(11)

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 in 2014 and 2013 aggregated $0.7 million and $0.5 million, respectively. Compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. 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 2014:

	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested options – beginning of year		367,470		$	6.68
Nonvested options granted		139,250		$	7.42
Nonvested options vested or forfeited		(121,215	)	$	6.06
Nonvested options – end of year		385,505		$	7.14

Share-based payment expenses decreased income before income taxes by $0.9 million in 2014 and $0.8 million in 2013 and 2012, decreased net income attributable to Inter Parfums, Inc. by $0.5 million in 2014, 2013 and 2012 and, reduced diluted earnings per share attributable to Inter Parfums, Inc. by $0.01 in 2014, 2013 and 2012.

The following table summarizes stock option activity and related information for the years ended December 31, 2014, 2013 and 2012:

	Year ended December 31,
	2014					2013					2012
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Shares under option - beginning of year		643,595		$	19.58		716,235		$	14.41		823,275		$	13.20
Options granted		139,250			27.93		136,350			34.84		128,850			19.25
Options exercised		(136,640	)		11.19		(204,240	)		11.68		(226,160	)		12.72
Options cancelled		(6,710	)		19.37		(4,750	)		17.47		(9,730	)		15.37
Shares under option - end of year		639,495			23.19		643,595			19.58		716,235			14.41

At December 31, 2014, options for 329,535 shares were available for future grant under the plans. The aggregate intrinsic value of options outstanding is $3.8 million as of December 31, 2014 and unrecognized compensation cost related to stock options outstanding aggregated $2.6 million, which will be recognized over the next five years.

The weighted average fair values of options granted by Inter Parfums, Inc. during 2014, 2013 and 2012 were $7.42, $9.20 and $5.54 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,
	2014			2013			2012
Weighted-average expected stock-price volatility		34	%		37	%		38	%
Weighted-average expected option life		5.0 years			5.0 years			5.0 years
Weighted-average risk-free interest rate		1.7	%		1.7	%		0.7	%
Weighted-average dividend yield		1.8	%		2.7	%		1.7	%

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,
	2014		2013		2012
Proceeds from stock options exercised	$	1,529	$	1,668	$	1,305
Tax benefits	$	670	$	700	$	100
Intrinsic value of stock options exercised	$	2,733	$	4,088	$	1,359

The following table summarizes additional stock option information as of December 31, 2014:

			Options outstanding
	Number		weighted average remaining	Options
Exercise prices	outstanding		contractual life	exercisable
$12.14		57,440	1.00 years		57,440
$13.45		250	0.08 years		250
$15.59 - $15.62		100,370	2.98 years		55,810
$17.07 - $17.94		4,375	1.71 years		2,000
$19.03 - $19.33		203,410	3.13 years		111,410
$21.76		4,000	3.09 years		1,000
$22.20		4,000	4.09 years		800
$27.80		133,750	6.00 years		—
$29.36		2,000	4.69 years		—
$32.12		3,500	4.09 years		—
$35.75		126,400	5.00 years		25,280
Totals		639,495	3.89 years		253,990

As of December 31, 2014, the weighted average exercise price of options exercisable was $18.43 and the weighted average remaining contractual life of options exercisable is 2.64 years. The aggregate intrinsic value of options exercisable at December 31, 2014 is $2.5 million.

The Chief Executive Officer and the President each exercised 32,875, 28,500 and 60,000 outstanding stock options of the Company's common stock in 2014, 2013 and 2012, respectively. The aggregate exercise prices of $0.6 million in 2014, $0.7 million in 2013 and $1.6 million in 2012 were paid by them tendering to the Company in 2014, 2013 and 2012, an aggregate of 19,656, 18,880 and 82,322 shares, respectively, of the Company's common stock, previously owned by them, valued at fair market value on the dates of exercise. All shares issued pursuant to these option exercises were issued from treasury stock of the Company. In addition, the Chief Executive Officer tendered in 2014, 2013 and 2012 an additional 3,112, 2,573 and 4,710 shares, respectively, for payment of certain withholding taxes resulting from his option exercises.

Dividends

The quarterly dividend of $3.7 million ($0.12 per share) declared in December 2013 was paid in January 2014. Furthermore, in January 2015, the Board of Directors of the Company authorized an 8% increase in the annual dividend to $0.52 per share. The next quarterly dividend of $0.13 per share will be paid on April 15, 2015 to shareholders of record on March 31, 2015.