Stock-Based Compensation - Note 10

12 Months Ended

Dec. 31, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation Disclosure

10. STOCK-BASED COMPENSATION

We account 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. Compensation related to restricted stock units is the intrinsic value on the date of grant, which is the closing price of our common stock less the employee exercise price, if any. Compensation related to stock options is determined using a stock option valuation model.

Valuation Assumptions

We use the Black-Scholes valuation model to determine the fair value of stock options. The Black-Scholes model requires the input of highly subjective assumptions, which are summarized in the table below for 2011, 2010 and 2009:

	Year Ended December 31,
	2011	2010	2009
Expected dividend yield	—	—	—
Expected stock price's volatility	77%	74%	67%
Risk-free interest rate	1.8%	2.1%	1.9%
Expected life of options in years	5	5	5

We estimate the expected life of options based on an analysis of our 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 our 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. We do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future; accordingly, the expected dividend yield is zero.

Our stock-based compensation in 2011, 2010 and 2009 was as follows:

	Year Ended December 31,
	2011	2010	2009
	(thousands)
Stock-based compensation by type of award:
Stock options	$ 2,167	$ 2,442	$ 2,280
Restricted stock units	112	263	626
Employee stock purchase plan	25	39	38
	$ 2,304	$ 2,744	$ 2,944
Stock-based compensation by category of expense:
Cost of sales	$     82	$     96	$    105
Research, development and engineering	367	451	426
Selling, general and administrative	1,855	2,197	2,413
	$ 2,304	$ 2,744	$ 2,944

We did not capitalize any stock-based compensation as inventory in 2011, 2010 and 2009, as such amounts were not material. As of December 31, 2011, we had $2.5 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 December 31, 2011, we had $19,000 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 0.4 years.