| Share Based Payments | 7.
Share Based Payments:
The Company maintains stock option programs 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 five
The following table sets forth information with respect to nonvested options for the six month period ended June 30, 2019:
Number of Shares Weighted Average Grant Date Fair Value
Nonvested options – beginning of period
485,360
$
10.72
Nonvested options granted
6,000
$
14.83
Nonvested options vested or forfeited (21,830
) $
9.43
Nonvested options – end of period
469,530
$
10.83
Share based payment expense decreased income before income taxes by $0.95
million and $1.90
million for the three and six months ended June 30, 2019, respectively, as compared to $0.57
million and $1.08
million for the corresponding periods of the prior year. Share based payment expense decreased income attributable to Inter Parfums, Inc. by $0.56
million and $1.14
million for the three and six months ended June 30, 2019, respectively, as compared to $0.36
million and $0.68
million for the corresponding periods of the prior year.
The following table summarizes stock option information as of June 30, 2019:
Shares Weighted Average Exercise Price
Outstanding at January 1, 2019
776,171
$
41.33
Options granted
6,000
66.46
Options forfeited (14,040
)
44.13
Options exercised (68,078
)
33.53
Outstanding at June 30, 2019
700,053
$
42.25
Options exercisable
230,523
$
31.21
Options available for future grants
752,255
As of June 30, 2019, the weighted average remaining contractual life of options outstanding is
3.61
years (2.08
years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $17.0
million and $8.1
million, respectively, and unrecognized compensation cost related to stock options outstanding aggregated $4.2
million.
Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the six months ended June 30, 2019 and June 30, 2018 were as follows:
(In thousands) June 30, June 30,
Cash proceeds from stock options exercised $
2,281
$
1,938
Tax benefits
300
157
Intrinsic value of stock options exercised
2,267
1,775
The weighted average fair values of the options granted by Inter Parfums, Inc. during the six months ended June 30, 2019 and 2018 were $14.83
and $10.73
per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted.
The assumptions used in the Black-Scholes pricing model for the periods ended June 30, 2019 and 2018 are set forth in the following table:
June 30, June 30,
Weighted average expected stock-price volatility
27
%
28
%
Weighted average expected option life
5 years
5 years
Weighted average risk-free interest rate
2.5
%
2.5
%
Weighted average dividend yield
2.0
%
2.0
%
Expected volatility is estimated based on historic volatility of the Company’s common stock. The expected term of the option is estimated based on historic data. 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 as authorized by the Board of Directors would increase as the earnings of the Company and its stock price increases.
In September 2016, Interparfums SA, our
73% owned French subsidiary, approved a plan to grant an aggregate of
15,100
shares of its stock to employees with no performance condition requirement, and an aggregate of
133,000
shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in September 2019 so long as the individual is employed by Interparfums SA at the time, and in the case of officers and managers, only to the extent that the performance conditions have been met. Once distributed, the shares will be unrestricted and the employees will be permitted to trade their shares.
The fair value of the grant of €16.87
per share (approximately $19.20
per share) has been determined based on the quoted share price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant. The estimated number of shares to be distributed of
173,056
has been determined taking into account employee turnover and has been adjusted for stock splits. The aggregate cost of the grant of approximately $3.4
million is being recognized as compensation cost by Interparfums SA on a straight-line basis over the requisite three-year service period.
To avoid dilution of the Company’s ownership of Interparfums SA, all shares to be distributed pursuant to this plan will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. In 2016 and 2018 , a total of
165,000
shares had been acquired at an aggregate cost of $3.7
million. During the six months ended June 30, 2019, an additional
8,056
shares were acquired at an aggregate cost of $0.3
million.
In December 2018, Interparfums SA approved an additional plan to grant an aggregate of
26,600
shares of its stock to employees with no performance condition requirement, and an aggregate of
133,000
shares to officers and managers, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2022 and will follow the same guidelines as the September 2016 plan.
The fair value of the grant of €27.45
per share (approximately $30.90
per share) has been determined based on the quoted stock price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant. The estimated number of shares to be distributed of
148,864
has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $4.9
million will be recognized as compensation cost by Interparfums SA on a straight-line basis over the requisite three and a half year service period.
Similar to the September 2016 plan, in order to avoid dilution of the Company’s ownership of Interparfums SA, all shares to be distributed pursuant to this plan will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. During the six months ended June 30, 2019, the Company acquired
131,613
shares at an aggregate cost of $5.8
million.
All share purchases have been classified as equity transactions on the accompanying balance sheet. |
