Stock-based Compensation

6 Months Ended

Jun. 30, 2012

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

Stock-based Compensation

Stock-based Compensation. Stock-based compensation expense before income tax expense for the three and six-month periods ended June 30, 2012 and 2011, consisted of the following (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Cost of goods sold	$	59	$	38	$	141	$	89
Research and development	35		16		67		29
Selling, general, and administrative	376		257		817		528
Stock-based compensation expense before taxes	$	470	$	311	$	1,025	$	646

The excess income tax benefit created from the exercises of stock options was approximately $162,000 and $166,000 for the three and six-month periods ended June 30, 2012, respectively, as compared to $1.8 million and $2.9 million for the three and six-month periods ended June 30, 2011, respectively. As of June 30, 2012, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $5.4 million and is expected to be recognized over a weighted average period of 3.7 years.

During the three and six-month periods ended June 30, 2012, we granted 120,000 stock awards. During the three and six-month periods ended June 30, 2011, there were no stock awards. 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:

	Six Months Ended
	June 30,
	2012	2011
Risk-free interest rate	0.95%	—
Expected option life	6 years	—
Expected dividend yield	—	—
Expected price volatility	42.01%	—

The average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock option. We determine the expected term of the stock options using the historical exercise behavior of employees. The expected price volatility was determined 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. For options with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.