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Stock-Based Compensation

3 Months Ended

Apr. 02, 2024

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):

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​	​	​	​	​	​	​
​	​	Thirteen		​	Thirteen
​	​	Weeks Ended		​	Weeks Ended
​		April 2, 2024			April 4, 2023
​	​	​	​	​	​	​
Labor expenses	​	$	2,495	​	$	2,362
Other operating costs and expenses	​	​	78	​	​	75
General and administrative expenses	​	​	5,076	​	​	3,465
Total stock-based compensation	​	​	7,649	​	​	5,902
Income tax benefit	​	​	1,908	​	​	1,474
Total stock-based compensation, net of taxes	​	$	5,741	​	$	4,428
​	​	​	​	​	​	​
Capitalized stock-based compensation (1)	​	$	49	​	$	42

(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 consolidated balance sheets.

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Stock Options

The weighted - average fair value at the grant date for options issued during the first quarter of fiscal 2024 and 2023 was $12.45 and $15.76 per share, respectively. The fair value of options issued was estimated utilizing the Black-Scholes valuation model with the following weighted-average assumptions for the first quarter of fiscal 2024 and 2023, respectively: (a) an expected option term of 6.9 and 6.7 years, (b) expected stock price volatility of 41.9% and 45.2%, (c) a risk-free interest rate of 4.3% and 4.0%, and (d) a dividend yield on our stock of 3.1% and 2.7%. Stock option activity during the thirteen weeks ended April 2, 2024 was as follows:

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​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​		​	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 2, 2024	​	1,550	​	$	45.75	​	3.8	​	$	0
Granted		81	​	​	34.91	​	​	​	​	​
Exercised		—	​	​	—	​	​	​	​	​
Forfeited or cancelled		(156)	​	​	50.26	​	​	​	​	​
Outstanding at April 2, 2024	​	1,475	​	$	44.68	​	4.3	​	$	164
​	​	​	​	​	​	​	​	​	​	​
Exercisable at April 2, 2024		1,233	​	$	45.90	​	3.6	​	$	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.

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There were no options exercised during both the first quarters of fiscal 2024 and 2023. As of April 2, 2024, total unrecognized stock-based compensation expense related to unvested stock options was $2.2 million, which we expect to recognize over a weighted-average period of approximately 2.6 years.

Restricted Shares and Restricted Share Units

​

Restricted share and restricted share unit activity during the thirteen weeks ended April 2, 2024 was as follows:

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​	​	​	​	​	​
​	​	​	​	Weighted-
​	​	​	​	Average
​		Shares		Fair Value
​	​	(In thousands)	​	(Per share)
Outstanding at January 2, 2024		2,886	​	$	40.28
Granted		726	​	​	34.77
Vested		(364)	​	​	48.99
Forfeited		(58)	​	​	36.34
Outstanding at April 2, 2024		3,190	​	$	38.11

​

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 first quarter of fiscal 2024 and 2023 was $34.77 and $39.94, respectively. The fair value of shares that vested during the thirteen weeks ended April 2, 2024 and April 4, 2023 was $17.8 million and $15.2 million, respectively. As of April 2, 2024, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $67.6 million, which we expect to recognize over a weighted-average period of approximately 3.3 years.

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- Definition

The entire disclosure for share-based payment arrangement.

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