Stock-Based Compensation

9 Months Ended

Oct. 03, 2023

Stock-Based Compensation

Stock-Based Compensation

9.  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. 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
	October 3, 2023		September 27, 2022		October 3, 2023		September 27, 2022
Labor expenses	$	2,365	$	2,237	$	7,153	$	6,621
Other operating costs and expenses		76		74		227		224
General and administrative expenses		4,182		3,302		11,470		10,375
Total stock-based compensation		6,623		5,613		18,850		17,220
Income tax benefit		1,653		1,379		4,706		4,229
Total stock-based compensation, net of taxes	$	4,970	$	4,234	$	14,144	$	12,991
Capitalized stock-based compensation (1)	$	44	$	52	$	131	$	161

(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 2023 and fiscal 2022. Stock option activity during the thirty-nine weeks ended October 3, 2023 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 January 3, 2023	1,685	$	46.11	4.2	$	—
Granted	40		40.42
Exercised	—		—
Forfeited or cancelled	(175)		48.01
Outstanding at October 3, 2023	1,550	$	45.75	4.0	$	—
Exercisable at October 3, 2023	1,199	$	47.11	3.4	$	—

(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 thirteen and thirty-nine weeks ended October 3, 2023. There were no options exercised during the third quarter of fiscal 2022. The total intrinsic value of options exercised during the thirty-nine weeks ended September 27, 2022 was $4.9 million. As of October 3, 2023, total unrecognized stock-based compensation expense related to unvested stock options was $1.9 million, which we expect to recognize over a weighted-average period of approximately 1.6 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirty-nine weeks ended October 3, 2023 was as follows:

		Weighted-
		Average
	Shares	Fair Value
	(In thousands)	(Per share)
Outstanding at January 3, 2023	2,512	$	41.93
Granted	887		38.75
Vested	(459)		43.24
Forfeited	(110)		39.78
Outstanding at October 3, 2023	2,830	$	40.81

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 2023 and 2022 was $36.81 and $28.59, respectively. The fair value of shares that vested during the thirteen and thirty-nine weeks ended October 3, 2023 was $3.3 million and $19.9 million, 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. As of October 3, 2023, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $59.5 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.