Edgar Filing: INTER PARFUMS INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

( MARK ONE )

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

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

Commission File No. 0-16469

INTER PARFUMS, INC.

(Exact name of registrant as specified in its charter)

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

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

(212) 983-2640

(Registrants telephone number, including area code)

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

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

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

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

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

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

At August 6, 2010, there were 30,442,881 shares of common stock, par value $.001 per share, outstanding.

INTER PARFUMS, INC. AND SUBSIDIARIES

INDEX

				Page Number
Part I.	Financial Information			1

	Item 1.	Financial Statements

			Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009	2

			Consolidated Statements of Income for the Three and Six Months Ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)	3

			Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)	4

			Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)	5

			Notes to Consolidated Financial Statements	6

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		16

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29

	Item 4.	Controls and Procedures		30

Part II.	Other Information			31

	Item 6.	Exhibits		31

Signatures				32

INTER PARFUMS, INC. AND SUBSIDIARIES

Part I. Financial Information

Item 1. Financial Statements

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

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

Page 1

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

	June 30, 2010			December 31, 2009
	(unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	58,670		$	100,467
Short-term investments		33,408			—
Accounts receivable, net		102,810			101,334
Inventories		97,914			85,428
Receivables, other		1,125			3,229
Other current assets		3,411			8,090
Deferred tax assets		4,026			4,088

Total current assets		301,364			302,636

Equipment and leasehold improvements, net		8,804			9,191

Goodwill		3,369			3,927

Trademarks, licenses and other intangible assets, net		86,289			101,799

Other assets		1,684			1,535

Total assets	$	401,510		$	419,088

LIABILITIES AND EQUITY

Current liabilities:
Loans payable – banks	$	3,505		$	5,021
Current portion of long-term debt		10,088			11,732
Accounts payable - trade		50,526			48,138
Accrued expenses		54,715			37,440
Income taxes payable		2,558			1,646
Dividends payable		1,979			996

Total current liabilities		123,371			104,973

Long-term debt, less current portion		10,011			17,862

Deferred tax liability		6,388			8,840

Equity:
Inter Parfums, Inc. shareholders’ equity:
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 30,442,881 and 30,171,952 shares at June 30, 2010 and December 31, 2009, respectively		30			30
Additional paid-in capital		48,859			45,126
Retained earnings		194,652			186,611
Accumulated other comprehensive income		(9,766	)		30,000
Treasury stock, at cost, 10,009,492 and 10,056,966 common shares at June 30, 2010 and December 31, 2009, respectively		(34,151	)		(33,043	)

Total Inter Parfums, Inc. shareholders’ equity		199,624			228,724

Noncontrolling interest		62,116			58,689

Total equity		261,740			287,413

Total liabilities and equity	$	401,510		$	419,088

See notes to consolidated financial statements.

Page 2

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009

Net sales	$	107,765		$	88,604		$	227,138		$	179,013

Cost of sales		43,041			38,403			90,693			75,247

Gross margin		64,724			50,201			136,445			103,766

Selling, general and administrative expenses		53,240			43,380			108,938			86,643

Income from operations		11,484			6,821			27,507			17,123

Other expenses (income):
Interest expense		510			397			1,098			1,709
(Gain) loss on foreign currency		514			(2,563	)		2,896			(3,942	)
Interest income		(341	)		(101	)		(595	)		(609	)

		683			(2,267	)		3,399			(2,842	)

Income before income taxes		10,801			9,088			24,108			19,965

Income taxes		3,818			3,335			8,175			6,956

Net income		6,983			5,753			15,933			13,009

Less: Net income attributable to the noncontrolling interest		1,627			1,527			4,027			3,355

Net income attributable to Inter Parfums, Inc.	$	5,356		$	4,226		$	11,906		$	9,654

Earnings per share:

Net income attributable to Inter Parfums, Inc. common shareholders:
Basic	$	0.18		$	0.14		$	0.39		$	0.32
Diluted	$	0.18		$	0.14		$	0.39		$	0.32

Weighted average number of shares outstanding:
Basic		30,361			30,064			30,277			30,115
Diluted		30,467			30,064			30,379			30,115

Dividends declared per share	$	0.065		$	0.033		$	0.13		$	0.066

See notes to consolidated financial statements.

Page 3

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

	Inter Parfums, Inc. shareholders
									Accumulated
			Additional						other
	Common		paid-in			Retained			comprehensive			Treasury			Noncontrolling
	stock		Capital			earnings			income			stock			interest			Total
Balance – January 1, 2009	$	30	$	41,950		$	168,025		$	25,515		$	(31,319	)	$	51,308		$	255,509
Comprehensive income:
Net income		—		—			9,654			—			—			3,355			13,009
Foreign currency translation adjustment		—		—			—			4,202			—			—			4,202
Net derivative instrument gain (loss), net of tax		—		—			—			(1,782	)		—			(567	)		(2,349	)
Purchase of subsidiary shares from noncontrolling interests		—		—			—			—			—			(55	)		(55	)
Sale of subsidiary shares to noncontrolling interests		—		(17	)		—			—			—			238			221
Dividends		—		—			(1,986	)		—			—			(1,716	)		(3,702	)
Purchased treasury stock		—		—			—			—			(631	)		—			(631	)
Stock compensation		—		254			115			—			—			55			424
Balance – June 30, 2009	$	30	$	42,187		$	175,808		$	27,935		$	(31,950	)	$	52,618		$	266,628

Balance – January 1, 2010	$	30	$	45,126		$	186,611		$	30,000		$	(33,043	)	$	58,689		$	287,413
Comprehensive income:
Net income		—		—			11,906			—			—			4,027			15,933
Foreign currency translation adjustment		—		—			—			(39,764	)		—			—			(39,764	)
Net derivative instrument gain (loss), net of tax		—		—			—			(2	)		—			48			46
Shares issued upon exercise of stock options and warrants		—		3,459			—			—			493			—			3,952
Purchase of subsidiary shares from noncontrolling interests		—		(1,063	)		—			—			—			(1,913	)		(2,976	)
Sale of subsidiary shares to noncontrolling interests		—		1,039			—			—			—			3,267			4,306
Dividends		—		—			(3,943	)		—			—			(2,049	)		(5,992	)
Shares received as proceeds of option exercise		—		—			—			—			(1,601	)		—			(1,601	)
Stock compensation		—		298			78			—			—			47			423
Balance – June 30, 2010	$	30	$	48,859		$	194,652		$	(9,766	)	$	(34,151	)	$	62,116		$	261,740

See notes to consolidated financial statements.

Page 4

INTER PARFUMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six months ended June 30,
	2010			2009
Cash flows from operating activities:
Net income	$	15,933		$	13,009
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,665			5,108
Provision for doubtful accounts		(186	)		703
Noncash stock compensation		484			508
Deferred tax (benefit)		(1,572	)		(987	)
Change in fair value of derivatives		(137	)		(702	)
Changes in:
Accounts receivable		(15,968	)		11,900
Inventories		(24,428	)		7,858
Other assets		5,460			(4,643	)
Accounts payable and accrued expenses		34,370			(25,680	)
Income taxes payable, net		1,143			2,507

Net cash provided by operating activities		19,764			9,581

Cash flows from investing activities:
Purchases of equipment and leasehold improvements		(2,567	)		(2,809	)
Purchases of short-term investments		(44,159	)		—
Proceeds from sale of short-term investments		7,975			—
Payment for intangible assets acquired		(1,834	)		(328	)
Payment for acquisition of noncontrolling interests		(2,976	)		(55	)
Proceeds from sale of stock of subsidiary		4,306			221

Net cash used in investing activities		(39,255	)		(2,971	)

Cash flows from financing activities:
Repayment of loans payable – banks, net		(1,367	)		(3,409	)
Repayment of long-term debt		(5,397	)		(7,452	)
Proceeds from exercise of options and warrants		2,457			—
Dividends paid		(2,960	)		(1,986	)
Dividends paid to noncontrolling interest		(2,049	)		(1,716	)
Purchase of treasury stock		(106	)		(631	)

Net cash used in financing activities		(9,422	)		(15,194	)

Effect of exchange rate changes on cash		(12,884	)		225

Net decrease in cash and cash equivalents		(41,797	)		(8,359	)

Cash and cash equivalents - beginning of period		100,467			42,404

Cash and cash equivalents - end of period	$	58,670		$	34,045

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	1,067		$	1,545
Income taxes		6,795			6,166

See notes to consolidated financial statements.

Page 5

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1.	Significant Accounting Policies:

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

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

2.	New Accounting Pronouncements - adopted:

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures about Fair Value Measurements” which amends ASC Subtopic 820, “Fair Value Measurements and Disclosures” (“ASU 2010-06”) to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. ASU 2010-06 also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The new disclosure and clarifications of existing disclosures are effective for interim and annual periods beginning after December 31, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements. Those disclosures are effective for interim and annual periods beginning after December 31, 2010. The adoption of the applicable provisions of this guidance did not have a material impact on our consolidated financial statements.

In June 2009, the FASB issued ASC topic 810 (formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”). ASC topic 810 amends the consolidation guidance applicable to variable interest entities and affects the overall consolidation analysis. ASC topic 810 is effective for fiscal years beginning after November 15, 2009. The adoption of ASC topic 810 did not have a material impact on our consolidated financial statements.

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

3.	Inventories:

Inventories consist of the following:

(In thousands)	June 30, 2010		December 31, 2009

Raw materials and component parts	$	37,949	$	29,052
Finished goods		59,965		56,376

	$	97,914	$	85,428

Page 6

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

4.	Fair Value Measurement:

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

(In thousands)			Fair Value Measurements at June 30, 2010
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Short-term investments	$	33,408	$	—	$	33,408	$	—
Liabilities:
Foreign currency forward
exchange contracts
not accounted for using
hedge accounting	$	2,682	$	—	$	2,682	$	—
Interest rate swaps		514		—		514		—

	$	3,196	$	—	$	3,196	$	—

(In thousands)			Fair Value Measurements at December 31, 2009
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Foreign currency forward
exchange contracts
not accounted for using
hedge accounting	$	5,620	$	—	$	5,620	$	—

Liabilities:
Interest rate swaps	$	752	$	—	$	752	$	—

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

Page 7

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents gains and losses in derivatives designated as hedges and the location of those gains and losses in the financial statements (in thousands):

Derivatives Designated as Hedging Instuments	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)					Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)				Location of Gain (Loss) Recognized in Income on Derivative (Effective Portion)	Amount of Gain (Loss) Recognized in Income on Derivative (Effective Portion) (A)
	Six months ended June 30,						Six months ended June 30,					Six months ended June 30,
	2010		2009				2010		2009			2010			2009
Foreign exchange contracts	$	—		(438	)	Gain (loss) on foreign currency	$	—		3,191	Gain (loss) on foreign currency	$	(2,679	)		702

	Three months ended June 30,					Three months ended June 30,					Three months ended June 30,
	2010		2009			2010		2009			2010		2009
Foreign exchange contracts	$	—		3,417	Gain (loss) on foreign currency	$	—		2,129	Gain (loss) on foreign currency	$	—		(94	)

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

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

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) recognized in Income on Derivative	Six months ended June 30, 2010			Six months ended June 30, 2009

Interest rate swaps	Interest expense	$	137		$	(105	)
Foreign exchange contracts	Gain (loss) on foreign currency	$	(69	)	$	24

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) recognized in Income on Derivative	Three months ended June 30, 2010			Three months ended June 30, 2009

Interest rate swaps	Interest expense	$	105		$	122
Foreign exchange contracts	Gain (loss) on foreign currency	$	(11	)	$	7

Page 8

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

All derivative instruments are reported as either assets or liabilities on the balance sheet measured at fair value. The valuation of interest rate swaps resulted in a liability which is included in long-term debt on the accompanying balance sheets. The valuation of foreign currency forward exchange contracts not accounted for using hedge accounting as of June 30, 2010 resulted in a liability and are included in accrued expenses on the accompanying balance sheet. The valuation of foreign currency forward exchange contracts not accounted for using hedge accounting as of December 31, 2009, resulted in an asset and are included in other current assets on the accompanying balance sheet. Generally, increases or decreases in the fair value of derivative instruments will be recognized as gains or losses in earnings in the period of change. If the derivative instrument is designated and qualifies as a cash flow hedge, the changes in fair value of the derivative instrument will be recorded as a separate component of shareholders’ equity.

We enter into foreign currency forward exchange contracts to hedge exposure related to receivables denominated in a foreign currency and to manage risks related to future sales expected to be denominated in a foreign currency. Before entering into a derivative transaction for hedging purposes, it is determined that a high degree of initial effectiveness exists between the change in value of the hedged item and the change in the value of the derivative instrument from movement in exchange rates. High effectiveness means that the change in the cash flows of the derivative instrument will effectively offset the change in the cash flows of the hedged item. The effectiveness of each hedged item is measured throughout the hedged period and is based on the dollar offset methodology and excludes the portion of the fair value of the foreign currency forward exchange contract attributable to the change in spot-forward difference which is reported in current period earnings. Any hedge ineffectiveness as defined by ASC topic 815-10-10 is also recognized as a gain or loss on foreign currency in the income statement. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses accumulated in other comprehensive income are reclassified to earnings. If it is probable that the forecasted transaction will no longer occur, then any gains or losses accumulated in other comprehensive income are reclassified to current-period earnings. Cash-flow hedges were highly effective, in all material respects.

At June 30, 2010, we had foreign currency contracts in the form of forward exchange contracts in the amount of approximately U.S. $37 million and GB pounds 1.55 million which all have maturities of less than one year.

5.	Goodwill and Other Intangible Assets:

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

			Fair Value Measurements at June 30, 2010
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Description
Trademark - Nickel	$	2,203	$	—	$	—	$	2,203

Goodwill	$	3,369	$	—	$	—	$	3,369

Page 9

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

			Fair Value Measurements at December 31, 2009
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Description
Trademark - Nickel	$	2,586	$	—	$	—	$	2,586

Goodwill	$	3,927	$	—	$	—	$	3,927

The goodwill and trademarks referred to above relate to our Nickel skin care business, which is primarily a component of our European operations. Testing goodwill for impairment requires us to estimate the fair value of the reporting unit using significant estimates and assumptions. The assumptions we make will impact the outcome and ultimate results of the testing. In making our assumptions and estimates, we use industry accepted valuation models and set criteria that are reviewed and approved by management and, in certain instances, we engage third party valuation specialists to advise us. There was no change to the carrying amount of the intangible assets referred to above during the six month period ended June 30, 2010 other than for the effect of changes in foreign currency translation rates.

6.	Accrued Expenses:

Accrued expenses include approximately $13.7 million and $9.2 million in advertising liabilities as of June 30, 2010 and December 31, 2009, respectively.

7.	Share-Based Payments:

We maintain a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six year term and vest over a four to five-year period. The fair value of shares vested during the six months ended June 30, 2010 and 2009 aggregated $0.04 million and $0.05 million, respectively. Compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. It is generally our policy to issue new shares upon exercise of stock options.

The following table sets forth information with respect to nonvested options for the six months ended June 30, 2010:

	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested options – beginning of year		480,598		$	3.92
Nonvested options granted		10,500		$	5.26
Nonvested options vested or forfeited		(15,845	)	$	3.62
Nonvested options – end of year		475,253		$	3.96

Page 10

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Share-based payment expense decreased income before income taxes by $0.33 million and $0.60 million for the three and six month periods ended June 30, 2010, respectively, as compared to $0.24 million and $0.51 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.21 million and $0.33 million for the three and six month periods ended June 30, 2010, respectively, as compared to $0.13 million and $0.29 million for the corresponding periods of the prior year.

The following table summarizes stock option information as of June 30, 2010:

	Number of Shares			Weighted Average Exercise Price

Outstanding at January 1, 2010		920,825		$	11.32
Granted		10,500			14.65
Cancelled		(5,450	)		11.15
Exercised		(223,455	)		9.99

Outstanding at June 30, 2010		702,420		$	11.80

Options exercisable at June 30, 2010		227,167		$	12.47
Options available for future grants		931,275

As of June 30, 2010, the weighted average remaining contractual life of options outstanding is 3.54 years (2.79 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $1.7 million and $0.4 million, respectively and unrecognized compensation cost related to stock options outstanding on Inter Parfums, Inc. stock aggregated $1.4 million. The amount of unrecognized compensation cost related to stock options outstanding of our majority-owned subsidiary, Inter Parfums S.A., was €0.34 million. Options under Inter Parfums, S.A. plans vest over a four-year period.

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

(In thousands)	2010		2009

Cash proceeds from stock options exercised	$	738	$	—
Tax benefits		—		—
Intrinsic value of stock options exercised		1,173		—

No tax benefit was realized or recognized from stock options exercised as valuation reserves were allocated to those potential benefits.

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

Page 11

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

	June 30, 2010			June 30, 2009

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

Expected volatility is estimated based on historic volatility of our common stock. We use the simplified method in developing its estimate of the expected term of the option as historic data regarding employee exercise behavior is incomplete for the new vesting parameters we recently instituted. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout in place at the time of stock-based award grant would continue with no anticipated increases.

8.	Shareholders’ Equity:

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

In April 2010, both the Chief Executive Officer and the President each exercised 75,000 outstanding stock options of the Company’s common stock. The aggregate exercise prices of $1.5 million were paid by them tendering to the Company an aggregate of 95,744 shares of the Company’s common stock, previously owned by them, valued at fair market value on the date of exercise. All shares issued pursuant to these option exercises were issued from treasury stock of the Company. In addition, the Chief Executive Officer tendered an additional 6,782 shares for payment of certain withholding taxes resulting from his option exercises.

9.	Earnings Per Share:

Basic earnings per share is computed using the weighted average number of shares outstanding during each period. Diluted earnings per share is computed using the weighted average number of shares outstanding during each period, plus the incremental shares outstanding assuming the exercise of dilutive stock options and warrants using the treasury stock method.

Page 12

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

(In thousands)	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Numerator:
Net income attributable to Inter Parfums, Inc.	$	5,356		$	4,226		$	11,906		$	9,654
Effect of dilutive securities of consolidated subsidiary		(12	)		(8	)		(17	)		(18	)

	$	5,344		$	4,218		$	11,889		$	9,636
Denominator:
Weighted average shares		30,361			30,064			30,277			30,115
Effect of dilutive securities:
Stock options and warrants		106			—			102			—

		30,467			30,064			30,379			30,115

Not included in the above computations is the effect of antidilutive potential common shares which consist of outstanding options to purchase 0.1 million and 0.3 million shares of common stock for the three and six month periods ended June 30, 2010, and 1.1 million shares of common stock for both the three and six month periods ended June 30, 2009, respectively, as well as outstanding warrants to purchase 0.15 million shares of common stock for both the three and six month periods ended June 30, 2010 and 0.3 million shares of common stock for both the three and six month periods ended June 30, 2009.

10.	Comprehensive Income (Loss):

(In thousands)	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Comprehensive income (loss):
Net income	$	6,983		$	5,753		$	15,933		$	13,009
Other comprehensive income, net of tax:
Foreign currency translation adjustment		(22,728	)		13,853			(39,764	)		4,202
Change in fair value of derivatives		(13	)		2,155			46			(771	)
Net gains reclassified into earnings from equity		—			(1,054	)		—			(1,578	)
Comprehensive income (loss):		(15,758	)		20,707			(23,785	)		14,862
Less comprehensive income (loss) attributable to the noncontrolling interest		1,601			1,751			4,075			2,788

Comprehensive income (loss) attributable to Inter Parfums, Inc.	$	(17,359	)	$	18,956		$	(27,860	)	$	12,074

Page 13

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

(In thousands)	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009

Net income attributable to Inter Parfums, Inc.	$	5,356		$	4,226		$	11,906		$	9,654
Decrease in Inter Parfums, Inc.’s additional paid-in capital for subsidiary share transactions		(985	)		(10	)		(24	)		(17	)
Change from net income attributable to Inter Parfums, Inc. and transfers from noncontrolling interest	$	4,371		$	4,216		$	11,882		$	9,637

12.	Segment and Geographic Areas:

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

(In thousands)	Three months ended June 30,					Six months ended June 30,
	2010		2009			2010			2009
Net sales:
United States	$	15,838	$	9,236		$	26,916		$	17,609
Europe		91,927		79,368			200,222			161,404
Eliminations of intercompany sales		—		—			—			—

	$	107,765	$	88,604		$	227,138		$	179,013

Net income (loss) attributable to Inter Parfums, Inc.:
United States	$	359	$	(578	)	$	(178	)	$	(1,345	)
Europe		4,975		4,792			12,062			10,972
Eliminations of intercompany profits		22		12			22			27

	$	5,356	$	4,226		$	11,906		$	9,654

						June 30,			December 31,
						2010			2009
Total Assets:
United States						$	45,580		$	45,580
Europe							365,240			382,628
Eliminations of investment in subsidiary							(9,310	)		(9,120	)

						$	401,510		$	419,088

Page 14

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

13.	Entry into Definitive Agreements:

Nine West

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

Betsey Johnson

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

Page 15

INTER PARFUMS, INC. AND SUBSIDIARIES

Item 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Information

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

Overview

We operate in the fragrance business, and manufacture, market and distribute a wide array of fragrances and fragrance related products. We manage our business in two segments, European based operations and United States based operations. Our prestige fragrance products are produced and marketed by our European operations through our 74% owned subsidiary in Paris, Inter Parfums, S.A., which is also a publicly traded company as 26% of Inter Parfums, S.A. shares trade on the Euronext. Prestige cosmetics and prestige skin care products represent less than 3% of consolidated net sales.

We produce and distribute our prestige products primarily under license agreements with brand owners, and prestige product sales represented approximately 88% and 90% of net sales for the six months ended June 30, 2010 and 2009, respectively. We have built a portfolio of brands, which include Burberry, Lanvin, Van Cleef & Arpels, Jimmy Choo, Montblanc, Paul Smith, S.T. Dupont and Nickel whose products are distributed in over 120 countries around the world. Burberry is our most significant license, as sales of Burberry products represented 57% and 58% of net sales for the six months ended June 30, 2010 and 2009, respectively.

Our specialty retail and mass-market fragrance and fragrance related products are marketed through our United States operations and represented 12% and 10% of sales for the six months ended June 30, 2010 and 2009, respectively. Trademarks used pursuant to license or other agreements with the brand owners include Gap, Banana Republic, New York & Company, Brooks Brothers, bebe, Betsey Johnson, Nine West and Jordache trademarks.

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

Page 16

INTER PARFUMS, INC. AND SUBSIDIARIES

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

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

Our reported net sales are impacted by changes in foreign currency exchange rates. If the U.S. dollar continues to strengthen, then there will be an adverse impact on our net sales in 2010. However, earnings are less affected by a strengthening dollar because in excess of 30% of net sales of our European operations are denominated in U.S. dollars, while all costs of our European operations are incurred in euro. Our Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. We primarily enter into foreign currency forward exchange contracts to reduce the effects of fluctuating foreign currency exchange rates.

Recent Important Events

Nine West

Betsey Johnson

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

Page 17

INTER PARFUMS, INC. AND SUBSIDIARIES

Gap and Banana Republic

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

Montblanc

In January 2010, we announced that we had entered into an exclusive worldwide license agreement with Montblanc International GMBH to create, produce and distribute perfumes and ancillary products under the Montblanc brand. Our rights under such license agreement, which took effect on July 1, 2010 and runs through December 31, 2020, are subject to certain minimum sales, advertising expenditures and royalty payments as are customary in our industry. We also paid an upfront entry fee of €1 million for this license, and purchased inventory from the former licensee which aggregated approximately €2.9 million. Plans call for our first new Montblanc fragrance launch in 2011.

Discussion of Critical Accounting Policies

We make estimates and assumptions in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations. These accounting policies generally require our management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

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

Page 18

INTER PARFUMS, INC. AND SUBSIDIARIES

Revenue Recognition