Stock Based Compensation

6 Months Ended

Mar. 31, 2013

Stock Based Compensation

Stock Based Compensation

Note C — Stock Based Compensation

Equity-Based Awards

On January 28, 2010, the Company’s shareholders approved the Rochester Medical Corporation 2010 Stock Incentive Plan. As of that same date, no new awards were allowed to be granted under the Company’s 1991 Stock Option Plan or the 2001 Stock Incentive Plan. The 2010 Stock Incentive Plan authorizes the issuance of up to 1,000,000 shares of common stock pursuant to grants of incentive stock options, non-incentive stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance awards, stock awards, and other stock-based awards. Per the terms of the 2010 Stock Incentive Plan, awards may be granted with a term no longer than ten years. The vesting schedule and other terms of the awards granted under the 2010 Stock Incentive Plan will be determined by the Compensation Committee of the Board of Directors at the time of the grant. As of March 31, 2013, there were 197,218 shares that remain available for issuance under the 2010 Stock Incentive Plan.

Restricted stock

The fair value of restricted stock awards is calculated using the Company’s stock price as of the associated grant date, and the expense is accrued ratably over the vesting period of the award.

Compensation expense associated with restricted stock awards for the six months ended March 31, 2013 and 2012, totaled $176,000 and $90,000, respectively. For the three months ended March 31, 2013 and 2012, compensation expense associated with restricted stock awards totaled $105,000 and $62,000, respectively. At March 31, 2013, unamortized compensation cost of restricted stock awards totaled $985,000. The unamortized cost is expected to be recognized over a weighted-average period of 2.2 years as of March 31, 2013.

A summary of restricted stock-based award activity under the Plans as of March 31, 2013 and 2012, and changes during the six months then ended is presented below:

Restricted Stock	Shares		Weighted Average Grant Date Fair Value
Unvested at September 30, 2012	99,883		$	9.11
Granted	49,843		11.68
Vested	(6,361	)	7.86
Forfeited/Cancelled	(8,000	)	7.86
Unvested at March 31, 2013	135,365		$	10.19

Restricted Stock	Shares	Weighted Average Grant Date Fair Value
Unvested at September 30, 2011	40,000	$	10.99
Granted	61,883	7.86
Vested	—	—
Forfeited/Cancelled	—	—
Unvested at March 31, 2012	101,883	$	9.09

Restricted stock units

During the second quarter of fiscal 2013, the Company issued 116,314 restricted stock units (RSUs) to its executive management team. The fair value of the RSUs was calculated using the Company’s stock price, $11.68 per unit, at the date of grant. The RSUs include a performance-based vesting trigger measured at the end of fiscal 2014. The Company has not recognized any compensation expense associated with the RSUs for the six months ended March 31, 2013 as at this preliminary time period it is too early to estimate with any certainty that the performance based trigger will be met.

During the second quarter of fiscal 2012, the Company issued 135,491 RSUs to its executive management team. The fair value of the RSUs was calculated using the Company’s stock price, $7.86 per unit, at the date of grant. The RSUs include a performance-based vesting trigger measured at the end of fiscal 2013. The Company has not recognized any compensation expense associated with the RSUs as it is unlikely the required performance metrics will be achieved.

Stock options

The Company accounts for stock option-based compensation by estimating the fair value of options granted using a Black-Scholes option valuation model. The Company recognizes the expense for grants of stock options on a straight-line basis in the statement of operations as operating expense based on their fair value over the requisite service period.

No stock options were granted in the three and six months ended March 31, 2013 or 2012.

A summary of option-based activity under the Plans as of March 31, 2013 and 2012, and changes during the six month periods then ended are presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2012	1,501,500		$	9.69
Granted	—		—
Exercised	(165,250	)	4.89
Forfeited	(21,750	)	11.64
Outstanding at March 31, 2013	1,314,500		$	10.26	5.0	$	5,752,000
Exercisable at March 31, 2013	1,193,000		$	10.16	4.7	$	5,340,000

	Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at September 30, 2011	1,588,750		9.39
Granted	—		—
Exercised	(52,250	)	2.17
Forfeited	—		—
Outstanding at March 31, 2012	1,536,500		9.64	5.5	$	2,191,000
Exercisable at March 31, 2012	1,273,500		9.29	5.0	$	2,191,000

The Company recorded compensation expense related to stock options of $208,000 and $474,000 for the six months ended March 31, 2013 and 2012, respectively. The Company recorded compensation expense related to stock options of $76,000 and $186,000 for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, there was $246,000 of total unrecognized compensation cost related to unvested stock options. The unamortized cost is expected to be recognized over a weighted-average period of 1.3 years as of March 31, 2013.

The Company issues new shares as settlement for stock options exercised. Cash received from option exercises for the six months ended March 31, 2013 and 2012 was $808,000 and $113,000, respectively. The intrinsic value of shares exercised was $1,153,000 and $220,000, for the six months ended March 31, 2013 and 2012, respectively.