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Share-Based Payments
 3 Months Ended
Mar. 31, 2012
Share-Based Payments
8. 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 during the three months ended March 31, 2012 and 2011 aggregated $0.51 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 three month period ended March 31, 2012:

 

    Number of Shares     Weighted Average
Grant  Date Fair Value		  
             
Nonvested options – beginning of period     456,923     $ 4.40  
Nonvested options granted     4,500     $ 4.99  
Nonvested options vested or forfeited     (139,343 )   $ 3.91  
Nonvested options – end of period     322,080     $ 4.62  

 

Share-based payment expense decreased income before income taxes by $0.22 million and $0.27 million for the three months ended March 31, 2012 and 2011, respectively, and decreased net income attributable to Inter Parfums, Inc. by $0.12 million and $0.15 million for the three months ended March 31, 2012 and 2011, respectively.

 

 

 

The following table summarizes stock option information as of March 31, 2012:

  

    Shares     Weighted Average
Exercise Price		  
             
Outstanding at January 1, 2012     823,275     $ 13.20  
Options granted     4,500       17.07  
Options cancelled     (8,030 )     15.21  
Options exercised     (20,110 )     12.28  
                 
Outstanding at March 31, 2012     799,635     $ 13.22  
                 
Options exercisable     477,555     $ 12.15  
Options available for future grants     715,325          

 

As of March 31, 2012, the weighted average remaining contractual life of options outstanding is 2.88 years (1.83 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $2.3 million and $1.8 million, respectively, and unrecognized compensation cost related to stock options outstanding of Inter Parfums, Inc. aggregated $1.3 million. The amount of unrecognized compensation cost related to stock options outstanding of our majority-owned subsidiary, Inter Parfums S.A., was approximately $0.81 million. Options under Interparfums SA plans vest over a four-year period.

 

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the three months ended March 31, 2012 and March 31, 2011 were as follows:

 

(In thousands)   March 31,
 2012		     March 31,
 2011		  
             
Cash proceeds from stock options exercised   $ 247     $ 445  
Tax benefits     25       —  
Intrinsic value of stock options exercised     78       228  

 

No tax benefit was realized or recognized from stock options exercised in 2011 as valuation reserves were allocated to those potential benefits.

 

The weighted average fair values of the options granted by Inter Parfums, Inc. during the three months ended March 31, 2012 and 2011 were $4.99 and $5.27 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 March 31, 2012 and 2011 are set forth in the following table:

 

    March 31,
 2012		     March 31,
 2011		  
             
Weighted-average expected stock-price volatility     40 %     38 %
Weighted-average expected option life     4.5 years       4.5 years  
Weighted-average risk-free interest rate     0.84 %     2.0 %
Weighted-average dividend yield     1.7 %     1.7 %

 

 

 

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 continue to increase.