Note 9 - Options

12 Months Ended

Dec. 31, 2014

Notes

Note 9 - Options

Note 9 – Options

The Company has stock option plans which authorize the grant of stock options to eligible employees, directors and other individuals to purchase up to an aggregate of 204 thousand shares of common stock, of which 91 thousand are outstanding as of December 31, 2014.  All options granted under the plans are granted at current market value at the date of grant, and may be exercised between six months and ten years following the date of grant.  The plans are intended to advance the interest of the Company by attracting and ensuring retention of competent directors, employees and executive personnel, and to provide incentives to those individuals to devote their utmost efforts to the advancement of shareholder value.  Changes in stock options were as follows:

	Shares (000’s)	Price Range Per Share
2014
Granted	39	$	49.18 - 50.72
Expired or canceled	4		25.59 - 49.18
Exercised	35		18.00 - 33.30
Total outstanding at December 31	91		21.68 - 50.72
Total exercisable at December 31	48		21.68 - 33.30

2013
Granted	-	$	- - -
Expired or canceled	3		17.71 - 33.30
Exercised	55		17.71 - 33.30
Total outstanding at December 31	91		18.00 - 33.30
Total exercisable at December 31	77		18.00 - 33.30
2012
Granted	13	$	33.30 - 33.30
Expired or canceled	19		24.00 - 28.13
Exercised	82		15.01 - 31.33
Total outstanding at December 31	150		17.71 - 33.30
Total exercisable at December 31	120		17.71 - 31.33

For the years ended December 31, 2014, 2013 and 2012, the Company reduced current income taxes payable and increased additional paid-in capital by $103, $281 and $178, respectively, for the income tax benefit attributable to sale by optionees of common stock received upon the exercise of stock options.

Stock-Based Compensation

In 2014, the Company recognized $74 in equity compensation cost, compared to $28 in 2013 and $70 in 2012. 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

		Years ended December 31,
		2014		2013		2012
Expected dividend amount per quarter	$	0.2624	$	n/a	$	0.2571
Expected stock price volatility		27.0%				22.8%
Risk-free interest rate		1.50%				0.54%
Expected life of options		4.7 years				3.8 years

The per share weighted average fair value of options granted during 2014 and 2012,  is $9.64 and $3.92 respectively. No options were granted in 2013.

All UTMD options vest over a four-year service period.  Expected dividend amounts were estimated based on the actual cash dividend rate at the time the options were granted and an estimate of future dividends based on past dividend rate changes as well as management’s expectations of future dividend rates over the expected holding period of the options.  Expected volatility is based on UTMD’s historical volatility over recent periods of time and trends in that volatility, giving weight to more recent periods.  Risk free interest rates were estimated based on actual U.S. Treasury Securities Interest rates as reported by the Federal Reserve Bank for periods of time equivalent to the holding periods estimated for the options on the dates the options were granted.  Expected term of options were estimated based on historical holding periods for similar options previously granted by UTMD to employees and directors. 

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

					Options Outstanding				Options Exercisable
		Range of Exercise Prices			Number Outstanding	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price	Number Exercisable		Weighted Average Exercise Price
1	$	21.68	-	24.00	15,399	3.58	$	23.68	15,399	$	23.68
2		26.52	-	33.30	38,139	4.65		29.82	32,188		29.48
3		49.18	-	50.72	37,000	9.35		49.22	0		0.00
4	$	21.68	--	50.72	90,538	6.39	$	36.70	47,587	$	27.60