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Share-Based Payments:
 9 Months Ended
Sep. 30, 2022
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, 2022 and 2021 aggregated $0.11 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, 2022:

 

   Number of Shares   Weighted Average
Grant-Date Fair Value		 
Nonvested options – beginning of period   209,510   $13.45 
Nonvested options granted   —    — 
Nonvested options vested or forfeited   (10,460)  $12.14 
Nonvested options – end of period   199,050   $13.52 

 

 

Share-based payment expense decreased income before income taxes by $0.47 million and $2.35 million for the three and nine months ended September 30, 2022, respectively, as compared to $0.71 million and $2.16 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.34 million and $1.52 million for the three and nine months ended September 30, 2022, respectively, as compared to $0.48 million and $1.42 million for the corresponding periods of the prior year.

 

The following table summarizes stock option information as of September 30, 2022:

 

   Shares   Weighted Average Exercise Price 
         
Outstanding at January 1, 2022   524,900   $57.58 
Options forfeited   (1,480)   67.41 
Options exercised   (45,205)   40.16 
           
Outstanding at September 30, 2022   478,215   $59.20 
           
Options exercisable   279,165   $54.40 
Options available for future grants   614,015      

 

As of September 30, 2022, the weighted average remaining contractual life of options outstanding is 2.12 years (1.76 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $7.8 million and $5.9 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $1.9 million.

 

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2022 and 2021 were as follows:

 

(In thousands)  September 30, 
2022		   September 30, 
2021		 
         
Cash proceeds from stock options exercised  $1,816   $1,727 
Tax benefits   320    240 
Intrinsic value of stock options exercised   2,105    1,562 

 

The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, 2021 were $11.35 per share on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted. There were no options granted during the nine months ended September 30, 2022. The assumptions used in the Black-Scholes pricing model for the period ended September 30, 2021 is set forth in the following table:

 

    September 30, 
2021		 
      
Weighted average expected stock-price volatility    25%
Weighted average expected option life    5 years 
Weighted average risk-free interest rate    0.4%
Weighted average dividend yield    1.6%

 

 

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 continues to increase.

 

In December 2018, Interparfums SA 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 corporate performance conditions were met and therefore in June 2022, 211,955 shares, adjusted for stock splits, were distributed. The aggregate cost of the grant of approximately $4.8 million was recognized as compensation cost on a straight-line basis over the requisite three-year service period.

 

In March 2022, Interparfums SA approved an additional plan to grant an aggregate of 88,400 shares to all Interparfums SA employees and corporate officers having more than six months of employment at grant date, subject to certain corporate performance conditions. The shares, subject to adjustment for stock splits, will be distributed in June 2025 and will follow the same guidelines as the December 2018 plan.

 

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 estimated number of shares to be distributed of 66,905 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $3.2 million will be recognized as compensation cost on a straight-line basis over the requisite three and a quarter year service period.

 

Similar to the December 2018 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, 2022, the Company acquired 63,281 shares at an aggregate cost of $3.0 million.

 

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