Shareholders’ Equity

On February 29, 2012, the Board of Directors adopted a cash dividend policy and declared an initial quarterly dividend of $0.15 per share. On October 28, 2013, the Board of Directors increased the quarterly dividend to $0.20 per share. The fourth quarter dividend for 2014 was paid on January 5, 2015 to shareholders of record as of December 15, 2014. The total dividend payable at December 31, 2014 was $5.5 million and is included in other current liabilities in the consolidated balance sheet.

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, 2014 and 2013, no preferred stock had been issued.

Our Board of Directors has authorized a $200.0 million share repurchase program. Through December 31, 2014, we have repurchased a total of 6.1 million shares of common stock aggregating $162.6 million under this authorization and have $37.4 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 2014, we repurchased 0.4 million shares for an aggregate cost of $16.9 million. During 2013, we repurchased 1.6 million shares for an aggregate cost of $50.6 million. During 2012, we repurchased 0.1 million shares for an aggregate cost of $3.9 million.

We have reserved 6.8 million shares of common stock for issuance to employees and directors under three shareholder- approved share-based compensation plans (the "Plans") of which approximately 1.0 million shares remain available for grant at December 31, 2014. 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 comprehensive income was $9.3 million, $5.6 million and $5.7 million for the years ended December 31, 2014, 2013 and 2012, respectively. These amounts are included in selling and administrative expenses, and in 2014, $3.9 million of the total is included in other expense on the consolidated statements of comprehensive income as it relates to acceleration of awards associated with executive management restructuring. Tax related benefits of $3.4 million, $2.1 million and $2.1 million were also recognized for the years ended December 31, 2014, 2013 and 2012, respectively. Cash received from the exercise of stock options was $1.8 million, $16.7 million and $9.6 million for the years ended December 31, 2014, 2013 and 2012, respectively, and is reflected in cash flows from financing activities in the consolidated statements of cash flows.

The Company uses the Black-Scholes option pricing model to estimate the fair value of options and SARs at the date of grant. Use of a valuation model requires management to make certain assumptions with respect to select model inputs. 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 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. The expected annual dividend yield is based on the Company's anticipated cash dividend payouts. 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 assumptions used in estimating fair value in the years ended December 31, 2014, 2013 and 2012.



	2014			2013			2012
Grant date fair value of SARs	$	13.40		$	9.77		$	7.38
Expected stock price volatility	34.85		%	35.88		%	35.84		%
Risk-free interest rate	1.53		%	1.04		%	0.62		%
Expected annual dividend yield	1.80		%	1.79		%	2.00		%
Expected life of options & SARs (years)	6.4			6.3			6.4

The following table illustrates the stock option and SAR activity for the year ended December 31, 2014.



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

Outstanding at December 31, 2013	1,130		$	25.55

Granted	109		$	44.56
Forfeited	(68	)	$	40.76
Exercised	(718	)	$	24.90

Outstanding at December 31, 2014	453		$	28.85
Exercisable at December 31, 2014	245		$	25.38
SARs expected to vest	208		$	32.93

The weighted average remaining contractual term for stock options and SARs outstanding and exercisable at December 31, 2014 was 6.0 years and 4.4 years, respectively. The aggregate intrinsic value of stock options and SARs outstanding and exercisable at December 31, 2014 was $7.3 million and $4.8 million, respectively. The aggregate intrinsic value of stock options and SARs exercised during the years ended December 31, 2014, 2013 and 2012 was $10.7 million, $4.7 million and $3.3 million, respectively.

The following table illustrates the RSU and PSU activity for the year ended December 31, 2014.



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

Outstanding at December 31, 2013	476		$	27.14

Granted	184		$	43.21
Vested	(259	)	$	28.54
Forfeited	(79	)	$	35.10

Outstanding at December 31, 2014	322		$	33.14

The weighted average fair value of awards of RSUs and PSUs granted in the years ended December 31, 2014, 2013 and 2012 was $43.21, $33.02 and $26.18, respectively.

The total fair value of shares vested was $11.6 million, $7.1 million and $4.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

As of December 31, 2014, there was $9.6 million of total unrecognized compensation cost related to nonvested stock options, SARs, RSUs and PSUs granted under the Plans which is expected to be recognized over a weighted average period of 3.0 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 2014, we issued approximately 13,000 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.