Stock-Based Compensation

3 Months Ended

Apr. 01, 2014

Stock-Based Compensation

Stock-Based Compensation

6.  Stock-Based Compensation

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

	ThirteenWeeks EndedApril 1, 2014		ThirteenWeeks EndedApril 2, 2013
Labor expenses	$	1,340	$	1,044
Other operating costs and expenses	47		46
General and administrative expenses	2,452		2,315
Total stock-based compensation	3,839		3,405
Income tax benefit	1,469		1,302
Total stock-based compensation, net of taxes	$	2,370	$	2,103
Capitalized stock-based compensation (1)	$	48	$	47

(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 first quarter of fiscal 2014 and 2013 was $15.48 and $10.83 per option, respectively.  The fair value of options was estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for the first quarter of fiscal 2014 and 2013, respectively: (a) an expected option term of 6.5 and 6.4 years, (b) expected stock price volatility of 32.9% and 33.5%, (c) a risk-free interest rate of 2.2% and 1.4%, and (d) a dividend yield on our stock of 1.2% and 1.3%.

Stock option activity during the thirteen weeks ended April 1, 2014 was as follows:

	Shares		WeightedAverageExercise Price		WeightedAverageRemainingContractualTerm	AggregateIntrinsic Value(1)
	(In thousands)		(Per share)		(In years)	(In thousands)
Outstanding at December 31, 2013	4,823		$	23.70	4.1	$	118,505
Granted	329		48.19
Exercised	(311	)	18.99
Forfeited or cancelled	(1	)	34.32
Outstanding at April 1, 2014	4,840		$	25.66	4.2	$	111,985
Exercisable at April 1, 2014	2,708		$	23.76	3.4	$	67,795

(1) Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal period 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 period end date.

The total intrinsic value of options exercised during the thirteen weeks ended April 1, 2014 and April 2, 2013 was $8.9 million and $8.1 million, respectively.  As of April 1, 2014, the total unrecognized stock-based compensation expense related to unvested stock options was $15.7 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 the thirteen weeks ended April 1, 2014 was as follows:

	Shares		WeightedAverageFair Value
	(In thousands)		(Per share)
Outstanding at December 31, 2013	1,672		$	32.81
Granted	293		48.11
Vested	(162	)	23.04
Forfeited	(33	)	34.40
Outstanding at April 1, 2014	1,770		$	36.20

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 first quarter of fiscal 2014 and fiscal 2013 was $48.11 and $35.57, respectively.  The fair value of shares that vested during the thirteen weeks ended April 1, 2014 and April 2, 2013 was $3.7 million and $2.4 million, respectively.  As of April 1, 2014, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $42.1 million, which we expect to recognize over a weighted average period of approximately 3.6 years.