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Recent Agreements

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

3. Recent Agreements:

Salvatore Ferragamo

In July 2021, we signed a transaction agreement with Salvatore Ferragamo S.p.A., whereby an exclusive and worldwide license will be granted for the production and distribution of Ferragamo brand perfumes. The license is expected to be effective from October 2021 and will last for 10 years with a 5-year optional term, subject to certain conditions.

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

French Tax Settlement

The French authorities had considered that the existence of IP Suisse, a wholly-owned subsidiary of Interparfums SA (“IPSA”), 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. The French Tax Authority had notified the Company that IP Suisse will be the subject of a tax audit covering the period January 1, 2010 through December 31, 2018. The Company’s exposure in connection with this matter was approximately $5.8 million, net of recovery taxes already paid to the Swiss authorities.

In June 2021, a global settlement agreement was reached with the French Tax Authorities, whereby IPSA 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. 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, our majority owned Paris-based subsidiary, 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 €125 million (approximately $149 million) purchase price is in line with market value and includes the complete renovation of the site. As of June 30, 2021, €104.1 million of the purchase price, including approximately €2.5 million of acquisition costs, is included in building, equipment and leasehold improvements on the accompanying balance sheet as of June 30, 2021. Approximately €21.6 million (approximately $25.7 million) of cash held in escrow is included in other assets on the accompanying balance sheet as of June 30, 2021. In addition, approximately €14.2 million in value added tax (“VAT”) credit associated with the purchase is included in other receivables on the accompanying balance sheet as of June 30, 2021. As of June 30, 2021, the Company borrowed €14.2 million pursuant to a short-term loan equal to the VAT credit, and in July 2021, the €14.2 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 $143 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, we have taken $2.4 million impairment charge on our Rochas fashion trademark in Q1 2021. 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.