Stock-based Compensation

3 Months Ended

Mar. 31, 2014

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

Stock-Based Compensation

Stock-Based Compensation. Stock-based compensation expense before income tax expense for the three-month periods ended March 31, 2014 and 2013, consisted of the following (in thousands):

	Three Months Ended
	March 31,
	2014		2013
Cost of goods sold	$	43	$	54
Research and development	16		25
Selling, general, and administrative	280		380
Stock-based compensation expense before taxes	$	339	$	459

As of March 31, 2014, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $3.5 million and is expected to be recognized over a weighted average period of 3.0 years.

We did not grant any stock-based awards during the three months ended March 31, 2014. During the three-months ended March 31, 2013, we granted awards representing 50,000 shares of our common stock. We use the Black-Scholes methodology to value the stock-based compensation expense for options. In applying the Black-Scholes methodology to our outstanding option grants, we used the following assumptions:

	Three Months Ended
	March 31,
	2013
Risk-free interest rate	0.65%
Expected option life	4.2 years
Expected dividend yield	—%
Expected price volatility	40.2%

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.