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Equity

12 Months Ended

Dec. 31, 2017

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 $0.9 million in both 2017 and 2016. 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 2017:

		Number of Shares				Weighted Average Grant Date Fair Value
Nonvested options – beginning of year			401,440			$	7.14
Nonvested options granted			174,600			$	9.82
Nonvested options vested or forfeited			(144,805	)		$	7.13
Nonvested options – end of year			431,235			$	8.22

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

		Year Ended December 31,
		2017				2016				2015
Income before income taxes		$	2,100			$	1,200			$	800
Net income attributable to Inter Parfums, Inc.			1,150				700				500
Diluted earnings per share attributable to Inter Parfums, Inc.			0.04				0.02				0.01

The following table summarizes stock option activity and related information for the years ended December 31, 2017, 2016 and 2015:

		Year ended December 31,
		2017								2016								2015
		Options				Weighted Average Exercise Price				Options				Weighted Average Exercise Price				Options				Weighted Average Exercise Price
Shares under option - beginning of year			684,540			$	26.94				709,300			$	24.34				639,495			$	23.19
Options granted			174,600				43.48				148,950				32.61				158,300				23.79
Options exercised			(103,230	)			19.03				(123,150	)			18.69				(80,685	)			13.82
Options forfeited			(24,930	)			29.49				(50,560	)			27.18				(7,810	)			27.77
Shares under option - end of year			730,980				31.92				684,540				26.94				709,300				24.34

At December 31, 2017, options for 929,985 shares were available for future grant under the plans. The aggregate intrinsic value of options outstanding is $8.5 million as of December 31, 2017 and unrecognized compensation cost related to stock options outstanding aggregated $3.4 million, which will be recognized over the next five years.

The weighted average fair values of options granted by Inter Parfums, Inc. during 2017, 2016 and 2015 were $9.82, $7.43 and $5.99 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,
		2017				2016				2015
Weighted-average expected stock-price volatility			28	%			29	%			33	%
Weighted-average expected option life			5.0 years				5.0 years				5.0 years
Weighted-average risk-free interest rate			2.2	%			2.0	%			1.7	%
Weighted-average dividend yield			2.0	%			2.1	%			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,
		2017				2016				2015
Proceeds from stock options exercised, excluding cashless exercise of $0.7 million and $0.5 million in 2016 and 2015, respectively		$	1,963			$	1,579			$	653
Tax benefits		$	600			$	400			$	260
Intrinsic value of stock options exercised		$	2,258			$	1,860			$	1,137

The following table summarizes additional stock option information as of December 31, 2017:

				Options outstanding
		Number		weighted average remaining		Options
Exercise prices		outstanding		contractual life		exercisable
$19.33		77,960		1.00 years		77,960
$22.20		2,800		1.08 years		2,000
$23.61		117,540		4.00 years		45,150
$25.29 - $28.82		13,000		2.85 years		5,500
$26.40		4,000		3.08 years		1,000
$27.80		102,600		3.00 years		59,120
$29.36		2,000		1.68 years		1,500
$32.12 - $32.83		137,900		4.93 years		28,955
$33.95		4,000		4.09 years		—
$35.75		99,580		2.00 years		78,560
$40.15		2,000		4.70 years		—
$43.80		167,600		6.00 years		—
Totals		730,980		3.86 years		299,745

As of December 31, 2017, the weighted average exercise price of options exercisable was $27.45 and the weighted average remaining contractual life of options exercisable is 2.51 years. The aggregate intrinsic value of options exercisable at December 31, 2017 is $4.8 million.

The Chief Executive Officer and the President each exercised 19,000 outstanding stock options of the Company’s common stock in 2016 and 2015. The aggregate exercise prices of $0.7 million in 2016 and $0.5 million in 2015 were paid by them tendering to the Company in 2016 and 2015 an aggregate of 20,658 and 18,764 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 2016 and 2015 an additional 2,179 and 1,299 shares, respectively, for payment of certain withholding taxes resulting from his option exercises.

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 $25.00 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 taking into account the dividend yield as no dividends on this grant will be earned until the shares are distributed. The estimated number of shares to be distributed of 137,381, subject to adjustment for stock splits, has been determined taking into account employee turnover. The aggregate cost of the grant, 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. The total compensation cost recognized in 2017 and 2016 was $1.2 million and $0.4 million, respectively.

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, 108,348 shares were acquired in the open market at an aggregate cost of $2.9 million, and such amount has been classified as an equity transaction on the accompanying balance sheet.

Dividends

In October 2017, the Board of Directors of the Company authorized a 24% increase in the annual dividend to $0.84 per share. The quarterly dividend aggregating approximately $6.6 million ($0.21 per share) declared in December 2017 was paid in January 2018. The next quarterly dividend of $0.21 per share will be paid on April 13, 2018 to shareholders of record on March 30, 2018.