Equity

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Equity

(13) Equity

Share-Based Payments:

The Company maintains a stock option program 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 aggregated $1.1 million and $0.9 million in 2018 and 2017, respectively. Compensation cost, net of estimated forfeitures, is recognized on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated based on historic trends. It is generally the Company’s policy to issue new shares upon exercise of stock options.

The following table sets forth information with respect to nonvested options for 2018:

	Number of Shares Grant Date			Weighted Average Grant Date Fair Value Grant Date
Nonvested options – beginning of year		431,235		$	8.22
Nonvested options granted		196,350		$	14.31
Nonvested options vested or forfeited		(142,225	)	$	8.11
Nonvested options – end of year		485,360		$	10.72

The effect of share-based payment expenses decreased income statement line items as follows:

	Year Ended December 31,
	2018		2017		2016
Income before income taxes	$	2,200	$	2,100	$	1,200
Net income attributable to Inter Parfums, Inc.		1,390		1,150		700
Diluted earnings per share attributable to Inter Parfums, Inc.		0.04		0.04		0.02

The following table summarizes stock option activity and related information for the years ended December 31, 2018, 2017 and 2016:

	Year ended December 31,
	2018					2017					2016
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Shares under option - beginning of year		730,980		$	31.92		684,540		$	26.94		709,300		$	24.34
Options granted		196,350			63.91		174,600			43.48		148,950			32.61
Options exercised		(140,579	)		24.21		(103,230	)		19.03		(123,150	)		18.69
Options forfeited		(10,580	)		37.64		(24,930	)		29.49		(50,560	)		27.18
Shares under option - end of year		776,171			41.33		730,980			31.92		684,540			26.94

At December 31, 2018, options for 744,215 shares were available for future grant under the plans. The aggregate intrinsic value of options outstanding is $18.8 million as of December 31, 2018 and unrecognized compensation cost related to stock options outstanding aggregated $4.9 million, which will be recognized over the next five years.

The weighted average fair values of options granted by Inter Parfums, Inc. during 2018, 2017 and 2016 were $14.31, $9.82 and $7.43 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value. 

The assumptions used in the Black-Scholes pricing model are set forth in the following table:

	Year Ended December 31,
	2018			2017			2016
Weighted-average expected stock-price volatility		27	%		28	%		29	%
Weighted-average expected option life		5.0 years			5.0 years			5.0 years
Weighted-average risk-free interest rate		2.5	%		2.2	%		2.0	%
Weighted-average dividend yield		2.0	%		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 maintain its current payout ratio as a percentage of earnings.

Proceeds, tax benefits and intrinsic value related to stock options exercised were as follows: 

	Year Ended December 31,
	2018		2017		2016
Proceeds from stock options exercised, excluding cashless exercise of $0.7 million 2016	$	3,406	$	1,963	$	1,579
Tax benefits	$	807	$	600	$	400
Intrinsic value of stock options exercised	$	4,310	$	2,258	$	1,860

The following table summarizes additional stock option information as of December 31, 2018:

			Options outstanding
	Number		weighted average remaining	Options
Exercise prices	outstanding		contractual life	exercisable
$23.61 - $29.36		209,920	2.48 years		134,170
$32.83 - $35.75		206,101	2.85 years		123,781
$40.15 - $46.90		177,800	4.96years		32,860
$65.25		182,350	6.00 years		—
Totals		776,171	3.98 years		290,811

As of December 31, 2018, the weighted average exercise price of options exercisable was $31.65 and the weighted average remaining contractual life of options exercisable is 2.57 years. The aggregate intrinsic value of options exercisable at December 31, 2018 is $9.9 million.

In 2016, the Chief Executive Officer and the President each exercised 19,000 outstanding stock options of the Company’s common stock. The aggregate exercise prices of $0.7 million was paid by them tendering to the Company an aggregate of 20,658 shares of the Company’s common stock, previously owned by them, valued at fair market value on the dates of exercise. All shares issued pursuant to these option exercises were issued from treasury stock of the Company. In addition, the Chief Executive Officer tendered in an additional 2,179 shares for payment of certain withholding taxes resulting from his option exercise.

In September 2016, Interparfums SA, 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 €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 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. For the year ended December 31, 2018, $1.1 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. In 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.

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 €29.84 per share (approximately $34.00 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 142,842 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.

Dividends

In October 2018, the Board of Directors of the Company authorized a 31% increase in the annual dividend to $1.10 per share. The quarterly dividend aggregating approximately $8.6 million ($0.275 per share) declared in December 2018 was paid in January 2019. The next quarterly dividend of $0.275 per share will be paid on April 15, 2019 to shareholders of record on March 29, 2019.