Stock-Based Compensation - Note 9

9 Months Ended

Oct. 02, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation Disclosure

9. Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the applicable authoritative guidance, which requires the measurement of stock-based compensation on the date of grant based on the fair value of the award, and the recognition of the expense over the requisite service period for the employee.

Valuation Assumptions

The Company uses the Black-Scholes valuation model to determine the fair value of stock options. The Black-Scholes model requires the input of subjective assumptions, which are summarized in the table below for the three and nine months ended October 2, 2011 and September 26, 2010:

	Three Months Ended		Nine Months Ended
	October 2,	September 26,	October 2,	September 26,
	2011	2010	2011	2010
Expected dividend yield	-	-	-	-
Expected stock price volatility	78%	76%	77%	74%
Risk-free interest rate	1.1%	1.6%	2.0%	2.1%
Expected life of options in years	5	5	5	5

The Company estimates the expected life of options based on an analysis of its historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option; expected volatility is based on the historical volatility of the Company's common stock; and the risk-free interest rate is equal to the U.S. Treasury rates, with maturity approximating the expected life of the option. The Company does not currently pay cash dividends on its common stock and does not anticipate doing so in the foreseeable future; accordingly, the expected dividend yield is 0 (zero) percent.

The Company's stock-based compensation expense for the three and nine months ended October 2, 2011 and September 26, 2010 was as follows:

	Three Months Ended		Nine Months Ended
	October 2,	September 26,	October 2,	September 26,
	2011	2010	2011	2010
	(thousands)
Stock-based compensation by type of award:
Stock options	$ 443	$ 662	$ 1,763	$ 1,745
Restricted stock units	24	51	92	215
Employee stock purchase plan	5	9	20	29
	$ 472	$ 722	$ 1,875	$ 1,989
Stock-based compensation by category of expense:
Cost of sales	$   13	$   27	$      69	$      62
Research, development and engineering	62	121	303	311
Selling, general and administrative	397	574	1,503	1,616
	$ 472	$ 722	$ 1,875	$ 1,989

The Company did not capitalize any stock-based compensation as inventory for the three and nine months ended October 2, 2011 and September 26, 2010 as such amounts were inconsequential.

As of October 2, 2011, the Company had $2.6 million in unrecognized stock-based compensation expense related to stock options, net of estimated forfeitures, which will be recognized over a weighted-average period of 2.7 years. As of October 2, 2011, the Company had approximately $40,000 in unrecognized stock-based compensation expense related to unvested time-based RSUs outstanding, net of estimated forfeitures, which will be recognized over a weighted-average period of 0.3 years.