Shareholders' Equity

12 Months Ended

Sep. 30, 2011

Shareholders' Equity/Share Repurchase Program [Abstract]

Shareholders' Equity

8. Shareholders’ Equity

Stock Options and Restricted Stock

The Rochester Medical Corporation 2001 Stock Incentive Plan authorized the issuance of up to 2,000,000 shares of common stock pursuant to grants of incentive stock options, non-qualified options or restricted stock. As of January 28, 2010, no new awards may be granted under the 2001 Stock Incentive Plan. As of September 30, 2011, there were 1,155,750 options outstanding under this plan.

On January 28, 2010, the Company’s shareholders approved the Rochester Medical Corporation 2010 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.

Stock-based awards activity for the year ended September 30, 2011 is summarized as follows:

	Shares Reserved For Grant			Options and Restricted Shares Outstanding			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contract Life
Balance as of September 30, 2008		384,500			1,709,134		$	6.34		5.70 years
Options granted		(217,000	)		217,000			11.29
Options exercised		—			(364,434	)		4.83
Options canceled		67,000			(67,000	)		11.31
Balance as of September 30, 2009		234,500			1,494,700			7.21		5.74 years
2010 Option Plan approved		1,000,000			—
Options granted		(203,000	)		203,000			12.27
Options exercised		—			(15,000	)		2.73
Options canceled		7,500			(7,500	)		11.78
Options expired		2,500			(2,500	)		11.78
2001 Plan — options canceled and not reissuable		(244,500	)		—			9.76
Balance as of September 30, 2010		797,000			1,672,700			7.83		5.31 years
Options granted		(230,000	)		230,000			10.72
Granted — restricted shares		(40,000	)		40,000			—
Options exercised		—			(353,950	)		1.83
Balance as of September 30, 2011		527,000			1,588,750		$	9.39		5.83 years
Outstanding options exercisable at end of period					1,160,625		$	8.68		4.89 years

As of September 30, 2011, there were 527,000 shares that remained available for issuance under the 2010 Stock Incentive Plan, and there were 433,000 options and 40,000 shares of restricted stock outstanding under this plan. The number of stock options exercisable at September 30, 2011, 2010 and 2009 was 1,160,625, 1,227,700 and 1,062,075 at a weighted average exercise price of $8.68, $6.79 and $6.04 per share, respectively.

At September 30, 2011, the aggregate intrinsic value of options outstanding was $1,463,876, and the aggregate intrinsic value of options exercisable was $1,463,876. Total intrinsic value of options exercised was $2,823,076 for the year ended September 30, 2011.

The Company measures stock-based compensation cost at the grant date base on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period. As of September 30, 2011, $1,641,657 of unrecognized compensation costs related to non-vested awards is expected to be recognized over a weighted average period of approximately fifteen months.

The weighted average fair value of options granted in 2011, 2010 and 2009 was $6.29, $7.14 and $6.70 per share, respectively. The exercise price of options outstanding at September 30, 2011 ranged from $2.17 to $18.02 per share as summarized in the following table:

Range of Exercise Prices	Number Outstanding at 9/30/11		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price Per Share - Total Options Outstanding		Number Exercisable at 9/30/11		Weighted Average Exercise Price Per Share - Options Exercisable
$0.00 - $5.00		357,250		2.2 years	$	4.20		357,250	$	4.20
$5.01 - $10.00		150,000		4.4 years		5.91		150,000		5.91
$10.01 - $15.00		1,076,500		7.2 years		11.56		648,375		11.72
$15.01 - $20.00		5,000		5.5 years		18.02		5,000		18.02
		1,588,750		5.8 years	$	9.39		1,160,625	$	8.68

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

The Black-Scholes option pricing model was used to estimate the fair value of stock-based awards with the following weighted-average assumptions for the years ended September 30:

	2011			2010
Dividend yield		0	%		0	%
Expected volatility		47	%		48	%
Risk-free interest rate		3.42	%		3.15	%
Expected holding period (in years)		8.74			8.46
Weighted-average grant-date fair value	$	6.29		$	7.14

The risk-free rate is based on a treasury instrument whose term is consistent with the expected life of the Company’s stock options. The expected volatility, holding period, and forfeitures of options are based on historical experience.

The estimated fair value of the restricted shares was determined by the market price at the date grant and expensed over a period of four years.