INTERPARFUMS INC (IPAR) FY 2023 MD&A

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 prestige
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 based operations through our 72%
owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company as 28% of Interparfums SA shares trade on the
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 65%, 68% and 75% of net sales for 2023, 2022 and 2021, 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. In addition, our exclusive and worldwide license for the production and distribution of Lacoste brand
perfumes and cosmetics became effective in January 2024.

Through
our United States based operations, we also market fragrances and fragrance related products. United States based operations represented
35%, 32% and 25% of net sales in 2023, 2022 and 2021, respectively. These fragrance products are sold primarily pursuant to license
or other agreements with the owners of the Abercrombie & Fitch, Anna Sui, Donna Karan, DKNY, Emanual Ungaro, Ferragamo,
Graff, GUESS, Hollister, MCM, Oscar de la Renta, and Roberto Cavalli 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 Jimmy Choo, Montblanc, Coach, GUESS, Donna Karan/DKNY and Ferragamo brand names. This diversified
portfolio of top brands represented 73%, 71% and 66% of total sales in 2023, 2022, and 2021, respectively.

As
a percentage of net sales, product sales for the Company’s largest brands were as follows:

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, the United States, and Italy.

We
grow our business in two distinct ways. First, we grow by adding new brands to our portfolio, through new licenses, or other arrangements
or outright 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.

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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 based operations are denominated in U.S. dollars, while almost all costs of our European based 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

Please
see our discussion of the Impact of the COVID-19 Pandemic, which is incorporated by reference to Note 2 to the Consolidated Financial
Statements contained in this 2023 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.

Recent
Important Events

Please
see our discussion of Recent Important Events, which is incorporated by reference to Note 3 to the Consolidated Financial Statements
contained in this 2023 Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.

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 10.39%. 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.

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At
December 31, 2023 indefinite-lived intangible assets aggregated $108.8 million. The following table presents the impact a change
in the following significant assumptions would have had on the calculated fair value in 2023 assuming all other assumptions remained
constant:

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
lived 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, 2023, 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.

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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 2023, had these estimates been changed simultaneously by 5% in
either direction, our reported gross profit would have increased or decreased by approximately $0.7 million and selling, general
and administrative expenses would have changed by approximately $0.1 million. The collective impact of these changes on 2023 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 in 2023 increased 21% compared to 2022. At comparable foreign currency exchange rates, net sales increased 20% in 2023,
as compared to 2022, of which 5% is related to new brands. The average dollar/euro exchange rate for 2023 was 1.08 compared to
1.05 in 2022.

For
European based operations, our largest brands, Jimmy Choo, Montblanc, and Coach grew 2023 sales by 19%, 15% and 25%, respectively,
as compared to 2022. There were also significant gains made by our mid-sized brands, including Van Cleef & Arpels, Rochas,
and Karl Lagerfeld. The year-over-year gains, in both euro and dollars, are all the more impressive considering our new product
pipeline was dominated by flankers and extensions. The increase was also driven by the continued success of our established lines
including Jimmy Choo I Want Choo, Montblanc Legend, Coach Woman, and Coach Man.

Sales
by our United States based operations grew substantially in 2023, up 33%, as compared to 2022, largely from the continued success
of GUESS fragrances, which performed exceedingly well during the quarters across all geographies, and was up 23% in 2023 as compared
to 2022. This was driven by the continued growth in sales of the Seductive line within GUESS. The increase was also driven
by the addition and extension of Donna Karan and DKNY to our portfolio. These two sister fragrance groups have climbed to become
our second largest United States based brand in just one year under our expertise. We also had strong sales of Ferragamo fragrances,
which we have enriched with sister scents for the Signorina and Storie di Seta collections. There were also gains
made by our mid-sized brands, Oscar de la Renta Abercrombie & Fitch, and Hollister. In the second half of the year, we successfully
completed Phase 1 of the Abercrombie & Fitch Fierce distribution roll-out.

We are confident
in our future as 2024 has many exciting developments for the Company. We transitioned to a new modern enterprise resource planning
system (“ERP”) for our United States based operations, which has enabled us to operate more efficiently and offer
more scale to absorb our newer brands. Distribution of Roberto Cavalli and Lacoste products, our newly acquired licenses, have
begun in the first quarter. A new blockbuster fragrance line for Lacoste, and a new flanker for Roberto Cavalli Signature are
planned to launch in the second half of 2024. We also have a solid line-up of new product launches in the pipeline for many of
our existing brands. This includes the Phase 2 distribution roll-out of Abercrombie & Fitch Fierce in the first quarter,
a roll out of the Donna Karan Cashmere Collection in the first quarter, a new DKNY blockbuster in the third quarter,
a launch of a new GUESS fragrance in the second quarter, as well as an Uomo flanker in the third quarter. Extensions of
Jimmy Choo I Want Choo, Montblanc Legend, and Coach Dreams, are set to debut throughout the year. Brand extensions
and flankers are also in the works for Ferragamo, MCM, Abercrombie & Fitch, Hollister, Anna Sui, Emanuel Ungaro, and Oscar
de la Renta. In sum, 2024 has all the earmarks of another strong year as the growth catalysts, such as the rebound of the travel
retail business in Asia, currently far outweigh the headwinds, most notably supply chain disruptions that have largely abated.

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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 have no certainty that any new license or acquisition agreements will be consummated.

Net
Sales to Customers by Region

Our largest market, North America, achieved sales growth of 22% in 2023 compared to 2022, followed
by Western Europe and Asia where sales grew by 16% and 17% in 2023, respectively, compared to 2022. Middle East, Eastern Europe,
and Central and South America also achieved top line growth of 22%, 39% and 33% in 2023, respectively, compared to 2022. Additionally,
our travel retail business is continuing to show signs of renewed life.

Gross
Profit Margin

The
Company’s gross margin percentage was 63.7% in 2023 as compared to 63.9% in 2022. The slight decrease in gross margin percentage
was driven by unfavorable segment mix as well as certain one-time expenses related to inventory as discussed further below. Overall,
the Company’s pricing actions have broadly compensated for cost inflation impacts.

For
European based operations, gross profit margin as a percentage of net sales was 67.2%, 68.2% and 66.6% in 2023, 2022 and 2021,
respectively. 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 1.08 in 2023, 1.05 in 2022, and 1.18 in 2021. The weaker dollar in 2023 resulted in a decline in our gross margin. This decline
was partially offset as distribution in the United States for European based operations is handled by a 100% owned subsidiary
of Interparfums SA based in the United States. Therefore, sales are made at a wholesale price rather than at an ex-factory price,
resulting in higher gross margins. Net sales of our United States based distribution subsidiary increased 14% in 2023, as compared
to 2022, leading to favorable mix and helping to further offset the gross margin decline. The decline was also driven by an increase
in inventory reserves made during 2023 related to certain underperforming brands. As the Company experienced long lead times in
obtaining and building inventory during the COVID-19 Pandemic, high levels of inventory investments were required to protect service
levels. Excluding these one-time adjustments, gross margin as a percentage of sales for European based operations would be in
line with the prior period, driven by increases in pricing and product mix, offset by cost inflation.

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For
United States based operations, gross profit margin was 57.0%, 54.7% and 53.1% in 2023, 2022 and 2021, respectively. The significant
margin expansion stems from a number of factors. Firstly, for the most part, the price increases we took in early 2023 weren’t
fully offset by a higher cost of goods given our cost containment efforts. Secondly, we are seeing favorable brand and channel
mix, as a larger portion of our higher priced fragrances are being sold directly to retailers as opposed to third-party distributors.
Lastly, the significant increase in sales in 2023 allowed us to better absorb fixed expenses such as depreciation and point of
sale expenses, as compared to the prior year.

Costs
relating to purchase with purchase and gift with purchase promotions are reflected in cost of sales, and aggregated $52.3 million,
$43.1 million and $36.9 million in 2023, 2022 and 2021, respectively, and represented 4.0%, 4.0% and 4.2% of net sales, respectively.

Generally,
we do not bill customers for shipping and handling costs and such costs, which aggregated $14.2 million, $15.8 million and $10.0
million in 2023, 2022 and 2021, 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 sales.

Selling,
General & Administrative Expenses

The
Company’s selling, general and administrative expenses as a percentage of nets sales were 44.6%, 45.3% and 46.2% in 2023,
2022 and 2021, respectively. This decrease was largely driven by sales growth during 2023 and 2022 allowing for better absorption
of fixed operating costs, and favorable segment mix.

For European based operations, selling, general and administrative expenses increased 13% and 9% in
2023 and 2022, respectively, as compared to the corresponding prior year period, and represented 47.2%, 48.2% and 49.4% of net
sales in 2023, 2022 and 2021, respectively. As discussed in more detail below, these fluctuations, which are in line with the fluctuations
in sales for European operations, are primarily from variations in promotion and advertising expenditures. For United States based
operations, selling, general and administrative expenses increased 35% and 70% in 2023 and 2022, respectively, as compared to the
corresponding prior year period and represented 39.7%, 39.1% and 36.5% of net sales in 2023, 2022 and 2021, respectively. As discussed
in more detail below, these fluctuations, which are in line with the fluctuations in sales for United States based operations,
are primarily from variations in promotion and advertising expenditures. Additionally, the United States based operations increased
expenses related to salaries and benefits as we build the organization and infrastructure to support our new brands and future
growth. The increase related to these structural and personnel investments began throughout 2022 and had full year impact in 2023
of $7.8 million.

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Promotion
and advertising included in selling, general and administrative expenses aggregated $259.9 million, $212.4 million and $171.1
million in 2023, 2022 and 2021, respectively. Promotion and advertising represented 19.7%, 19.5% and 19.5% of net sales in 2023,
2022 and 2021, respectively. Promotion and advertising are integral parts of our industry, and we continue to invest heavily to
support new product launches and to build brand awareness. We believe that our promotion and advertising efforts have had a beneficial
effect on sales. 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 and compelling
content to deliver an integrated consumer experience. Long term, we anticipate that on a full year basis, promotion and advertising
expenditures should aggregate approximately 21% of net sales, which is in line with pre-COVID historical averages.

Royalty
expense included in selling, general and administrative expenses aggregated $103.8 million, $87.0 million and $68.9 million in
2023, 2022 and 2021, respectively. Royalty expense represented 7.9%, 8.0% and 7.8% of net sales in 2023, 2022 and 2021, respectively,
due to changes in brand mix.

Service
fees, which are fees paid within our European based operations to third parties relating to the activities of our distribution
subsidiaries, aggregated $11.0 million, $7.9 million and $9.4 million in 2023, 2022 and 2021, respectively. The 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 19.1%, 17.9% and 16.8% for the years ended December 31, 2023, 2022 and 2021, respectively.

Other
Income and Expenses

Interest
expense is primarily related to the financing of brand and licensing acquisitions. The increase in interest expense in 2023 is
related to prior year acquisitions. In December 2022, to finance the acquisition of the Lacoste trademark, the Company entered
into a $55.3 million (€50 million) four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus
a margin of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum. Additionally,
in April 2021, we completed the acquisition of the headquarters of Interparfums SA. The acquisition was financed by a 10-year
approximately $132.6 million (€120 million) bank loan which bears interest at one-month Euribor plus 0.75%. Approximately
$88.4 million (€80 million) of the variable rate debt was swapped for fixed interest rate debt with a maximum interest rate
of 2% per annum. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%. Long-term debt
including current maturities aggregated $157.5 million, $180.0 million and $148.8 million as of December 31, 2023, 2022 and 2021,
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. Over 50% of net sales of our European based operations are denominated in U.S. dollars. Gains and losses in derivatives
designated as hedges are accumulated in other comprehensive income and gains and losses in derivatives not designated as hedges
are included in (gain) loss on foreign currency on the accompanying consolidated income statements. Such gains and losses were
immaterial in each 2023, 2022, and 2021.

Interest
and investment income represents interest earned on cash and cash equivalents and short-term investments. As of December 31, 2023,
short-term investments include approximately $9.4 million of marketable equity securities of other companies in the luxury goods
sector. In the first quarter of 2023, the Company sold marketable securities which generated a gain of $3.1 million. The Company
purchased additional marketable securities in the second and third quarter of 2023, which generated unrealized losses of $0.3
million during 2023. Overall the increases in interest rates led to higher net interest expenses. These increases in interest
expense combined with losses on foreign currency were partially offset by the gains on marketable securities.

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Income
Taxes

Our
consolidated effective tax rate was 24.8%, 22.2% and 27.1% in 2023, 2022 and 2021, respectively.

The
effective tax rate for European based operations was 27.3%, 25.2% and 30.6% in 2023, 2022 and 2021, respectively. The French Government
voted the reduction of the French corporate income tax rate from approximately 33% to 25% over a three-year period resulting in
the decrease in rate from 2021 to 2022. Our effective tax rate in 2023 differs from the 25% statutory rate due to a one-time tax
assessment of € 2.8 million ($3.1 million) included in tax expense as the result of a tax audit conducted for the 2020 and
2021 tax years.

The
effective tax rate for United States based operations was 19.3%, 13.8% and 15.6% in 2023, 2022 and 2021, respectively. Our effective
tax rate differs from the 21% statutory rate due to benefits received from the exercise of stock options as well as deductions
we are allowed for a portion of our foreign derived intangible income, slightly offset by state and local taxes. Additionally,
in the third quarter of 2022, our United States based operations recognized a one-time tax benefit of $2.5 million associated
with the 2021 Salvatore Ferragamo acquisition. At the time of the acquisition, we had not recognized deferred tax benefits as
there were uncertainties concerning its potential recoverability; however, as of September 30, 2022, recoverability was deemed
likely. Other than as discussed above, we did not experience any significant changes in tax rates, and none were expected in the
jurisdictions where we operate.

The
Company has determined that it has no tax liability related to global intangible low-taxed income (“GILTI”) as of
December 31, 2023, 2022 and 2021. The Company also estimated the effect of its foreign derived intangible income (“FDII”)
and recorded a tax benefit of $2.4 million, $1.5 million and $0.6 million as of December 31, 2023, 2022 and 2021, respectively.
Share-based compensation resulted in a discrete tax benefit of $1.2 million, $0.8 million and $1.3 million in 2023, 2022 and 2021,
respectively.

Net
Income

Net
income attributable to Inter Parfums, Inc. was $152.7 million, $120.9 million and $87.4 million in 2023, 2022 and 2021, respectively.

Net
income attributable to European based operations was $124.0 million, $107.3 million and $80.7 million in 2023, 2022 and 2021,
respectively, while net income attributable to United States based operations was $63.8 million, $43.7 million and $29.4 million
in 2023, 2022 and 2021, respectively. The significant fluctuations in net income for both European and United States based operations
are directly related to the previous discussions relating to changes in sales, gross profit margins, selling, general and administrative
expenses.

The
noncontrolling interest arises from our 72% owned subsidiary in Paris, Interparfums SA, which is also a publicly traded company
as 28% of Interparfums SA shares trade on the Euronext. Net income attributable to the noncontrolling interest is directly related
to the profitability of our European based operations and aggregated 28.1%, 27.9% and 28.0% of European based operations net income
in 2023, 2022 and 2021, respectively. Net profit margins attributable to Inter Parfums, Inc. aggregated 11.6%, 11.1% and 9.9%
in 2023, 2022 and 2021, respectively.

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Liquidity
and Capital Resources

Our
conservative financial tradition has enabled us to amass significant cash balances. As of December 31, 2023, we had $182.8 million
in cash and cash equivalents and short-term investments, most of which are held in euro by our European based operations and is
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, 2023, short-term investments include approximately
$12.9 million of marketable equity securities.

As
of December 31, 2023, working capital aggregated $514 million, and we had a working capital ratio of 2.6 to 1. Approximately 78%
of the Company’s total assets are held by European based operations, and approximately $255 million of trademarks, licenses
and other intangible assets are also held by European based operations.

The
Company is party to a number of licenses 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 2039. In connection with most 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, 2023, 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 July 2023, we entered into a global licensing agreement for the creation, development and
distribution of fragrances and fragrance-related products under the Roberto Cavalli brand. Our rights under this license are subject
to certain minimum advertising expenditures and royalty payments as are customary in our industry. This license took effect in
July 2023, and began shipping products in February 2024.

In
December 2022, we entered into a long-term global licensing agreement for the creation, development and distribution of fragrances
and fragrance-related products under the Lacoste brand. Our rights under this license are subject to certain minimum advertising
expenditures and royalty payments as are customary in our industry. This new license took effect and products have started to
ship in January 2024.

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 gained 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 became effective on July 1, 2022, and we are planning to launch new
fragrances under these brands in 2024.

In
October 2021, we closed 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%.

Cash
provided by operating activities aggregated $105.8 million, $73.0 million, and $119.6 million in 2023, 2022 and 2021, respectively.
In 2023, working capital items used $102.0 million in cash from operating activities, as compared to $107.7 million in 2022 and
$13.7 million in 2021. Although, from a cash flow perspective, accounts receivable is up 19% from year-end 2022, the balance is
reasonable based 2023 record sales levels and reflects a strong collection activity as day’s sales outstanding decreased
slightly to 60 days in 2023, as compared to 64 days and 61 days in 2022 and 2021, respectively. From a cash flow perspective,
inventory levels are up 25% from year-end 2022. Inventory days on hand increased to 249 days in 2023, as compared to 231 days
in 2022, and 208 days in 2021 as we have built up inventory related to the newly acquired licenses for Lacoste and Roberto Cavalli
which began shipping to customers in 2024.

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Cash
flows provided by investing activities in 2023 reflect the purchases 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, 2023, approximately $2.2 million of certificates of deposit contain penalties where we would forfeit a portion of the interest
earned in the event of early withdrawal.

Furthermore, in December 2023, the second installment payment to Lacoste related to the acquisition
of the Lacoste trademark in 2022 for $43.3 million (€40 million) was made.

Our
business is not capital intensive as we do not own any manufacturing facilities. On a full year basis, we typically spend approximately
$5.0 million on tools and molds, depending on our new product development calendar. Capital expenditures also include amounts
for office fixtures, computer equipment and industrial equipment needed at our distribution centers.

Cash
flows used in financing activities in 2023 reflect issuances and repayment of debt, purchases of treasury shares, and payment
of dividends to stockholders.

In
December 2022, to finance Interparfums SA’s acquisition of the Lacoste trademark, Interparfums SA entered into an approximately
$55.3 million (€50 million) four-year loan agreement. The loan agreement bears interest at EURIBOR-1 month rates plus a margin
of 0.825%. This variable rate debt was swapped for variable interest rate debt with a maximum rate of 2% per annum.

In
April 2021, Interparfums SA completed the acquisition of its 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, 2023, $154 million of the purchase price, including approximately $3.1 million of acquisition
costs, is included in building, equipment and leasehold improvements on the accompanying consolidated balance sheet. As of December
31, 2023, there was no cash held in escrow included in property, equipment and leasehold improvements on the accompanying consolidated
balance sheet. In addition, Interparfums SA 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 $132.6 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. The swap effectively exchanges the variable interest rate to a fixed rate of approximately 1.1%.

Our
short-term financing requirements are expected to be met by available cash on hand at December 31, 2023, and by short-term credit
lines provided by domestic and foreign banks. The principal credit facilities for 2023 consist of a $25.0 million unsecured revolving
line of credit provided by a domestic commercial bank and approximately $8 million in credit lines provided by a consortium of
international financial institutions. Balances due from short-term borrowings totaled $4.4 million and $0 million as of December
31, 2023 and 2022, respectively.

In
December 2022, our Board of Directors authorized a share repurchase program for our outstanding common stock. During 2023, the
Company repurchased 116,860 shares at a cost of $15.4 million. These shares are classified as treasury shares on the accompanying
consolidated balance sheet. In February 2024, our Board of Directors authorized the Company to continue repurchasing up to 130,000
shares throughout 2024.

In
February 2021, our Board of Directors authorized an annual dividend of $1.00 per share, payable quarterly. In February 2022, our
Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share and in February 2023 the Board of Directors
increased the annual dividend to $2.50 per share. Just recently, in February 2024, the Board of Directors further increased the
annual dividend to $3.00 per share. The next quarterly cash dividend of $0.75 per share is payable on March 29, 2024, to shareholders
of record on March 15, 2024. Dividends paid, including dividends paid once per year to noncontrolling stockholders of Interparfums
SA, aggregated $100.3 million, $79.8 million and $41.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The cash dividends to be paid in 2024 are not expected to have any significant impact on our financial position.

58

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, 2023 as they were either offset by price increases we passed onto our respective customers or operating efficiencies.