Stock-Based Compensation

9 Months Ended

Sep. 27, 2022

10. Stock-Based Compensation

We maintain stock-based incentive plans under which incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares and restricted share units may be granted to staff members, consultants and non-employee directors.

On March 24, 2022, our Board approved an amendment to our The Cheesecake Factory Incorporated Stock Incentive Plan to increase the number of shares of common stock reserved for grant under the plan to 19.8 million shares from 17.5 million shares. This amendment was approved by our stockholders at our annual meeting held on May 23, 2022.

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


	Thirteen		Thirteen		Thirty-Nine		Thirty-Nine
	Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
	September 27, 2022		September 28, 2021		September 27, 2022		September 28, 2021

Labor expenses	$	2,237	$	2,137	$	6,621	$	6,240
Other operating costs and expenses		74		72		224		218
General and administrative expenses		3,302		3,185		10,375		9,871
Total stock-based compensation		5,613		5,394		17,220		16,329
Income tax benefit		1,379		1,325		4,229		4,010
Total stock-based compensation, net of taxes	$	4,234	$	4,069	$	12,991	$	12,319

Capitalized stock-based compensation ⁽¹⁾	$	52	$	48	$	161	$	137

(1)

It is our policy to capitalize the portion of stock-based compensation costs for our internal development department that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations and equipment installation. Capitalized stock-based compensation is included in property and equipment, net on the condensed consolidated balance sheets.

Stock Options

We did not issue any stock options during the third quarter of fiscal 2022 or fiscal 2021. Stock option activity during the thirty-nine weeks ended September 27, 2022 was as follows:


				Weighted-
				Average
		Weighted-		Remaining
		Average		Contractual	Aggregate
	Shares	Exercise Price		Term	Intrinsic Value ⁽¹⁾
	(In thousands)	(Per share)		(In years)	(In thousands)
Outstanding at December 28, 2021	1,716	$	46.14	5.1	$	0
Granted	—		—
Exercised	(2)		40.16
Forfeited or cancelled	(29)		48.19
Outstanding at September 27, 2022	1,685	$	46.11	4.4	$	0

Exercisable at September 27, 2022	1,119	$	48.10	3.5	$	0

(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 pre-tax amount that would have been received by the option holders, had they all exercised their options on the fiscal period end date.

There were no options exercised during the third quarters of fiscal 2022 or 2021. The total intrinsic value of options exercised during the first three quarters of fiscal 2022 and 2021 were $4.9 million and $7.1 million, respectively. As of September 27, 2022, total unrecognized stock-based compensation expense related to unvested stock options was $3.1 million, which we expect to recognize over a weighted-average period of approximately 1.9 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirty-nine weeks ended September 27, 2022 was as follows:


		Weighted-
		Average
	Shares	Fair Value
	(In thousands)	(Per share)
Outstanding at December 28, 2021	2,123	$	44.82
Granted	783		37.64
Vested	(356)		46.03
Forfeited	(110)		41.91
Outstanding at September 27, 2022	2,440	$	42.47

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 for restricted shares and restricted share units issued during the third quarter of fiscal 2022 and 2021 was $28.59 and $51.95, respectively. The fair value of shares that vested during the thirteen and thirty-nine weeks ended September 27, 2022 was $1.9 million and $16.4 million, respectively. The fair value of shares that vested during the thirteen weeks and thirty-nine weeks ended September 28, 2021 was $2.1 million and $13.3 million, respectively. As of September 27, 2022, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $53.3 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.