v2.3.0.15
Stock-Based Compensation
9 Months Ended
Oct. 01, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] 
Stock Based Compensation
Stock-Based Compensation
Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):
 
 
Three Months Ended
 
Nine Months Ended
 
October 1,
2011

October 2,
2010
 
October 1,
2011

October 2,
2010
Cost of products
$
45

 
$
30

 
$
111

 
$
90

Cost of service
51

 
44

 
146

 
149

Research and development
221

 
135

 
589

 
387

Selling
264

 
170

 
790

 
417

General and administrative
389

 
231

 
1,110

 
1,698

Total stock-based compensation expense
$
970

 
$
610

 
$
2,746

 
$
2,741


The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the following table. The expected term of options granted was calculated using the simplified method. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of Nanometrics’ stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future. The assumptions in the following table do not include the assumptions used in the Option Exchange Program as disclosed in Note 5 the Company's 2010 Annual Report on Form 10-K for the fiscal year ended January 1, 2011 filed with the SEC on March 14, 2011.

 
Three Months Ended
 
Nine Months Ended
 
October 1,
2011

October 2,
2010
 
October 1,
2011

October 2,
2010
Stock Options
 
 
 
 
 
 
 
Expected life
4.6 years

 
4.6 years

 
4.5 years

 
4.5 years

Volatility
77.47
%
 
74.88
%
 
77.02
%
 
73.48
%
Risk free interest rate
1.01
%
 
1.56
%
 
1.89
%
 
2.28
%
Dividends
—

 
—

 
—

 
—

Employee Stock Purchase Plan
 
 
 
 
 
 
 
Expected life
0.5 years

 
0.5 years

 
0.5 years

 
0.5 years

Volatility
65.91
%
 
67.43
%
 
73.41
%
 
80.34
%
Risk free interest rate
0.17
%
 
0.22
%
 
0.19
%
 
0.20
%
Dividends
—

 
—

 
—

 
—

The weighted average fair value per share of the stock options awarded in the three and nine month periods ended October 1, 2011 was $9.71 and $9.95, respectively, based on the fair market value of the Company’s common stock on the grant dates. The weighted average fair value per share of the stock options awarded in the three and nine month periods ended October 2, 2010 was $7.30 and $6.19, respectively, for both periods, based on the fair market value of the Company’s common stock on the grant dates.
A summary of activity under the Company’s stock option plans during the quarter ended October 1, 2011 is as follows:
 
 
Number of
Shares
Outstanding
(Options)
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Aggregate
Intrinsic
Value (in
Thousands)
Options
 
 
 
 
 
 
 
Outstanding at January 1, 2011
2,763,686

 
$
7.43

 
5.20

 
$
15,308

Exercised
(733,439
)
 
6.25

 
 
 
 
Granted
634,847

 
16.47

 
 
 
 
Cancelled
(151,055
)
 
8.87

 
 
 
 
Outstanding at October 1, 2011
2,514,039

 
$
9.97

 
5.09

 
$
12,747

Exercisable at October 1, 2011
1,251,496

 
$
7.44

 
4.29

 
$
9,074

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $14.50 as of October 1, 2011, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the three and nine month periods ended October 1, 2011 was immaterial for both periods. The total intrinsic value of options exercised during the three and nine month periods ended October 2, 2010 was $3.3 million and $4.7 million, respectively.
During the nine month period ended October 1, 2011, the Company granted 24,292 Restricted Stock Units (“RSUs”), which vest between one and four years after the vesting commencement date identified in the applicable grant document. As of October 1, 2011, there were 47,621 RSUs outstanding.