Stock-based Compensation

9 Months Ended

Sep. 30, 2013

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

Stock-based Compensation

Stock-based Compensation. Stock-based compensation expense before income taxes for the three and nine-month periods ended September 30, 2013 and 2012 consisted of the following (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Cost of goods sold	$	18	$	49	$	98	$	190
Research and development	20		26		69		93
Selling, general, and administrative	251		354		905		1,171
Stock-based compensation expense before income taxes	$	289	$	429	$	1,072	$	1,454

As of September 30, 2013, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $4.7 million and is expected to be recognized over a weighted-average period of 3.5 years.

During the three and nine-month periods ended September 30, 2013, we granted awards representing 172,500 and 347,500 shares, respectively, of our common stock. During the three and nine-month periods ended September 30, 2012, we granted awards representing 7,500 and 127,500 shares of common stock, respectively. We use the Black-Scholes methodology to value stock-based compensation expense for options. In applying the Black-Scholes methodology to our outstanding option grants, we used the following assumptions:

	Nine Months Ended
	September 30,
	2013	2012
Risk-free interest rate	0.65% - 1.16%	0.54% - 0.95%
Expected option life	4.2 - 6.0 years	4.2 - 6.0 years
Expected dividend yield	—	—
Expected price volatility	34.08% - 41.67%	42.01% - 44.56%

For purposes of the foregoing analysis, the average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock option. The expected term of the stock options is determined using the historical exercise behavior of employees. The expected price volatility is determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option life and implied volatility based on recent trends of the daily historical volatility. For options with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.