar and his holding company and a covenant not to compete for one year after termination of the agreement. The agreement was for one year, with automatic one year renewals unless either party terminates on 120 days’ notice or Mr. Madar ceases to be the Chief Executive Officer of our company. As discussed above, in view of receiving substantially less than the annual and median average CEO salaries for peer companies and companies with comparable market capitalization, in early February 2020 the Mr. Madar’s base salary was increased by $600,000 to $1.23 million effective as of January 1, 2020, and allocated so that the annual base salary for Jean Madar individually was $285,000, and the fees to Jean Madar Holding SAS were $945,000, effective as of January 1, 2020. For 2021, the compensation to Mr. Madar and the fees paid to Jean Madar Holding SAS were unchanged from 2020. In addition, in December 2018 and December 2019, we granted options to purchase 25,000 shares for the benefit of Mr. Madar, which were granted to his personal holding company instead of Mr. Madar directly.
Compensation of Directors
The following table sets forth certain information relating to the compensation for each of our directors who is not an executive officer of our Company named in the Summary Compensation Table for the past fiscal year.
DIRECTOR COMPENSATION
Name
Fees Earned or Paid in Cash
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity Incentive Plan Compensation
($)
Change in
Pension Value
and Nonqualified Deferred Compensation Earnings
All Other Compensation
($)1
Total
($)
Francois Heilbronn2
20,000
17,020
58,861
95,881
Robert Bensoussan3
12,000
17,020
36,032
65,052
Patrick Choël4
20,000
17,020
39,254
76,274
Michel Dyens5
12,000
17,020
87,095
116,115
Veronique Gabai-Pinsky6
20,000
17,020
37,020
Gilbert Harrison7
12,000
17,020
120,000
149,020
[Footnotes from table above]
1. Represents gain from exercise of stock options, except for Mr. Harrison, which consists of a $120,000 payment made in 2021 to the company controlled by Mr. Harrison in connection with the acquisition of the Donna Karan license. See “Fee for Director’s Company” in Item 13, Certain Relationships and Related Transactions, and Director Independence, in this annual report on Form 10-K.
2. As of the end of the last fiscal year, Mr. Heilbronn held options to purchase an aggregate of 5,000 shares of our common stock.
3. As of the end of the last fiscal year, Mr. Bensoussan held options to purchase an aggregate of 5,000 shares of our common stock.
4. As of the end of the last fiscal year, Mr. Choël held options to purchase an aggregate of 4,500 shares of our common stock.
5. As of the end of the last fiscal year, Mr. Dyens held options to purchase an aggregate of 5,000 shares of our common stock.
6. As of the end of the last fiscal year, Ms. Gabai-Pinsky held options to purchase an aggregate of 6.000 shares of our common stock.
7. As of the end of the last fiscal year, Mr. Harrison held options to purchase an aggregate of 6,000 shares of our common stock.
In July 2019 and compensation to all nonemployee directors was increased to $6,000 for each board meeting at which they participate in person, and $3,000 for each meeting held by conference telephone. In addition, effective January 1, 2020 the annual fee for each member of the audit committee was raised to $8,000. The compensation for the nonemployee directors remained the same for 2021, except for Mr. Harrison. During 2021, a company owned by Mr. Harrison received a fee equal to $300,000, in connection with the Donna Karan license agreement, which is effective on July 1, 2022. A payment of $120,000 was made in 2021 to Mr. Harrison’s company, and the balance will be paid, $120,000 one year later in 2022, and $60,000 two years later in 2023.
We maintain stock option plans for our nonemployee directors. The purpose of these plans is to assist us in attracting and retaining key directors who are responsible for continuing the growth and success of our company. Under such plans, options to purchase 1,500 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date. However, if a nonemployee director does not attend certain of the board meetings, then such option grants are reduced according to a schedule. In addition, options to purchase 2,000 shares are granted to each nonemployee director upon his or her initial election or appointment to our board, but if such option is granted within six months of the next February 1 automatic grant, then such nonemployee director would not be eligible to receive that February 1 grant. On February 1, 2021, options to purchase 1,500 shares were granted to all of our nonemployee directors at the exercise price of $62.18 per share under our 2016 Stock Option Plan. However, our board of directors cancelled the automatic grant of options to the nonemployee directors effective with the grant that had been scheduled for February 1, 2022.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information with respect to the beneficial ownership of our common stock by (a) each person we know to be the beneficial owner of more than 5% of our outstanding common stock, (b) our executive officers and directors and (c) all of our directors and officers as a group. Messrs. Madar and Benacin own 99.99% of their respective personal holding companies. As of January 26, 2022, we had 31,836,545 shares of common stock outstanding.
Name and Address of Beneficial Owner
Amount of
Beneficial
Ownership1
Approximate
Percent of
Class
Jean Madar
c/o Interparfums SA
4, Rond Point des Champs Elysees
75008 Paris, France
7,109,341
22.4 %
Philippe Benacin
c/o Interparfums SA
4, Rond Point des Champs Elysees
75008 Paris, France
6,910,064
21.7 %
Russell Greenberg
c/o Inter Parfums, Inc.
551 Fifth Avenue
New York, NY 10176
77,500
Less than 1 %
Philippe Santi
Interparfums SA
4, Rond Point des Champs Elysees
75008, Paris France
7,200
Less than 1 %
Francois Heilbronn
60 Avenue de Breteuil
75007 Paris, France
26,438
Less than 1 %
Robert Bensoussan
c/o Sirius Equity LLP
52 Brook Street
W1K 5DS London
9,875
Less than 1 %
Patrick Choël
140 Rue de Grenelle
75007, Paris, France
6,375
Less than %
Michel Dyens
Michel Dyens & Co.
17 Avenue Montaigne
75008 Paris, France
6,875
Less than 1 %
Veronique Gabai-Pinsky
200 East End Avenue
New York NY 10128
3,875
Less than 1 %
Gilbert Harrison
Harrison Group
745 Fifth Avenue, Suite 514
New York, NY 10151
3,875
Less than 1 %
Frederic Garcia-Pelayo
Interparfums SA
4, Rond Point des Champs Elysees
75008, Paris, France
6,555
Less than 1 %
Blackrock, Inc.
55 East 52nd Street
New York, NY 10055
2,662,032
8.4 %
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
1,983,427
6.2 %
Ameriprise Financial, Inc. 145
Ameriprise Financial Center
Minneapolis, MN 55474
1,744,296
5.4 %
All Directors and Officers
(As a Group 10 Persons)
14,167,793
44.2 %
All shares of common stock are directly held with sole voting power and sole power to dispose, unless otherwise stated. Options which are exercisable within 60 days are included in beneficial ownership calculations.
Consists of 13,000 shares held directly, 7,032,341 shares held indirectly through Jean Madar Holding SAS, a personal holding company, and options to purchase 64,000 shares.
Consists of 6,846,064 shares held indirectly through Philippe Benacin Holding SAS, a personal holding company, and options to purchase 64,000 shares.
Consists of shares 7,500 shares held directly and options to purchase 70,000 shares.
Consists of options to purchase shares.
Consists of 24,063 shares held directly and options to purchase 2,375 shares.
Consists of 7,500 shares held directly and options to purchase 2,375 shares.
Consists of 4,250 shares held directly and options to purchase 2,125 shares.
Consists of 4,000 shares held directly and options to purchase 2,875 shares.
Consists of shares of common stock underlying options.
Consists of shares of common stock underlying options.
Consists of shares of common stock underlying options.
Information based upon Schedule 13G Amendment 6 of Blackrock, Inc. dated February 1, 2022 as filed with the Securities and Exchange Commission.
Information based upon Schedule 13G Amendment 5 of The Vanguard Group, an investment advisor, dated February 9, 2022 as filed with the Securities and Exchange Commission.
Information based upon Schedule 13G Amendment 1 of Ameriprise Financial, Inc. (“AFI”) dated February 14, 2022 as filed with the Securities and Exchange Commission. AFI disclaims beneficial ownership of any shares reported on this Schedule 13G.
Consists of 13,938,718 shares held directly or indirectly, and options to purchase 229,255 shares.
The following table sets forth certain information as of the end of our last fiscal year regarding all equity compensation plans that provide for the award of equity securities or the grant of options, warrants or rights to purchase our equity securities.
Equity Compensation Plan Information
Plan category
Number of
securities to
be issued
upon
exercise of
outstanding
options,
warrants and
rights
(a)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
Equity compensation plans approved by security holders
650,440
$57.58
612,535
Equity compensation plans not approved by security holders
N/A
Total

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions with European Subsidiaries
We have guaranteed the obligations of our majority-owned, French subsidiary, Interparfums SA under our expired Paul Smith license agreement. We also provide (or had provided on our behalf) certain financial, accounting and legal services for Interparfums SA, and during 2021, 2020 and 2019 fees for such services were $443,625, $450,750 and $483,675, respectively.
During 2018, Interparfums SA, loaned the Company $10 million. This loan was repayable in ten (10) equal monthly payments of $1 million of principal plus accrued interest at 2% per annum, with the first payment made on May 31, 2019, and the last payment made on February 28, 2020.
In March 2020, Interparfums Luxury Brands, Inc., an indirect majority-owned subsidiary of the Company, loaned the Company $10 million, which was repaid in full, with interest at 2% per annum, in December 2020.
In September 2021, Interparfums Luxury Brands, Inc., an indirect majority-owned subsidiary of the Company, loaned the Company $24 million, which is repayable in 12 equal monthly payments with interest at 2% per annum commencing on January 31, 2022.
In December 2021, Inter Parfums USA, LLC, a United States subsidiary, renewed a license agreement for five years that was initially signed in 2012 on the same terms with Interparfums Suisse (SARL), a Swiss subsidiary of Interparfums SA, for the right to sell amenities under the Lanvin brand name to luxury hotels, cruise lines and airlines in return for royalty payments as are customary in our industry.
Fee for Director’s Company
In connection with the acquisition of the Donna Karan license, which takes effect on July 1, 2022 as discussed above, we agreed to pay to the company controlled by Mr. Gilbert Harrison, a director, the sum of $300,000, payable over time, with $120,000 being paid in 2021, and deferred payments of $120,000 one year later and $60,000 two years later.
Consulting Agreements
In 2014, we entered into a consulting agreement with Mr. Benacin’s holding company, Philippe Benacin Holding SAS, which provides for review on an annual basis of the amount of compensation payable to such company. The agreement also provides for indemnification for Mr. Benacin and his holding company and a covenant not to compete for one year after termination of the agreement. The agreement was for one year, with automatic one year renewals unless either party terminates on 120 days’ notice or Mr. Benacin ceases to be the President of our company. For 2015 through 2021 Mr. Benacin’s personal holding company received $250,000 each year for services rendered outside of the United States by Mr. Benacin in his capacity as President. In addition, in December 2018 and December 2019, we granted options to purchase 25,000 shares for the benefit of Mr. Benacin, which were granted to his personal holding company instead of Mr. Benacin directly.
In 2013, we enter into a consulting agreement with Mr. Madar’s holding company, Jean Madar Holding SAS, which provides for review on an annual basis of the amount of compensation payable to such company. The agreement also provides for indemnification for Mr. Madar and his holding company and a covenant not to compete for one year after termination of the agreement. The agreement was for one year, with automatic one year renewals unless either party terminates on 120 days’ notice or Mr. Madar ceases to be the Chief Executive Officer of our company. As discussed above, in view of receiving substantially less than the annual and median average CEO salaries for peer companies and companies with comparable market capitalization, in early February 2020 the Mr. Madar’s base salary was increased by $600,000 to $1.23 million effective January 1, 2020, and allocated so that the annual base salary for Jean Madar individually was $285,000, and the fees to Jean Madar Holding SAS were $945,000. For 2021, the compensation to Mr. Madar and the fees paid to Jean Madar Holding SAS were unchanged from 2020. In addition, in December 2018 and again in December 2019, we granted options to purchase 25,000 shares for the benefit of Mr. Madar, which were granted to his personal holding company rather than to Mr. Madar directly.
Procedures for Approval of Related Person Transactions
Transactions between related persons, such as between an executive officer or director and our company, or any company or person controlled by such officer or director, are required to be approved by our Audit Committee of our board of directors. Our Audit Committee Charter contains such explicit authority, as required by the applicable rules of The Nasdaq Stock Market.
Director Independence
The following are our directors who are independent directors within the applicable rules of The Nasdaq Stock Market:
Francois Heilbronn
Robert Bensoussan
Patrick Choël
Michel Dyens
Veronique Gabai-Pinsky
Gilbert Harrison
We follow and comply with the independent director definitions as provided by The Nasdaq Stock Market rules in determining the independence of our directors, which are posted on our company’s website. In addition, such rules are also available on The Nasdaq Stock Market’s website. In addition, The Nasdaq Stock Market maintains more stringent rules relating to director independence for the members of our Audit Committee, and the members of our Audit Committee, Messrs. Heilbronn and Choël, as well as Ms. Gabai-Pinsky, are independent within the meaning of those rules.
Board Leadership Structure and Risk Management
For more than the past ten (10) years, Jean Madar has held the positions of Chairman of the Board of Directors and Chief Executive Officer of our company. Almost since inception, Mr. Madar has been allocated the responsibility of overseeing our United States operations and the operation of Inter Parfums, Inc., as a public company. Philippe Benacin, as Chief Executive Officer of Interparfums SA, has been allocated the responsibility of overseeing our European operations and its operation as a public company in France. In addition, Mr. Benacin is also the Vice Chairman of the Board of Directors of our company. Our board of directors is comfortable with this approach, as the two largest beneficial stockholders of our company are also directly responsible for the operations of our company’s two operating segments. Accordingly, our board of directors does not have a “Lead Director,” a non-management director who controls the meetings of our board of directors.
Our board of directors manages risk by (i) review of periodic operating reports and discussions with management; (ii) approval of executive compensation incentive plans through its committee, the Executive Compensation and Stock Option Committee; (iii) approval of related party transactions through its committee, the Audit Committee; and (iv) approval of material transactions not in the ordinary course of business. Since our inception, we have never been the subject of any material product liability claims, and we have had no recent material property damage claims.
Further, we periodically enter into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a foreign currency. We enter into these exchange contracts for periods consistent with our identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the receivables and cash flows of Interparfums SA, our French subsidiary, whose functional currency is the Euro. All foreign currency contracts are denominated in currencies of major industrial countries and are with large financial institutions, which are rated as strong investment grade.
In addition, we mitigate interest rate risk by continually monitoring interest rates, and then determining whether fixed interest rates should be swapped for floating rate debt, or if floating rate debt should be swapped for fixed rate debt.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Fees
The following sets forth the fees billed to us by Mazars USA LLP, as well as discusses the services provided for the past two fiscal years, fiscal years ended December 31, 2021 and December 31, 2020.
Audit Fees
Fees billed by Mazars USA LLP and its affiliate, Mazars S.A. for audit services and review of the financial statements contained in our Quarterly Reports on Form 10-Q were $1.2 and $1.1 and million for 2021 and 2020, respectively.
Audit-Related Fees
Mazars USA LLP did not bill us for any audit-related services during 2021 and 2020.
Tax Fees
Mazars USA LLP billed us $49,300 and $34,500 for tax services during 2021 and 2020, respectively.
All Other Fees
Mazars S.A. billed us $3,000 and $3,500 for other services during 2021 and 2020, respectively.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has the sole authority for the appointment, compensation and oversight of the work of our independent accountants, who prepare or issue an audit report for us.
During the second quarter of 2021, the audit committee authorized the following non-audit services to be performed by Mazars USA LLP.
● We authorized the engagement of Mazars USA LLP if deemed necessary to provide tax consultation in the ordinary course of business for fiscal year ended December 31, 2021.
● We authorized the engagement of Mazars USA LLP if deemed necessary to provide tax consultation as may be required on a project by project basis that would not be considered in the ordinary course of business, up to a $10,000 fee limit per project (or €10,000 in the case of Interparfums SA), subject to an aggregate fee limit of $50,000 for fiscal year ended December 31, 2021. If we require further tax services from Mazars USA LLP, then the approval of the audit committee must be obtained.
● We authorized the engagement of Mazars USA LLP if deemed necessary to provide attestation or other services as may be required on a project by project basis that would not be considered in the ordinary course of business, up to a $10,000 fee limit per project (or €10,000 in the case of Interparfums SA), subject to an aggregate fee limit of $50,000 for fiscal year ended December 31, 2021. If we require further tax services from Mazars USA LLP, then the approval of the audit committee must be obtained.
● If we require other services by Mazars USA LLP on an expedited basis such that obtaining pre-approval of the audit committee is not practicable, then the Chairman of the Committee has authority to grant the required pre-approvals for all such services.
● We imposed a cap of $100,000 on the fees that Mazars USA LLP can charge for services on an expedited basis that are approved by the Chairman without obtaining full audit committee approval.
● None of the non-audit services of either of the Company’s auditors had the pre-approval requirement waived in accordance with Rule 2-01(c)(7)(i)(C) of Regulation S-X.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
Page
(a)(1) Financial Statements annexed hereto
Report of Independent Registered Public Accounting Firm
Audited Financial Statements:
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2021
Consolidated Statements of Comprehensive Income (Loss) for each of the years in the three-year period ended December 31, 2021
Consolidated Statements of Changes in Shareholders’ Equity for each of the years in the three-year period ended December 31, 2021
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2021
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
(a)(3) Exhibits - The list of exhibits is contained in the Exhibit Index, which follows the signature page of this report.