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Share-Based Payments:
6 Months Ended
Jun. 30, 2023
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, 2023 and 2022 aggregated $0.10 million and $0.10 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, 2023:

 

   Number of Shares   Weighted Average Grant-Date Fair Value 
Nonvested options – beginning of period   168,730   $16.31 
Nonvested options granted        
Nonvested options vested or forfeited   (23,560)  $13.59 
Nonvested options – end of period   145,170   $16.75 

 

Share-based payment expense decreased income before income taxes by $0.63 million and $1.27 million for the three and six months ended June 30, 2023, respectively, as compared to $1.22 million and $1.88 million for the corresponding periods of the prior year. Share-base income before income d payment expense decreased income attributable to Inter Parfums, Inc. by $0.43 million and $0.86 million for the three and six months ended June 30, 2023, respectively, as compared to $0.74 million and $1.18 million for the corresponding periods of the prior year.

 

The following table summarizes stock option information as of June 30, 2023:

 

   Shares   Weighted Average Exercise Price 
         
Outstanding at January 1, 2023   441,580   $67.30 
Options forfeited   (15,960)   70.48 
Options exercised   (93,430)   55.57 
           
Outstanding at June 30, 2023   332,190   $70.44 
           
Options exercisable   187,020   $61.53 
Options available for future grants   574,935      

 

 

As of June 30, 2023, the weighted average remaining contractual life of options outstanding is 2.40 years (0.6 years for options exercisable); the aggregate intrinsic value of options outstanding and options exercisable is $21.5 million and $13.8 million, respectively; and unrecognized compensation cost related to stock options outstanding aggregated $2.0 million.

 

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the six months ended June 30, 2023 and 2022 were as follows:

 

(In thousands)  June 30,
2023
   June 30, 
2022
 
         
Cash proceeds from stock options exercised  $5,192   $810 
Tax benefits   840    75 
Intrinsic value of stock options exercised   5,773    698 

 

There were no options granted during the six months ended June 30, 2023 and June 30, 2022.

 

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 93,489 has been determined taking into account employee turnover. The aggregate cost of the grant of approximately $4.2 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. As of June 30, 2023 the Company acquired 69,609 shares at an aggregate cost of $3.0 million.

 

In the first half of 2023, the Company initiated a share repurchase program with the primary intent of neutralizing the dilution impact of the stock option programs previously discussed. Over the course of the first half of 2023, the Company repurchased 85,060 shares at a cost of $11.3 million. These shares are classified as treasury shares on the accompanying balance sheet. The Company plans to continue repurchasing shares throughout 2023.

 

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