Share-Based Compensation

9 Months Ended

Sep. 30, 2011

Share-Based Compensation [Abstract]

SHARE-BASED COMPENSATION

3. SHARE-BASED COMPENSATION

Share-based compensation is measured at the grant date, based on the fair value of the award and is recognized over the employee’s requisite service period. For further details regarding the Company’s share-based compensation arrangements, refer to Note 7 of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The following table summarizes total share-based compensation expense included in the Condensed Consolidated Statement of Operations (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Cost of revenues	$	246		$	197		$	772		$	589
Research and development		615			453			1,666			1,309
Selling, general and administrative		629			550			1,737			1,539
Pre-tax share-based compensation expense		1,490			1,200			4,175			3,437
Less income tax effect		(512	)		(381	)		(1,504	)		(1,109	)
Net share-based compensation expense	$	978		$	819		$	2,671		$	2,328

During the three months ended September 30, 2011 and 2010, the Company granted an aggregate of 619,495 and 154,599 stock options and restricted stock units, respectively, at weighted average fair values of $6.36 and $4.01 per share, respectively. For the nine months ended September 30, 2011 and 2010, the Company granted an aggregate of 2,421,866 and 1,240,250 stock options and restricted stock units, respectively, at weighted average fair values of $5.62 and $3.87 per share, respectively. The fair value of the Company’s stock options granted under the Company’s option plans was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Expected term (years)		5.6			5.7			5.7			6.1
Stock volatility		41.3	%		41.2	%		40.5	%		40.8	%
Risk free interest rates		1.1	%		1.5	%		1.9	%		2.2	%
Dividends during expected terms		1.7	%		1.4	%		1.4	%		1.4	%

As of September 30, 2011, there was $23.6 million of total unrecognized share-based compensation related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 4.3 years. Total share-based compensation capitalized as part of inventory as of September 30, 2011 and December 31, 2010 was $143,000 and $142,000, respectively.

Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees are permitted to have salary withholdings to purchase shares of Common Stock at a price equal to 95% of the market value of the stock at the end of each three-month offer period, subject to an annual limitation. The ESPP is considered non-compensatory per current share-based compensation accounting guidelines.