Share-Based Compensation

12 Months Ended

Dec. 31, 2011

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

Share-Based Compensation

Share-Based Compensation

The Company recognizes compensation expense on awards that are ultimately expected to vest, under ASC 718 Compensation — Stock Compensation, using a straight-line amortization method based on the grant date estimated fair value method under ASC 718, reduced for estimated forfeitures. The following table summarizes the impact on our results of operations of recording share-based compensation (in thousands):

Years ended December 31,	2011		2010		2009
Cost of sales	$	76	$	49	$	67
Product development and engineering	128		125		342
Selling, general and administrative	2,265		1,572		1,089
Total share-based compensation expense	$	2,469	$	1,746	$	1,498

The amount of share-based compensation expense capitalized as part of inventory was insignificant for all periods presented. The weighted average fair values of awards granted during the years ended December 31, 2011, 2010 and 2009 were $1.00, $0.93 and $0.57 per share, respectively. The total fair value of shares vesting during the years ended December 31, 2011, 2010 and 2009 was $3.0 million, $1.7 million and $2.5 million, respectively. For the years ended December 31, 2011, 2010, and 2009, the income tax benefits realized from exercised stock options and similar awards was immaterial. As of December 31, 2011, the total unrecorded deferred share-based compensation balance for unvested shares, net of expected forfeitures, was $2.3 million which is expected to be amortized over a weighted-average period of 2.33 years.

Valuation Assumptions

MRV uses the Black-Scholes option pricing model to estimate the fair value of share-based awards. The Black-Scholes model requires the use of subjective assumptions, including the option's expected life and the underlying stock price volatility. The Company assumes that future volatility approximates historical volatility.

The following weighted average assumptions were used for estimating the fair value of options granted during each of the following years:

	2011		2010		2009
Risk-free interest rate	1.9	%	1.6	%	2.2	%
Dividend yield	—	%	—	%	—	%
Volatility	87.0	%	93.9	%	95.4	%
Expected life (in years)	5.9		5.2		5.0

Share-Based Payment Award Activity

The following table summarizes option share-based payment award activity for the two-year period ended December 31, 2011 (in thousands, except per share amounts):

	Shares under option		Weighted average exercise price			Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding, January 1, 2011	11,871			$	2.14
Granted	1,919			$	1.39
Exercised	(248	)		$	0.95
Canceled and forfeited	(1,715	)		$	3.03
Outstanding, December 31, 2011	11,827			$	1.82		4.91	$	54
Vested and expected to vest, December 31, 2011	11,488			$	1.83		4.78	$	54
Exercisable, December 31, 2011	8,564			$	2.00		3.50	$	48

The aggregate intrinsic value represents the total pre-tax intrinsic value, based on MRV's closing stock price of $0.86 at December 31, 2011, which would have been received by award holders had all award holders exercised in-the-money awards as of that date.

The following table summarizes significant ranges of outstanding and exercisable options at December 31, 2011 (in thousands, except years and per-share amounts):

Range of Exercise prices	Options outstanding as of December 31, 2011	Weighted average remaining contractual life (years)	Weighted average exercise price		Options exercisable as of December 31, 2011	Weighted average exercise price of exercisable options
$0.67 - $1.10	1,048	2.18	$	0.94	929	$	0.96
$1.19 - $1.19	1,775	7.75	$	1.19	621	$	1.19
$1.25 - $1.25	1,750	3.93	$	1.25	1,750	$	1.25
$1.38 - $1.38	1,539	8.97	$	1.38	104	$	1.38
$1.45 - $1.66	1,220	6.27	$	1.56	760	$	1.55
$1.73 - $2.44	1,579	3.37	$	2.14	1,484	$	2.16
$2.56 - $2.74	1,280	3.85	$	2.64	1,280	$	2.64
$2.75 - $3.62	1,239	1.88	$	3.18	1,239	$	3.18
$3.66 - $3.82	369	2.58	$	3.69	369	$	3.69
$3.96 - $3.96	28	4.25	$	3.96	28	$	3.96
$0.67 - $3.96	11,827	4.91	$	1.82	8,564	$	2.00

The following table summarizes certain stock option exercise activity during the periods presented (in thousands):

	2011		2010		2009
Total intrinsic value of stock options exercised	$	139	$	481	$	40
Cash received from stock options exercised	$	232	$	995	$	47