Share Based Payments

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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 nine months ended September 30, 2018 and 2017 aggregated $0.05 million. 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 nine month period ended September 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		(13,845	)	$	7.94
Nonvested options – end of period		431,390		$	8.31

Share based payment expense decreased income before income taxes by $0.49 million and $1.57 million for the three and nine months ended September 30, 2018, respectively, as compared to $0.54 million and $1.56 million for the corresponding periods of the prior year. Share based payment expense decreased income attributable to Inter Parfums, Inc. by $0.31 million and $1.00 million for the three and nine months ended September 30, 2018, respectively, as compared to $0.29 million and $0.86 million for the corresponding periods of the prior year.

The following table summarizes stock option information as of September 30, 2018:

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2018		730,980		$	31.92
Options granted		14,000			46.44
Options forfeited		(7,440	)		37.63
Options exercised		(92,294	)		25.81
Outstanding at September 30, 2018		645,246		$	33.05
Options exercisable		213,856		$	28.16
Options available for future grants		923,425

As of September 30, 2018, the weighted average remaining contractual life of options outstanding is 3.38 years (1.92 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $20.3 million and $7.8 million, respectively, and unrecognized compensation cost related to stock options outstanding aggregated $2.7 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2018 and September 30, 2017 were as follows:

(In thousands)	September 30, 2018		September 30, 2017
Cash proceeds from stock options exercised	$	2,384	$	839
Tax benefits		417		135
Intrinsic value of stock options exercised		2,307		804

The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, 2018 and 2017 were $10.73 and $8.04 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 September 30, 2018 and 2017 are set forth in the following table:

	September 30, 2018			September 30, 2017
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	%		1.9	%
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 and has been adjusted for stock splits. 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 nine months ended September 30, 2018, $0.7 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 nine months ended September 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.