Stock-based Compensation

9 Months Ended

Sep. 30, 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 and nine-month periods ended September 30, 2014 and 2013, consisted of the following (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Cost of goods sold	$	19	$	18	109		$	98
Research and development	24		20		57		69
Selling, general, and administrative	298		251		838		905
Stock-based compensation expense before taxes	$	341	$	289	$	1,004	$	1,072

As of September 30, 2014, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $3.3 million and is expected to be recognized over a weighted average period of 3.0 years.

During the three months ended September 30, 2014, we did not grant any stock-based awards. During the nine months ended September 30, 2014, we granted awards representing 125,000 shares of our common stock. During the three and nine months ended September 30, 2013, we granted awards representing 172,500 and 347,500 shares, respectively, 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:

	Nine Months Ended
	September 30,	September 30,
	2014	2013
Risk-free interest rate	1.97%	0.65% - 1.16%
Expected option life	5.5 years	4.2 - 6.0 years
Expected dividend yield	—%	—%
Expected price volatility	36.90%	34.08% - 41.67%

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.