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Recent Agreements

9 Months Ended

Sep. 30, 2021

3. Recent Agreements:

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.

INTER PARFUMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

With respect to the management and coordination of activities related to the license agreement, the Company will operate through a wholly-owned Italian subsidiary based in Florence, and all products will be produced in Italy.

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. In addition, a company owned by a member of our Board of Directors is to receive a fee of $0.3 million in connection with this license. 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 (“IPSA”), our majority owned Paris-based subsidiary, does not, in and of itself, constitute a permanent establishment and therefore IPSA 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 IPSA agreed to pay €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. IPSA also agreed to apply the lower rate in 2021 through 2025 and to transfer the Lanvin brand from IP Suisse to IPSA by December 31, 2025.

Building Acquisition - Future Headquarters in Paris

In April 2021, IPSA, 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 $145 million purchase price is in line with market value and includes the complete renovation of the site. As of September 30, 2021, $131.2 million of the purchase price, including approximately $2.9 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of September 30, 2021. Approximately $14.2 million of cash held in escrow is included in other assets on the accompanying balance sheet as of September 30, 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.

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.