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Share-Based Payments:
 9 Months Ended
Sep. 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 nine months ended September 30, 2021 and 2020 aggregated $0.09 million and $0.09 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 nine months ended September 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

 

 

(38,730

)

 

$

13.00

 

Nonvested options – end of period

 

 

324,060

 

 

$

12.91

 

 

Share-based payment expense decreased income before income taxes by $0.71 million and $2.16 million for the three and nine months ended September 30, 2021, respectively, as compared to $0.62 million and $1.81 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.48 million and $1.42 million for the three and nine months ended September 30, 2021, respectively, as compared to $0.43 million and $1.29 million for the corresponding periods of the prior year.

 

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

 

 

 

Shares

 

 

Weighted Average
Exercise Price

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2021

 

 

713,210

 

 

$

52.74

 

Options granted

 

 

9,000

 

 

 

62.18

 

Options forfeited

 

 

(39,220

)

 

 

62.64

 

Options exercised

 

 

(48,370

)

 

 

35.71

 

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2021

 

 

634,620

 

 

$

53.56

 

 

 

 

 

 

 

 

 

 

Options exercisable

 

 

310,560

 

 

$

44.53

 

Options available for future grants

 

 

610,935

 

 

 

 

 

 

As of September 30, 2021, the weighted average remaining contractual life of options outstanding is 2.67 years (1.96 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $13.5 million and $9.4 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $3.3 million.

 

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

 

(In thousands)

 

   September 30, 2021  

 

   September 30, 2020  

 

 

 

 

 

 

 

 

 

Cash proceeds from stock options exercised

 

$

1,727

 

 

$

796

 

Tax benefits

 

 

240

 

 

 

--

 

Intrinsic value of stock options exercised

 

 

1,562

 

 

 

788

 

 

 

 

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

 

 

 

 

September 30, 2021

 

 

September 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 September 30, 2021, the number of shares to be distributed, after forfeited shares, increased to 173,141 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.