Stock-Based Compensation

9 Months Ended

Sep. 30, 2014

6. Stock-Based Compensation

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

	Thirteen Weeks Ended September 30, 2014		Thirteen Weeks Ended October 1, 2013		Thirty-nine Weeks Ended September 30, 2014		Thirty-nine Weeks Ended October 1, 2013

Labor expenses	$	1,309	$	1,158	$	3,845	$	3,251
Other operating costs and expenses	52		35		141		133
General and administrative expenses	2,694		2,267		7,807		6,889
Total stock-based compensation	4,055		3,460		11,793		10,273
Income tax benefit	1,551		1,324		4,511		3,930
Total stock-based compensation, net of taxes	$	2,504	$	2,136	$	7,282	$	6,343

Capitalized stock-based compensation (1)	$	55	$	41	$	154	$	129

(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

We did not issue any stock options during the third quarter of either fiscal 2014 or fiscal 2013. Stock option activity during the thirty-nine weeks ended September 30, 2014 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 31, 2013	4,823		$	23.70	4.1	$	118,505
Granted	329		48.19
Exercised	(648	)	19.66
Forfeited or cancelled	(37	)	30.89
Outstanding at September 30, 2014	4,467		$	26.03	3.7	$	87,875

Exercisable at September 30, 2014	2,556		$	23.56	2.9	$	56,076

(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.

The total intrinsic value of options exercised during the thirteen and thirty-nine weeks ended September 30, 2014 was $4.8 million and $17.5 million, respectively. The total intrinsic value of options exercised during the thirteen and thirty-nine weeks ended October 1, 2013 was $9.7 million and $29.4 million, respectively. As of September 30, 2014, the total unrecognized stock-based compensation expense related to unvested stock options was $12.5 million, which we expect to recognize over a weighted average period of approximately 2.1 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during the thirty-nine weeks ended September 30, 2014 was as follows:

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

Outstanding at December 31, 2013	1,672		$	32.81
Granted	374		47.27
Vested	(180	)	23.31
Forfeited	(92	)	36.40
Outstanding at September 30, 2014	1,774		$	36.63

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 2014 and fiscal 2013 was $43.41 and $42.63, respectively. The fair value of shares that vested during the thirteen and thirty-nine weeks ended September 30, 2014 was $0.4 million and $4.2 million, respectively. The fair value of shares that vested during the thirteen and thirty-nine weeks ended October 1, 2013 was $0.1 million and $2.5 million, respectively. As of September 30, 2014, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $36.2 million, which we expect to recognize over a weighted average period of approximately 3.2 years.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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