Stock-Based Compensation:

12 Months Ended

Jan. 03, 2012

Stock-Based Compensation:

Stock-Based Compensation:

11.  Stock-Based Compensation:

We maintain performance incentive plans under which incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares, restricted share units, deferred shares, performance shares and performance units may be granted to employees and consultants.  Our current practice is to issue new shares, rather than treasury shares, upon stock option exercises and for restricted share grants.  To date, we have only granted non-qualified stock options, restricted shares and restricted share units of common stock under these plans.  Non-employee directors have received only non-qualified stock options under a non-employee director equity plan, which expired in May 2007.  Currently, we do not have a plan under which non-employee directors may be granted stock options or other equity interests in the Company.

In April 2011, our Board of Directors approved an amendment to our 2010 Stock Incentive Plan to increase the number of shares of common stock authorized for issuance under the plan to 4.8 million shares from 3.8 million shares.  This amendment was approved by our shareholders at our Annual Meeting held on June 1, 2011.  This is our only active performance incentive plan, and 3.2 million of these shares are currently available for grant.

Stock options generally vest at 20% per year or, in the case of restaurant management, cliff vest in five years and expire eight to ten years from the date of grant.  Restricted shares and restricted share units generally vest between three to five years from the date of grant and require that the staff member remains employed in good standing with the Company as of the vesting date.  Equity awards for certain executive officers may vest earlier in the event of a change of control, as defined in the plan.

The following table presents information related to stock-based compensation (in thousands):

	Fiscal Year
	2011		2010		2009
Labor expenses	$	3,186	$	3,205	$	5,938
Other operating costs and expenses	138		165		246
General and administrative expenses	6,311		7,543		8,426
Stock-based compensation expense	9,635		10,913		14,610
Income tax benefit	3,685		4,139		5,537
Total stock-based compensation expense, net of tax	$	5,950	$	6,774	$	9,073
Capitalized stock-based compensation (1)	$	197	$	257	$	473

(1)It is our policy to capitalize the portion of stock-based compensation costs for our internal development and construction, legal, and facilities departments that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations, lease, intellectual property and liquor license acquisition activities and equipment installation.  Capitalized stock-based compensation is included in property and equipment, net and other assets on the consolidated balance sheets.

Stock Options

The weighted average fair value at the grant date for options issued during fiscal 2011, 2010 and 2009 was $12.62, $10.03 and $5.29 per option, respectively.  The fair value of options at the grant date was estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for fiscal 2011, 2010 and 2009, respectively: (a) an expected option term of 6.0 years, 5.8 years and 5.4 years, (b) expected stock price volatility of 39.7%, 41.1% and 55.5%, (c) a risk-free interest rate of 2.0%, 2.3% and 2.0%, and (d) no dividend yield on our stock.

The expected option term represents the estimated period of time until exercise and is based on historical experience of similar options, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.  Expected stock price volatility is based on a combination of the historical volatility of our stock and the implied volatility of actively traded options on our common stock.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with an equivalent remaining term. We have not paid dividends in the past and do not have definitive plans to pay dividends in the near future.  Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on our historical experience and future expectations.

Stock option activity during fiscal 2011 was as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
	(In thousands)				(In years)	(In thousands)
Outstanding at start of year	9,159		$	22.63	5.4	$	79,835
Granted	775		$	30.74
Exercised	(767	)	$	21.08
Forfeited or cancelled	(340	)	$	21.10
Outstanding at end of year	8,827		$	23.51	4.8	$	58,857
Exercisable at end of year	4,562		$	27.00	3.6	$	16,753

(1)Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal year end and the exercise price, multiplied by the number of in-the-money options and represents the pretax amount that would have been received by the option holders, had they all exercised their options on the fiscal year end date.

The total intrinsic value of options exercised during fiscal years 2011, 2010 and 2009 was $6.4 million, $10.3 million and $1.5 million, respectively.  As of January 3, 2012, total unrecognized stock-based compensation expense related to nonvested stock options was $17.1 million, which we expect to recognize over a weighted average period of approximately 2.4 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during fiscal 2011 was as follows:

	Shares		Weighted Average Fair Value
	(In thousands)
Outstanding at start of year	537		$	14.72
Granted	363		$	29.12
Vested	(51	)	$	23.67
Forfeited	(23	)	$	17.10
Outstanding at end of year	826		$	20.40

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant.  The fair value of shares that vested during fiscal years 2011, 2010 and 2009 was $1.2 million, $4.7 million and $4.5 million, respectively.  The weighted average fair value at the grant date for restricted shares and restricted share units issued during fiscal 2011, 2010 and 2009 was $29.12, $23.16 and $10.29, respectively.  As of January 3, 2012, total unrecognized stock-based compensation expense related to nonvested restricted shares and restricted share units was $10.2 million, which is expected to be recognized over a weighted average period of approximately 3.2 years.