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Share Based Payments

6 Months Ended

Jun. 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 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, 2018				June 30, 2017

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, 2018				June 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	%			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.