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Equity
 12 Months Ended
Dec. 31, 2022
Equity:  
Equity

 

(13)Equity

 

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 aggregated $1.3 million, $1.4 million and $1.7 million in 2022, 2021 and 2020, respectively. Compensation cost, net of estimated 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 the Company’s policy to issue new shares upon exercise of stock options.

 

The following table sets forth information with respect to nonvested options for 2022:

 

   Number of Shares    Weighted Average Grant Date Fair Value 
Nonvested options – beginning of year   209,510   $13.45 
Nonvested options granted   62,000   $20.36 
Nonvested options vested or forfeited   (102,780)  $12.93 
Nonvested options – end of year   168,730   $16.31 

 

The effect of share-based payment expenses decreased income statement line items as follows:

 

   Year Ended December 31, 
   2022   2021   2020 
Income before income taxes  $3,143   $2,850   $3,030 
Net income attributable to Inter Parfums, Inc.   2,036    1,880    2,040 
Diluted earnings per share attributable to Inter Parfums, Inc.   0.06    0.06    0.06 

 

The following table summarizes stock option activity and related information for the years ended December 31, 2022, 2021 and 2020:

 

   Year ended December 31, 
   2022   2021   2020 
   Options  

Weighted

Average

Exercise

Price

   Options  

Weighted

Average

Exercise

Price 

   Options  

Weighted

Average

Exercise

Price 

 
 Shares under option - beginning of year   524,900   $57.58    713,210   $52.74    815,800   $49.89 
 Options granted   62,000    97.84    9,000    62.18    9,000    69.11 
 Options exercised   (136,880)   43.86    (156,490)   34.46    (95,570)   28.99 
 Options forfeited   (8,440)   67.65    (40,820)   62.57    (16,020)   58.38 
 Shares under option - end of year   441,580    67.30    524,900    57.58    713,210    52.74 

 

 

At December 31, 2022, options for 558,975 shares were available for future grant under the plans. The aggregate intrinsic value of options outstanding is $13.0 million as of December 31, 2022 and unrecognized compensation cost related to stock options outstanding aggregated $2.7 million, which will be recognized over the next five years.

 

The weighted average fair values of options granted by Inter Parfums, Inc. during 2022, 2021 and 2020 were $20.36, $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.

 

The assumptions used in the Black-Scholes pricing model are set forth in the following table:

 

                       
   Year Ended December 31, 
   2022   2021   2020 
Weighted-average expected stock-price volatility   26%   25%   25%
Weighted-average expected option life   4.0 years    5.0 years    5.0 years 
Weighted-average risk-free interest rate   4.0%   0.4%   1.4%
Weighted-average dividend yield   2.4%   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 maintain its current payout ratio as a percentage of earnings.

 

Proceeds, tax benefits and intrinsic value related to stock options exercised were as follows:

 

                       
   Year Ended December 31, 
   2022   2021   2020 
Proceeds from stock options exercised  $6,003   $5,393   $2,771 
Tax benefits  $800   $1,300   $400 
Intrinsic value of stock options exercised  $6,760   $7,800   $2,873 

  

The following table summarizes additional stock option information as of December 31, 2022:

 

Exercise prices   Options outstanding   Options outstanding weighted average remaining contractual life  Options exercisable 
$40.15 - $46.90   103,460   0.96 years   101,860 
$62.18 - $69.11   139,900   2.04 years   97,210 
$73.09   136,220   3.00 years   73,780 
$97.84   62,000   5.85 years   — 
Totals   441,580   2.62 years   272,850 

 

As of December 31, 2022, the weighted average exercise price of options exercisable was $59.46 and the weighted average remaining contractual life of options exercisable is 1.88 years. The aggregate intrinsic value of options exercisable at December 31, 2022 is $10.1 million.

 

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 Euronext on the date of grant. The estimated number of shares to be distributed of 85,062 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $4.1 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 year ended December 31, 2022, the Company acquired 63,281 shares at an aggregate cost of $3.0 million.

 

 

Dividends

 

In October 2019, our Board of Directors authorized a 20% increase in the annual dividend to $1.32 per share on an annual basis. In April 2020, as a result of the uncertainties raised by the COVID-19 pandemic, the Board of Directors authorized a temporary suspension of the annual cash dividend. In February 2021, the Board of Directors authorized a reinstatement of an annual dividend of $1.00, payable quarterly. In February 2022, the Board of Directors authorized a 100% increase in the annual dividend to $2.00 per share and in February 2023, the Board of Directors further increased the annual dividend to $2.50 per share. The next quarterly cash dividend of $0.625 per share is payable on March 31, 2023 to shareholders of record on March 15, 2023.