| Share-Based Payments | 6. 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 to five-year period. The fair value of shares vested for the six months ended June 30,
2018 and 2017 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 month period ended June 30,
2018:
Number
of Shares Weighted
Average Grant Date Fair Value
Nonvested
options – beginning of period 431,235 $ 8.22
Nonvested options granted 14,000 $ 10.73
Nonvested
options vested or forfeited (13,045 ) $ 7.87
Nonvested
options – end of period 432,190 $ 8.32 Share
based payment expense decreased income before income taxes by $0.57 million and $1.08 million for the three and six months ended
June 30, 2018, respectively, as compared to $0.51 million and $1.02 million for the corresponding periods of the prior year. Share
based payment expense decreased income attributable to Inter Parfums, Inc. by $0.36 million and $0.68 million for the three and
six months ended June 30, 2018, respectively, as compared to $0.28 million and $0.56 million for the corresponding periods of
the prior year. The
following table summarizes stock option information as of June 30, 2018:
Shares Weighted
Average Exercise Price
Outstanding at January 1,
2018 730,980 $ 31.92
Options granted 14,000 46.44
Options forfeited (7,140 ) 37.37
Options
exercised (76,725 ) 25.26
Outstanding at
June 30, 2018 661,115 $ 32.95
Options exercisable 228,925 $ 28.19
Options available for
future grants 923,125 As
of June 30, 2018, the weighted average remaining contractual life of options outstanding is 3.61 years (2.21 years for options
exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $13.6 million and $5.8 million,
respectively, and unrecognized compensation cost related to stock options outstanding aggregated $3.0 million. Cash
proceeds, tax benefits and intrinsic value related to stock options exercised during the six months ended June 30, 2018 and June
30, 2017 were as follows:
(In thousands) June
30, June
30,
Cash proceeds
from stock options exercised $ 1,938 $ 625
Tax benefits 157 135
Intrinsic value of
stock options exercised 1,775 600 The
weighted average fair values of the options granted by Inter Parfums, Inc. during the six months ended June 30, 2018 and 2017
were $10.73 and $7.67 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, 2018 and 2017 are set forth in the following
table:
June
30, June
30,
Weighted average expected
stock-price volatility 28 % 29 %
Weighted average expected option life 5 years 5 years
Weighted average risk-free interest rate 2.5 % 2.0 %
Weighted average dividend yield 2.0 % 2.1 % 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 subsidiary in Paris, 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 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 €18.56 per share (approximately $22.00 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 157,840 has been determined taking into account employee turnover. The aggregate cost of the grant of €2.9 million (approximately
$3.4 million) will be recognized as compensation cost by Interparfums SA on a straight-line basis over the requisite three year
service period. For the six months ended June 30, 2018, $0.5 million of compensation cost has been recognized in connection with
this plan. 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, 131,101 shares had been acquired
in the open market at an aggregate cost of $2.9 million. During the six months ended June 30, 2018, an additional 18,899 shares
were acquired in the open market at an aggregate cost of $0.8 million. All share purchases have been classified as equity transactions
on the accompanying balance sheet. |
