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Share-Based Payments:
 6 Months Ended
Jun. 30, 2021
Equity:  
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 six months ended June 30, 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 six months ended June 30, 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   (32,730)  $13.00 
Nonvested options – end of period   330,060   $12.91 

 

Share-based payment expense decreased income before income taxes by $1.45 million and $0.72 million for the three and six months ended June 30, 2021, respectively, as compared to $1.07 million and $1.19 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.94 million and $0.46 million for the three and six months ended June 30, 2021, respectively, as compared to $0.67 million and $0.86 million for the corresponding periods of the prior year.

 

 

 

  

The following table summarizes stock option information as of June 30, 2021:

  

   Shares   Weighted Average Exercise Price 
         
Outstanding at January 1, 2021   713,210   $52.74 
Options granted   9,000    62.18 
Options forfeited   (33,240)   62.15 
Options exercised   (45,550)   34.75 
           
Outstanding at June 30, 2021   643,420   $53.66 
           
Options exercisable   313,360   $44.64 
Options available for future grants   604,955      

 

As of June 30, 2021, the weighted average remaining contractual life of options outstanding is 2.93 years (2.23 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 $3.7 million.

 

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the six months ended June 30, 2021 and June 30, 2020 were as follows:

 

(In thousands)  June 30,
2021		   June 30,
2020		 
         
Cash proceeds from stock options exercised  $1,583   $657 
Tax benefits   200    — 
Intrinsic value of stock options exercised   1,496    740 

 

The weighted average fair values of the options granted by Inter Parfums, Inc. during the six months ended June 30, 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 June 30, 2021 and 2020 are set forth in the following table:

 

  June 30,
2021		   June 30,
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, IPSA 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 IPSA, all shares to be distributed pursuant to the plan will be pre-existing shares of IPSA, purchased in the open market by IPSA in prior years.

 

The fair value of the grant had been determined based on the quoted stock price of IPSA shares as reported by the NYSE Euronext on the date of grant. In June 2020, the performance conditions were modified effecting 96 employees. As of June 30, 2021, the number of shares to be distributed, after forfeited shares, increased to 173,603 resulting from the modification and stock split. The increase in shares anticipated to be distributed were transferred from treasury shares at the IPSA level. The original cost of the grant was approximately $4.4 million, and the modification resulted in a revised cost of approximately $4.7 million.