Stock-based Compensation

9 Months Ended

Sep. 30, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock-basedCompensation.  Stock-based compensation expense for the three and nine-month periods ended September 30, 2011 and 2010 has been categorized as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Cost of sales	$	69	$	53	$	158	$	149
Research and development	24		13		53		42
Selling, general and administrative	343		278		871		759
Stock-based compensation	$	436	$	344	$	1,082	$	950

The excess income tax benefit created from the exercises of stock options was approximately $4,000 and $2.9 million for the three and nine-month periods ended September 30, 2011, respectively, as compared to $64,000 and $113,000 for both the three and nine-month periods ended September 30, 2010, respectively.  As of September 30, 2011, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $6.5 million and is expected to be recognized over a weighted average period of 3.82 years. During the nine-month periods ended September 30, 2011 and 2010, we granted 844,000 and 100,000 stock awards, respectively.  We use the Black-Scholes methodology to value the stock-based compensation expense for options.  In applying the Black-Scholes methodology to our outstanding option grants, we used the following assumptions:

	Nine Months Ended September 30,
	2011	2010
Risk-free interest rate	1.34% - .68%	2.24%
Expected option life	4.2 - 6.0	6.0
Expected price volatility	42.11% - 45.29%	41.40%

For the purpose of determining stock compensation for options, we estimate the average risk-free interest rate using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock option.  We estimate the expected term of stock options using the historical exercise behavior of our employees.  We estimate the expected price volatility using a weighted average of daily historical volatility of our stock price over the corresponding expected option life and implied volatility based on recent trends of the daily historical volatility.