Stock-based Compensation

6 Months Ended

Jun. 30, 2011

Stock-based Compensation

Stock-based Compensation

4. Stock-based Compensation.  Stock-based compensation expense for the three and six-month periods ended June 30, 2011 and 2010 has been categorized as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Cost of sales	$	38	$	45	$	89	$	96
Research and development	16		15		29		29
Selling, general and administrative	257		242		528		481
Stock-based compensation	$	311	$	302	$	646	$	606

The excess income tax benefit created from the exercises of stock options was $1.8 million and $2.9 million for the three and six-month periods ended June 30, 2011, respectively, as compared to $49,000 for both the three and six-month periods ended June 30, 2010.  As of June 30, 2011, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $2.6 million and is expected to be recognized over a weighted average period of 2.40 years. During the three and six-month periods ended June 30, 2011, there were no stock awards. During the three and six-month periods ended June 30, 2010, we granted 100,000 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,
	2011	2010
Risk-free interest rate	N/A	2.24	%
Expected option life	N/A	6.0
Expected price volatility	N/A	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 the 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.