STOCKHOLDERS' EQUITY

Special Dividend

On January 6, 2014, a special dividend of $2.00 per share of the Company’s common stock, representing an aggregate of $46.7 million, was paid to stockholders of record as of December 20, 2013. On December 20, 2012, a special dividend of $2.00 per share of the Company's Common Stock, representing an aggregate of $45.0 million, was paid to stockholders of record as of December 10, 2012. In connection with these special dividends, holders of deferred stock units, restricted stock and stock awards were credited with deferred stock units, restricted stock or stock equal to $2.00 per special dividend for each deferred stock unit, share of restricted stock or stock award, representing $1.8 million in total for the 2014 special dividend and $1.4 million in total for the 2012 special dividend. In connection with each of these special cash dividends, the exercise price of all outstanding stock options was reduced by $2.00 per share. These reductions in exercise price were made pursuant to the terms of the outstanding awards, resulting in no incremental stock-based compensation expense.

Stock-Based Awards

Pursuant to the Drew Industries Incorporated Equity Award and Incentive Plan, as Amended and Restated (the “Equity Plan”), which was approved by stockholders in May 2011, the Company may grant to its directors, employees, and other eligible persons Common Stock-based awards, such as stock options, restricted stock and deferred stock units. All such awards granted under the Equity Plan must be approved by the Compensation Committee of Drew’s Board of Directors (the “Committee”). The Committee determines the period for which all such awards may be exercisable, but in no event may such an award be exercisable more than 10 years from the date of grant. The number of shares available under the Equity Plan, and the exercise price of all such awards granted under the Equity Plan, are subject to adjustments by the Committee to reflect stock splits, dividends, recapitalization, mergers, or other major corporate actions.

At the Annual Meeting of Stockholders held on May 22, 2014, stockholders approved an amendment to the Equity Plan to increase the number of shares of common stock available for issuance pursuant to awards by 1,678,632 shares.

The number of shares available for granting awards was 1,389,506, 246,368 and 688,712 at December 31, 2014, 2013 and 2012, respectively.

Stock-based compensation resulted in charges to operations as follows for the years ended December 31:



(In thousands)	2014		2013		2012
Stock options	$	1,412	$	2,325	$	2,836
Deferred stock units	4,343		5,425		1,888
Restricted stock	910		911		849
Stock awards	4,152		2,178		745
Stock-based compensation expense	$	10,817	$	10,839	$	6,318

Stock-based compensation expense is recorded in the Consolidated Statements of Income in the same line as cash compensation to those employees is recorded, primarily in selling, general and administrative expenses. In addition, for the years ended December 31, 2014, 2013 and 2012, the Company issued deferred stock units to certain executive officers in lieu of cash for a portion of prior year incentive compensation, in accordance with their compensation arrangements, of $2.0 million, $0.1 million and $0.2 million, respectively. In February 2015, the Company issued deferred stock units valued at $2.0 million, to certain officers in lieu of cash for a portion of their 2014 incentive compensation in accordance with their compensation arrangements.

Stock Options

The Equity Plan provides for the grant of stock options that qualify as incentive stock options under Section 422 of the Internal Revenue Code, and non-qualified stock options. The exercise price for stock options granted under the Equity Plan must be at least equal to 100 percent of the fair market value of the shares subject to such stock option on the date of grant. The exercise price may be paid in cash or in shares of the Company’s Common Stock which have been held for a minimum of six months. Historically, upon exercise of stock options, new shares have been issued instead of using treasury shares.

Outstanding stock options expire six years from the date of grant, and either vest ratably over the service period of five years for employees or, for certain executive officers, based on achievement of specified performance conditions. As a result of the Company’s executive succession and corporate relocation, the vesting of certain stock options was accelerated pursuant to contractual obligations with certain employees whose employment terminated as a result of the relocation to Indiana.

Transactions in stock options under the Equity Plan are summarized as follows:



	Number of Option Shares			Stock Option Exercise Price	Weighted Average Exercise Price
Outstanding at December 31, 2011	1,810,650		$10.09 - $31.11		$	21.46
Exercised	(422,131	)	$ 8.09 - $31.11		$	19.13
Forfeited	(67,700	)	$10.09 - $31.11		$	22.61
Reduction for cash dividend	—		$ 8.09 - $29.11		$	(2.00	)
Outstanding at December 31, 2012	1,320,819		$ 8.09 - $29.11		$	19.92
Exercised	(574,288	)	$ 8.09 - $29.11		$	23.04
Forfeited	(22,870	)	$ 8.09 - $29.11		$	19.36
Reduction for cash dividend	—		$ 6.09 - $19.17		$	(2.00	)
Outstanding at December 31, 2013	723,661		$ 6.09 - $19.17		$	15.46
Exercised	(258,530	)	$ 6.09 - $19.17		$	12.89
Forfeited	(11,800	)	$6.09 - $19.17		$	16.93
Outstanding at December 31, 2014	453,331		$15.49 - $19.17		$	16.89
Exercisable at December 31, 2014	289,971		$15.49 - $19.17		$	16.27

Additional information for the exercise of stock options is as follows for the years ended December 31:



(In thousands)	2014		2013		2012
Intrinsic value of stock options exercised	$	7,860	$	9,062	$	4,838
Cash receipts from stock options exercised	$	3,333	$	13,231	$	8,075
Income tax benefits from stock option exercises	$	3,660	$	3,473	$	1,852
Grant date fair value of stock options vested	$	1,561	$	2,252	$	2,814

The following table summarizes information about stock options outstanding at December 31, 2014:



Exercise Price		Option Shares Outstanding	Remaining Life in Years	Option Shares Exercisable
$	15.49	93,881	0.9	93,881
$	15.67	196,350	1.9	141,350
$	19.17	163,100	2.9	54,740
Total Shares		453,331^(a)		289,971^(a)


(a)	The aggregate intrinsic value for option shares outstanding and option shares exercisable is $15.5 million and $10.1 million, respectively. The weighted average remaining term for option shares outstanding and option shares exercisable is 2.0 years and 1.8 years, respectively.

As of December 31, 2014, there was $1.4 million of total unrecognized compensation costs related to unvested stock options, which are expected to be recognized over a weighted average remaining period of 1.3 years.

Deferred Stock Units

The Equity Plan provides for the grant or issuance of deferred stock units (“DSUs”) to directors, employees and other eligible persons. Recipients of DSUs are entitled to receive shares at the end of a specified deferral period. Holders of DSUs receive dividends granted to holders of the Common Stock, payable in additional DSUs, and are subject to the same vesting criteria as the original grant.

DSUs vest (i) ratably over the service period, (ii) at a specified future date, or (iii) for certain officers, based on achievement of specified performance conditions. As a result of the Company’s executive succession and corporate relocation, the vesting of certain deferred stock units was accelerated pursuant to contractual obligations with certain employees whose employment terminated as a result of the relocation to Indiana. In addition, DSUs are issued in lieu of cash compensation.

Transactions in DSUs under the Equity Plan are summarized as follows:



	Number of Shares		Stock Price
Outstanding at December 31, 2011	369,133		$ 5.50 - $40.68
Issued	23,713		$24.53 - $32.07
Granted	282,925		$26.54 - $30.50
Dividend equivalents	34,568		$33.32
Exercised	(96,585	)	$ 5.50 - $40.68
Outstanding at December 31, 2012	613,754		$ 6.16 - $33.32
Issued	32,462		$33.84 - $48.53
Granted	140,461		$36.58 - $50.85
Forfeited	(4,505	)	$30.50
Exercised	(89,211	)	$20.20 - $30.65
Outstanding at December 31, 2013	692,961		$ 6.16 - $50.85
Issued	56,212		$36.68 - $51.46
Granted	187,490		$45.98 - $46.95
Dividend equivalents	27,532		$50.45
Forfeited	(38,855	)	$26.98 - $50.89
Exercised	(187,052	)	$19.98 - $50.89
Outstanding at December 31, 2014	738,288		$ 6.16 - $51.46

As of December 31, 2014, there was $13.3 million of total unrecognized compensation costs related to DSUs, which is expected to be recognized over a weighted average remaining period of 2.0 years.

Restricted Stock

The Equity Plan provides for the grant of restricted stock to directors, employees and other eligible persons. The restriction period is established by the Committee, but may not be less than one year. Holders of restricted stock have all the rights of a stockholder of the Company, including the right to vote and the right to receive dividends granted to holders of the Common Stock, payable in additional shares of restricted stock, and subject to the same vesting criteria as the original grant. Shares of restricted stock are not transferable during the restriction period, which lapses one year from the date of grant. Restricted stock grants, which were all made to directors, were as follows (in thousands except share and per share amounts):



	2014		2013		2012
Granted	19,439		17,885		29,841
Stock price	$	46.82	$	50.89	$	30.50
Fair value of stock granted	$	910	$	910	$	910

As of December 31, 2014, there was $0.8 million of total unrecognized compensation costs related to restricted stock, which is expected to be recognized over a weighted average remaining period of 0.9 years.

Stock Awards

In accordance with the Executive Employment and Non-Competition Agreements for 2012 – 2014 with two of the Company’s named executive officers, such officers are entitled to receive an annual long-term award consisting of the right to earn an aggregate of 85,000 shares of Common Stock. In accordance with compensation arrangements for 2013 – 2014 with certain other officers of the Company, such officers are entitled to receive an annual long-term award consisting of the right to earn an aggregate of 18,500 shares of the Common Stock. All of these shares are earned during the subsequent three year period based on growth in the Company’s earnings per diluted share over that same three year period. As of December 31, 2014, there was $4.1 million of total unrecognized compensation costs related to outstanding stock awards, which is expected to be recognized over a weighted average remaining period of 1.3 years.

Weighted Average Common Shares Outstanding

The following reconciliation details the denominator used in the computation of basic and diluted earnings per share for the years ended December 31:



(In thousands)	2014	2013	2012
Weighted average shares outstanding for basic earnings per share	23,911	23,321	22,558
Common stock equivalents pertaining to stock-based awards	423	432	270
Weighted average shares outstanding for diluted earnings per share	24,334	23,753	22,828

The weighted average diluted shares outstanding for the years ended December 31, 2014, 2013 and 2012, exclude the effect of 293,860, 303,240 and 426,788 shares of common stock, respectively, subject to stock-based awards. Such shares were excluded from total diluted shares because they were anti-dilutive or the specified performance conditions that those shares were subject to were not yet achieved.