Stock-Based Compensation

3 Months Ended

Mar. 29, 2016

6. Stock-Based Compensation

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

	Thirteen Weeks Ended March 29, 2016		Thirteen Weeks Ended March 31, 2015

Labor expenses	$	1,256	$	1,546
Other operating costs and expenses	50		73
General and administrative expenses	3,879		3,112

Total stock-based compensation	5,185		4,731
Income tax benefit	1,983		1,810

Total stock-based compensation, net of taxes	$	3,202	$	2,921

Capitalized stock-based compensation(1)	$	73	$	67

(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 2016 and 2015 was $12.10 and $14.17 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 2016 and 2015, respectively: (a) an expected option term of 6.8 and 6.6 years, (b) expected stock price volatility of 26.3% and 31.3%, (c) a risk-free interest rate of 1.6% and 1.9%, and (d) a dividend yield on our stock of 1.6% and 1.4%.

Stock option activity during the thirteen weeks ended March 29, 2016 was as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
	(In thousands)		(Per share)		(In years)	(In thousands)
Outstanding at December 29, 2015	3,066		$	30.00	3.6	$	52,416
Granted	225		50.26
Exercised	(556	)	20.95
Forfeited or cancelled	(31	)	40.97

Outstanding at March 29, 2016	2,704		$	33.42	4.1	$	52,871


Exercisable at March 29, 2016	1,672		$	27.65	3.0	$	42,326

(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 March 29, 2016 and March 31, 2015 was $16.2 million and $8.5 million, respectively. As of March 29, 2016, total unrecognized stock-based compensation expense related to unvested stock options was $11.0 million, which we expect to recognize over a weighted average period of approximately 2.9 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirteen weeks ended March 29, 2016 was as follows:

	Shares		Weighted Average Fair Value
	(In thousands)		(Per share)

Outstanding at December 29, 2015	1,891		$	41.31
Granted	312		49.93
Vested	(250	)	33.79
Forfeited	(37	)	40.96

Outstanding at March 29, 2016	1,916		$	43.66

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 quarters of fiscal 2016 and fiscal 2015 was $49.93 and $48.48, respectively. The fair value of shares that vested during the thirteen weeks ended March 29, 2016 and March 31, 2015 was $8.4 million and $5.7 million, respectively. As of March 29, 2016, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $50.0 million, which we expect to recognize over a weighted average period of approximately 3.0 years.