Note 9 - Options

12 Months Ended

Dec. 31, 2016

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  266 thousand shares of common stock, of which 75 thousand are outstanding as of December 31, 2016.  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 stockholder value.  Changes in stock options were as follows:

	Shares (000’s)	Price Range Per Share
2016
Granted	28	$	58.50 - 58.50
Expired or canceled	3		49.18 - 49.18
Exercised	13		24.00 - 49.18
Total outstanding at December 31	75		24.00 - 58.50
Total exercisable at December 31	36		24.00 - 50.72

2015
Granted	-	$	- - -
Expired or canceled	7		26.58 - 49.18
Exercised	22		21.68 - 49.18
Total outstanding at December 31	62		24.00 - 50.72
Total exercisable at December 31	41		24.00 - 50.72
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

For the years ended December 31, 2016, 2015 and 2014, the Company reduced current income taxes payable and increased additional paid-in capital by $50, $114 and $103, 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 2016, the Company recognized $92 in equity compensation cost, compared to $87 in 2015 and $74 in 2014. 

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,
		2016		2015		2014
Expected dividend amount per quarter	$	0.2775	$	n/a	$	0.2624
Expected stock price volatility		28.0%				27.0%
Risk-free interest rate		1.30%				1.50%
Expected life of options		4.7 years				4.7 years

The per share weighted average fair value of options granted during 2016 is $12.15 and in 2014 is $9.64. No options were granted in 2015.

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, 2016:

				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
$	24.00	-	33.30	20,936	3.40	$	27.50	20,936	$	27.50
	49.18	-	58.50	53,736	8.66		54.07	15,359		49.24
$	24.00	-	58.50	74,672	7.18	$	46.62	36,295	$	36.70