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Share Based Payments

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

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, 2019 and 2018 aggregated $0.07 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 nine month period ended September 30, 2019:

Schedule of nonvested share activity
	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested options – beginning of period		485,360		$	10.72
Nonvested options granted		6,000		$	14.83
Nonvested options vested or forfeited		(29,740	)	$	9.68
Nonvested options – end of period		461,620		$	10.84

Share based payment expense decreased income before income taxes by $0.8 million and $2.7 million for the three and nine months ended September 30, 2019, respectively, as compared to $0.5 million and $1.6 million for the corresponding periods of the prior year. Share based payment expense decreased income attributable to Inter Parfums, Inc. by $0.5 million and $1.7 million for the three and nine months ended September 30, 2019, respectively, as compared to $0.3 million and $1.0 million for the corresponding periods of the prior year.

The following table summarizes stock option information as of September 30, 2019:

Schedule of stock options, activity
	Shares			Weighted Average Exercise Price

Outstanding at January 1, 2019		776,171		$	41.33
Options granted		6,000			66.46
Options forfeited		(21,450	)		44.79
Options exercised		(82,441	)		33.74

Outstanding at September 30, 2019		678,280		$	42.37

Options exercisable		216,660		$	30.99
Options available for future grants		752,255

As of September 30, 2019, the weighted average remaining contractual life of options outstanding is 3.41 years (1.93 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $18.7 million and $8.4 million, respectively, and unrecognized compensation cost related to stock options outstanding aggregated $3.9 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2019 and 2018 were as follows:

Schedule of cash proceeds received from share-based payment awards
(In thousands)	September 30, 2019		September 30, 2018

Cash proceeds from stock options exercised	$	2,781	$	2,384
Tax benefits		400		417
Intrinsic value of stock options exercised		2,752		2,307

The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, 2019 and 2018 were $14.83 and $10.73 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, 2019 and 2018 are set forth in the following table:

Schedule of valuation assumptions in Black-Scholes pricing
	September 30, 2019			September 30, 2018

Weighted average expected stock-price volatility		27	%		28	%
Weighted average expected option life		5 years			5 years
Weighted average risk-free interest rate		2.5	%		2.5	%
Weighted average dividend yield		2.0	%		2.0	%

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 French subsidiary, 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 corporate performance conditions were met and therefore in September 2019, 172,851 shares, adjusted for stock splits, were distributed. The aggregate cost of the grant of approximately $3.9 million was recognized as compensation cost on a straight-line basis over the requisite three-year service period.

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 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 142,379 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $4.4 million will be recognized as compensation cost on a straight-line basis over the requisite three and a half year service period.

Similar to the September 2016 plan, in order to avoid dilution of the Company's ownership of Interparfums SA, all shares distributed or to be distributed pursuant to these plans will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. During the nine months ended September 30, 2019, the Company acquired 131,613 shares at an aggregate cost of $5.8 million.

All share purchases and issuances have been classified as equity transactions on the accompanying balance sheet.