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Share-Based Payments
 3 Months Ended
Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Share-Based Payments
9.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, 2021 and 2020 aggregated $0.09 million and $0.08 million, respectively. Compensation cost, net of 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 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, 2021:

 

   Number of Shares   Weighted Average Grant-Date Fair Value 
Nonvested options – beginning of period   353,790   $12.96 
Nonvested options granted   9,000   $11.35 
Nonvested options vested or forfeited   (27,830)  $12.96 
Nonvested options – end of period   334,960   $12.91 

 

Share-based payment expense decreased income before income taxes by $0.73 million and $0.12 million for the three months ended March 31, 2021 and 2020, respectively, and decreased net income attributable to Inter Parfums, Inc. by $0.49 million and $0.18 million for the three months ended March 31, 2021 and 2020.

 

The following table summarizes stock option information as of March 31, 2021:

 

   Shares   Weighted Average Exercise Price 
         
Outstanding at January 1, 2021   713,210   $52.74 
Options granted   9,000    62.18 
Options forfeited   (28,320)   61.30 
Options exercised   (43,450)   33.77 
           
Outstanding at March 31, 2021   650,440   $53.76 
           
Options exercisable   315,480   $44.75 
Options available for future grants   559,440      

 

As of March 31, 2021, the weighted average remaining contractual life of options outstanding is 3.19 years (2.49 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $11.5 million and $8.3 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $4.1 million.

 

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the three months ended March 31, 2021 and March 31, 2020 were as follows:

 

(In thousands)  March 31,
2021		   March 31,
2020		 
         
Cash proceeds from stock options exercised  $1,467   $641 
Tax benefits   200    
--
 
Intrinsic value of stock options exercised   1,457    733 

 

The weighted average fair values of the options granted by Inter Parfums, Inc. during the three months ended March 31, 2021 and 2020 were $11.35 and $12.16 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, 2021 and 2020 are set forth in the following table:

 

   March 31,
2021		   March 31,
2020		 
         
Weighted average expected stock-price volatility   25%   25%
Weighted average expected option life   5 years    5 years 
Weighted average risk-free interest rate   0.4%   1.4%
Weighted average dividend yield   1.6%   2.5%

 

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.

 

In December 2018, Interparfums SA, our 73% owned French subsidiary, approved a 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. In order to avoid dilution of the Company’s ownership of Interparfums SA, all shares to be distributed pursuant to the plan will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA in prior years.

 

In March 2020, due to the potential impact on future net sales and operating results resulting from the COVID-19 pandemic, the estimated number of shares to be distributed, after forfeited shares, was reduced from 142,571 to 82,162. As the Company had already purchased shares in contemplation of the higher anticipated distribution, shares purchased in excess of the reduced anticipated distribution were transferred to treasury shares at Interparfums SA level.

 

The fair value of the grant had been determined based on the quoted stock price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant. The original cost of the grant was approximately $4.4 million, and the March 2020 revaluation resulted in a reduction of the cost, to approximately $2.5 million.

 

In June 2020, the performance conditions were modified effecting 96 employees. As of March 31, 2021, the number of shares to be distributed, after forfeited shares, increased to 158,707. The increase in shares anticipated to be distributed were transferred from treasury shares at the Interparfums SA level. The original cost of the grant was approximately $4.4 million, and the modification resulted in a revised cost of approximately $4.6 million.