Share-Based Compensation

9 Months Ended

Sep. 30, 2014

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

MRV records share-based compensation expense at fair value. The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the three and nine months ended September 30, 2014, and 2013 (in thousands):



	Three months ended				Nine months ended
	September 30,				September 30,
	2014		2013		2014		2013
Cost of goods sold	$	34	$	27	$	87	$	70
Product development and engineering	49		21		122		46
Selling, general and administrative	148		161		497		395
Total share-based compensation expense (1)	$	231	$	209	$	706	$	511


(1)	Income tax benefits realized from stock option exercises and similar awards were immaterial in both periods.

The Company granted 15,000 stock options during the three months ended September 30, 2014, and the related fair value was $6.06 per option. The Company granted 5,000 restricted shares during the three months ended September 30, 2014, and the related fair value was $13.46 per share. The Company granted no stock options and no restricted shares during the three months ended September 30, 2013. The Company granted 188,722 stock options during the nine months ended September 30, 2014 and the related weighted average fair value was $7.07 per share. The average fair value of 90,907 restricted shares granted during the nine months ended September 30, 2014, was $14.35 per share. The Company granted 80,242 stock options during the nine months ended September 30, 2013, and the related weighted average fair value was $4.89 per share. The average fair value of 91,388 restricted shares granted during the nine months ended September 30, 2013, was $9.98 per share. As of September 30, 2014, the total unrecognized share-based compensation balance for unvested securities, net of expected forfeitures, was $1.8 million, which is expected to be amortized over a weighted-average period of 2.3 years.

Valuation Assumptions

MRV uses the Black-Scholes option pricing model to estimate the fair value of stock option awards or related modifications. The Black-Scholes model requires the use of subjective and complex assumptions including the option's expected life and the underlying stock price volatility. MRV bases volatility on the Company's historical quoted prices and peer company data. The following weighted average assumptions were used for estimating the fair value of options granted during the nine months ended September 30, 2014 and the options modified during the nine months ended September 30, 2013, respectively.




Nine months ended September 30,	2014		2013
Risk-free interest rate	2.0	%	1.2	%
Dividend yield ₍₁₎	—		—
Volatility	51	%	52	%
Expected life (in years)	5.9		5.7


(1)	As the Company does not pay a dividend on a regular basis, and dividends paid in the past have been special in nature, a dividend rate of zero was used.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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