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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 2013 and 2012 aggregated $0.5 million and $0.9 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 2013:

	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested options - beginning of year		346,075		$	5.02
Nonvested options granted		136,350		$	9.20
Nonvested options vested or forfeited		(114,955	)	$	4.67
Nonvested options - end of year		367,470		$	6.68

Share-based payment expenses decreased income before income taxes by $0.8 million in 2013 and 2012 and $1.1 million in 2011, decreased net income attributable to Inter Parfums, Inc. by $0.50 million in 2013 and 2012 and $0.60 million in 2011, respectively, and reduced diluted earnings per share by $0.01 in 2013 and 2012, and $0.02 in 2011.

The following table summarizes stock option activity and related information for the years ended December 31, 2013, 2012 and 2011 and does not include information relating to options of IPSA granted by IPSA, our majority-owned subsidiary:

	Year ended December 31,
	2013					2012					2011
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Shares under option - beginning of year		716,235		$	14.41		823,275		$	13.20		807,620		$	12.78
Options granted		136,350			34.84		128,850			19.25		118,900			15.66
Options exercised		(204,240	)		11.68		(226,160	)		12.72		(95,625	)		12.66
Options cancelled		(4,750	)		17.47		(9,730	)		15.37		(7,620	)		14.37
Shares under option - end of year		643,595			19.58		716,235			14.41		823,275			13.20

At December 31, 2013, options for 461,075 shares were available for future grant under the plans. The aggregate intrinsic value of options outstanding is $10.4 million as of December 31, 2013 and unrecognized compensation cost related to stock options outstanding on Inter Parfums, Inc. common stock aggregated $2.3 million, which will be recognized over the next five years. The amount of unrecognized compensation cost related to stock options outstanding of our majority-owned subsidiary, IPSA, was €0.1 million (approximately $0.15 million). Options under IPSA plans vest four years after grant.

The weighted average fair values of options granted by Inter Parfums, Inc. during 2013, 2012 and 2011 were $9.20, $5.54 and $4.59 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 for the years ended December 31, 2013, 2012 and 2011 are set forth in the following table:

	Year Ended December 31,
	2013			2012			2011
Weighted-average expected stock-price volatility		37	%		38	%		40	%
Weighted-average expected option life		5.0 years			5.0 years			4.5 years
Weighted-average risk-free interest rate		1.7	%		0.7	%		0.9	%
Weighted-average dividend yield		2.7	%		1.7	%		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.

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

	Year Ended December 31,
	2013		2012		2011
Cash proceeds from stock options exercised	$	1,668	$	1,305	$	1,210
Tax benefits	$	700	$	100	$	-
Intrinsic value of stock options exercised	$	4,088	$	1,359	$	720

The following table summarizes additional stock option information as of December 31, 2013:

			Options outstanding
	Number		weighted average remaining	Options
Exercise prices	outstanding		contractual life	exercisable
$6.15 - $6.93		47,930	0.99 years		47,930
$11.30 - $11.41		39,225	0.12 years		39,225
$12.14		78,120	2.00 years		60,010
$13.45		3,000	1.08 years		1,875
$15.59 - $15.62		113,010	3.90 years		44,550
$17.07 - $17.94		6,750	2.68 years		1,625
$19.03 - $19.33		219,210	4.11 years		80,910
$21.76		5,000	4.09 years		-
$22.20		4,000	5.09 years		-
$35.75		127,350	6.00 years		-
Totals		643,595	3.69 Years		276,125

As of December 31, 2013, the weighted average exercise price of options exercisable was $13.76 and the weighted average remaining contractual life of options exercisable is 2.32 years. The aggregate intrinsic value of options exercisable at December 31, 2013 is $6.1 million.

The Chief Executive Officer and the President each exercised 13,875, 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 $0.3 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 10,080, 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 1,193, 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. The next quarterly dividend of $0.12 per share will be paid on April 15, 2014 to shareholders of record on March 31, 2014.