Stock-Based Compensation

9 Months Ended

Oct. 02, 2012

Stock-Based Compensation

Stock-Based Compensation

6.  Stock-Based Compensation

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

	Thirteen Weeks Ended October 2, 2012		Thirteen Weeks Ended September 27, 2011		Thirty-Nine Weeks Ended October 2, 2012		Thirty-Nine Weeks Ended September 27, 2011
Labor expenses	$	932	$	993	$	2,765	$	3,072
Other operating costs and expenses	47		44		142		135
General and administrative expenses	1,174		1,814		5,520		5,590
Total stock-based compensation	2,153		2,851		8,427		8,797
Income tax benefit	823		1,091		3,223		3,365
Total stock-based compensation, net of taxes	$	1,330	$	1,760	$	5,204	$	5,432
Capitalized stock-based compensation (1)	56		76		206		206

(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 the third quarter of fiscal 2012 and 2011 was $10.27 and $11.88 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 the third quarter of fiscal 2012 and 2011, respectively: (a) an expected option term of 6.1 and 6.0 years, (b) expected stock price volatility of 37.3% and 38.5%, (c) a risk-free interest rate of 1.1% and 1.4%, and (d) a dividend yield on our stock of 1.4% and 0.0%.

Stock option activity during the thirty-nine weeks ended October 2, 2012 was as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)		(Per share)		(In years)	(In thousands)
Outstanding at January 3, 2012	8,827		$	23.51	4.8	$	58,857
Granted	485		$	29.32
Exercised	(1,210	)	$	22.56
Forfeited or cancelled	(165	)	$	22.73
Outstanding at October 2, 2012	7,937		$	24.03	4.4	$	91,308
Exercisable at October 2, 2012	4,281		$	27.35	3.4	$	35,214

The total intrinsic value of options exercised during the thirteen and thirty-nine weeks ended October 2, 2012 was $3.4 million and $11.6 million, respectively.  The total intrinsic value of options exercised during the thirteen and thirty-nine weeks ended September 27, 2011 was $0.9 million and $4.6 million, respectively.  As of October 2, 2012, the total unrecognized stock-based compensation expense related to unvested stock options was $16.8 million, which we expect to recognize over a weighted average period of approximately 2.3 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirty-nine weeks ended October 2, 2012 was as follows:

	Shares		Weighted Average Fair Value
	(In thousands)		(Per share)
Outstanding at January 3, 2012	826		$	20.40
Granted	523		30.68
Vested	(175	)	13.98
Forfeited	(13	)	23.43
Outstanding at October 2, 2012	1,161		$	25.97

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant.  The weighted average fair value at the grant date for restricted shares and restricted share units issued during the third quarter of fiscal 2012 and fiscal 2011 was $34.00 and $26.98, respectively.  The fair value of shares that vested during thirty-nine weeks ended October 2, 2012 was $2.4 million.  No shares vested during the thirteen weeks ended October 2, 2012.  The fair value of shares that vested during the thirteen and thirty-nine weeks ended September 27, 2011 was $0.3 million and $1.2 million, respectively.  As of October 2, 2012, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $21.4 million, which we expect to recognize over a weighted average period of approximately 3.7 years.