STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2015

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

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 RSUs 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 the years ended December 31:



	2015	2014	2013
Expected dividend yield	—	—	—
Expected stock price volatility	66%	67%	83%
Risk-free interest rate	1.2%	1.3%	0.9%
Expected life of options in years	4.0	4.0	4.4

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. The risk-free interest rate is the rate on a U.S. Treasury Bill, with a 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.

Stock-based compensation expense on time-based RSUs is determined based on the fair value of our common stock on the date of grant of the RSU and recognized over the vesting period.

Our stock-based compensation for the years ended December 31 was as follows (in thousands):



	2015		2014		2013
Stock-based compensation by type of award:
Stock options	$	1,018	$	994	$	1,289
Restricted stock units	1,227		484		124
Employee stock purchase plan	35		48		20
	$	2,280	$	1,526	$	1,433
Stock-based compensation by category of expense:
Cost of goods sold	$	167	$	40	$	52
Research, development and engineering	253		181		254
Selling, general and administrative	1,860		1,305		1,127
	$	2,280	$	1,526	$	1,433

We did not capitalize any stock-based compensation as inventory in the years ended December 31, 2015, 2014 and 2013, as such amounts were immaterial. As of December 31, 2015, we had $1.3 million in unrecognized stock-based compensation expense, net of estimated forfeitures, related to stock options that will be recognized over a weighted-average period of 2.2 years. As of December 31, 2015, we had $2.6 million in unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested RSUs that will be recognized over a weighted-average period of 2.5 years.