Note 13. Equity and Stock Based Compensation Plans

Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the following table. The expected term of options granted was calculated using the simplified method. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of Nanometrics’ stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.



	Three Months Ended
	March 30, 2013		March 31, 2012
Stock Options
Expected life	4.5 years		4.6 years
Volatility	73.12	%	78.13	%
Risk free interest rate	0.86	%	0.88	%
Dividends	—		—
Employee Stock Purchase Plan
Expected life	0.5 years		0.5 years
Volatility	27.61	%	55.93	%
Risk free interest rate	0.11	%	0.06	%
Dividends	—		—

The weighted average fair value per share of the stock options awarded in the three month periods ended March 30, 2013, and March 31, 2012 was $8.88 and $11.13, respectively, based on the fair market value of the Company’s common stock on the grant dates.

A summary of activity under the Company’s stock option plans during the three month period ended March 30, 2013, is as follows:



	Number of Shares Outstanding (Options)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 29, 2012	2,020,319		$	12.01	4.44	$	6,770
Exercised	(105,843	)	7.79
Granted	254,300		15.52
Cancelled	(29,650	)	13.45
Outstanding at March 30, 2013	2,139,126		$	12.62	4.43	$	6,142
Exercisable at March 30, 2013	1,205,776		$	10.65	3.55	$	5,438

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $14.43 as of March 30, 2013 which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the three month periods ended March 30, 2013, and March 31, 2012 was $0.8 million and $2.7 million, respectively.

Restricted Stock Units ("RSUs")

A summary of activity for RSUs during the three month period ended March 30, 2013, is as follows:



	Number of RSUs		Weighted Average Fair Value
Outstanding RSU as of December 29, 2012	235,162		$	16.32
Granted	218,480		15.74
Released	(14,168	)	14.83
Cancelled	—		—
Outstanding RSU as of March 30, 2013	439,474		$	16.08

Stock-based Compensation Expense

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):



	Three Months Ended
	March 30, 2013		March 31, 2012
Cost of products	$	45	$	57
Cost of service	59		58
Research and development	317		319
Selling	440		441
General and administrative	596		586
Total stock-based compensation expense	$	1,457	$	1,461

Other Comprehensive Income

The following table shows a summary of changes in accumulated other comprehensive income by component for the three months ended March 31, 2013 (in thousands):



	Defined Benefit Pension Plans			Foreign Currency Translations			Unrealized Gain (Loss) on Investment			Total
Balance as of December 29, 2012	$	(179	)	$	1,453		$	(2	)	$	1,272
Other comprehensive income before reclassifications	—			(1,944		)	5			(1,939		)
Amounts reclassified from accumulated other comprehensive income	—			—			—			—
Net current-period other comprehensive income	—			(1,944		)	5			(1,939		)
Balance as of March 30, 2013	$	(179	)	$	(491	)	$	3		$	(667	)