Shareholders’ Equity

Our shareholders have authorized 500,000 shares of preferred stock, par value $.01 per share, which may be issued in one or more series by the Board of Directors without further action by the shareholders. As of December 31, 2010 and 2011, no preferred stock had been issued.

Our Board of Directors authorized a $100.0 million share repurchase program in 2005. In October 2011, our Board of Directors authorized an additional $100.0 million of share repurchases under an amendment to the share repurchase program. Through December 31, 2011, we have repurchased a total of 4.0 million shares of common stock aggregating $91.2 million under these authorizations and have $108.8 million remaining available for share repurchases. The repurchase program calls for shares to be purchased in the open market or in private transactions from time to time. We may suspend or discontinue the share repurchase program at any time. During 2011, we repurchased 0.7 million shares for an aggregate cost of $15.0 million. During 2010, we repurchased 1.2 million shares for an aggregate cost of $23.0 million. No stock repurchases were made in 2009.

We have reserved 6.0 million shares of common stock for issuance to employees and directors under three shareholder-approved share-based compensation plans (the "Plans") of which approximately 0.7 million shares remain available for grant at December 31, 2011. The exercise price on all outstanding options and stock appreciation rights (“SARs”) is equal to the quoted fair market value of the stock at the date of grant. Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are valued at the market value of the underlying stock on the date of grant. Stock options, SARs, RSUs and PSUs are non-transferable other than on death and generally become exercisable over a five year period from date of grant. Stock options and SARs expire ten years from date of grant. SARs are only settled in shares of the Company’s stock. The issuance of shares pursuant to the exercise of stock options and SARs and vesting of RSUs and PSUs are from the Company’s treasury stock.

Total pre-tax stock-based compensation expense recognized in the Consolidated Statements of Operations was $4.3 million, $4.2 million and $5.2 million for the years ended December 31, 2009, 2010 and 2011, respectively. This amount is included in selling and administrative expenses on the Consolidated Statements of Operations. Tax related benefits of $1.3 million, $1.6 million and $1.9 million were also recognized for the years ended December 31, 2009, 2010 and 2011. Cash received from the exercise of stock options was $0.7 million, $2.0 million and $5.6 million for the years ended December 31, 2009, 2010 and 2011, respectively and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows.

The weighted average fair value of awards of options and SARs granted in the years ended December 31, 2009, 2010 and 2011, respectively was $7.03, $7.72 and $10.43, respectively. The fair value of these options and SARs was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for options and SARs granted in the years ended December 31, 2009, 2010 and 2011, respectively: risk-free interest rate of 2.48%, 2.07% and 1.59%; volatility factor of the expected market price of the Company's common stock of 37.17%, 36.72% and 35.52%; a weighted-average expected life of the option and SAR of 6.2 years for 2009, 6.4 years for 2010, and 6.3 years for 2011; and that no dividends would be paid on common stock. The risk free interest rate is based on the option and SAR grant date for a traded U.S. Treasury bond with a maturity date closest to the expected life. Expected volatilities are based upon historical volatility of the Company’s stock over a period equal to the expected life of each option and SAR grant. The expected life represents the period of time that the options and SARs are expected to be outstanding based on a study of historical data of option holder exercise and termination behavior.

The following table illustrates the stock option and SAR activity for the year ended December 31, 2011.



	Number of Shares (in 000’s)		Weighted- Average Exercise Price

Outstanding at December 31, 2010	2,337		$	23.98

Granted	149		$	27.63
Forfeited	(18	)	$	28.77
Exercised	(339	)	$	21.55

Outstanding at December 31, 2011	2,129		$	24.58
Exercisable at December 31, 2011	1,639		$	25.08

The weighted average remaining contractual term for stock options and SARs outstanding and exercisable at December 31, 2011 was 4.3 years and 3.2 years, respectively. The aggregate intrinsic value of stock options and SARs outstanding and exercisable at December 31, 2011 was $5.5 million and $3.6 million, respectively. The aggregate intrinsic value of stock options and SARs exercised during the years ended December 31, 2009, 2010 and 2011 was $0.2 million, $1.2 million and $2.0 million, respectively.

The following table illustrates the RSU and PSU activity for the year ended December 31, 2011. There were no PSU’s granted prior to 2010.



	Number of Shares (in 000’s)		Weighted- Average Grant-Date Fair Value

Outstanding at December 31, 2010	534		$	20.54

Granted	294		$	27.48
Vested	(140	)	$	21.65
Forfeited	(180	)	$	25.75

Outstanding at December 31, 2011	508		$	23.43

The weighted average fair value of awards of RSUs and PSUs granted in the years ended December 31, 2009, 2010 and 2011was $17.02, $19.26 and $27.48, respectively.

The total fair value of shares vested was $1.8 million, $2.8 million and $3.6 million for the years ended December 31, 2009, 2010 and 2011, respectively.

As of December 31, 2011, there was $12.9 million of total unrecognized compensation cost related to nonvested stock options, SARs, RSUs and PSUs granted under the Plan which is expected to be recognized over a weighted average period of 3.5 years.

We offer to our employees a shareholder-approved Employee Stock Purchase Plan (the “Employee Plan”), under which we have reserved 1.0 million shares of common stock for issuance to our employees. The Employee Plan provides employees with the opportunity to invest from 1% to 10% of their annual salary to purchase shares of CONMED common stock through the exercise of stock options granted by the Company at a purchase price equal to 95% of the fair market value of the common stock on the exercise date. During 2011, we issued approximately 20,350 shares of common stock under the Employee Plan. No stock-based compensation expense has been recognized in the accompanying consolidated financial statements as a result of common stock issuances under the Employee Plan.