SHARE-BASED AWARDS

12 Months Ended

Jul. 29, 2023

Share-Based Payment Arrangement [Abstract]

NOTE 12—SHARE-BASED AWARDS

As of July 29, 2023, the Company has restricted stock awards and performance share units and stock options outstanding under two equity incentive plans: the 2012 Equity Incentive Plan, as amended and restated (the “2012 Plan”) and the Second Amended and Restated 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”). The terms of each stock-based award will be determined by the Board of Directors or the Compensation Committee thereof. As of July 29, 2023, the Company has 1.6 million shares authorized and available for grant under the 2020 Equity Incentive Plan. The authorization for new grants under the 2012 Plan has expired.

Share-Based Compensation Expense

The following table presents information regarding share-based compensation expenses and the related tax impacts:


(in millions)	2023		2022		2021
Restricted stock awards	$	35	$	36	$	36
Supervalu replacement awards(1)	—		—		5
Performance-based share awards	3		7		8
Share-based compensation expense recorded in Operating expenses	38		43		49
Income tax benefit	(10)		(12)		(13)
Share-based compensation expense, net of tax	$	28	$	31	$	36

Share-based compensation expense recorded in Restructuring, acquisition and integration related expenses(2)	$	—	$	1	$	1
Income tax benefit	—		—		—
Share-based compensation expense recorded in Restructuring, acquisition and integration related expenses, net of tax	$	—	$	1	$	1

(1)Amounts are derived primarily from liability classified awards.

(2)Includes equity classified awards of $1 million for fiscal 2022 and fiscal 2021, respectively.

Vesting requirements for awards are generally at the discretion of the Company’s Board of Directors or the Compensation Committee thereof. Time-based vesting awards for employees typically vest in three or four equal installments. The Board of Directors has adopted a policy in connection with the 2020 Equity Incentive Plan that sets forth grant, vesting and settlement dates for equity awards, a one-year vesting period for awards issued to non-employee directors, and a three-year equal installment vesting period for designated employee restricted stock awards. Performance awards have a three-year cliff vest, subject to achievement of the performance objective. As of July 29, 2023, there was $45 million of total unrecognized compensation cost related to outstanding share-based compensation arrangements (including restricted stock units and performance-based restricted stock units). This cost is expected to be recognized over a weighted-average period of 1.9 years.

Restricted Stock Awards

The fair value of restricted stock units and performance share units are determined based on the number of units granted and the quoted price of the Company’s common stock as of the grant date. The following summary presents information regarding restricted stock units, Supervalu Replacement Awards and performance share units:


	Number of Shares (in millions)	Weighted Average Grant-Date Fair Value
Outstanding at August 1, 2020	7.4	$	18.54
Granted	2.4	17.55
Vested	(2.6)	19.94
Forfeited/Canceled	(0.4)	24.11
Outstanding at July 31, 2021	6.8	17.33
Granted	1.2	45.46
Vested	(2.8)	42.06
Forfeited/Canceled	(0.3)	37.68
Outstanding at July 30, 2022	4.9	20.02
Granted	1.7	35.01
Vested	(3.1)	35.48
Forfeited/Canceled	(0.3)	21.55
Outstanding at July 29, 2023	3.2	$	32.11


(in millions)	2023		2022		2021
Intrinsic value of restricted stock units vested	$	113	$	125	$	51

Performance-Based Share Awards

During fiscal 2023, the Company granted 0.4 million performance share units, included in the granted number in the above table, to its executives and other senior leaders (subject to the issuance of up to 0.4 million additional shares if the Company’s performance exceeds specified targeted levels) with a weighted average grant-date fair value of $36.87. These performance units are tied to fiscal 2023, 2024 and 2025 performance metrics, including adjusted earnings per share (“EPS”) growth and adjusted return on invested capital (“ROIC”). An insignificant amount of performance share units granted in fiscal 2023 were forfeited during fiscal 2023.

During fiscal 2022, the Company granted 0.3 million performance share units to its executives and other senior leaders (subject to the issuance of up to 0.3 million additional shares if the Company’s performance exceeds specified targeted levels) with a weighted average grant-date fair value of $49.31. These performance units are tied to fiscal 2022, 2023 and 2024 performance metrics, including adjusted EPS growth and adjusted ROIC. An insignificant amount of performance share units granted in fiscal 2022 were forfeited during fiscal 2023.

During fiscal 2021, the Company granted 0.5 million performance share units to its executives and other senior leaders (subject to the issuance of up to 0.3 million additional shares if the Company’s performance exceeds specified targeted levels) with a weighted average grant-date fair value of $18.19. These performance units were tied to fiscal 2021, 2022 and 2023 performance metrics, including adjusted EPS growth, adjusted ROIC and adjusted EBITDA leverage. An insignificant amount of performance share units granted in fiscal 2021 were forfeited during fiscal 2023. Based on performance through the performance period ended July 29, 2023, 0.3 million performance share units have been earned and will be issued in fiscal 2024.

Stock Options

The Company did not grant options in fiscal 2023, 2022 or 2021. The following summary presents information regarding outstanding stock options as of July 29, 2023 and changes during the fiscal year then ended:


	Number of Options (in millions)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of year	0.5	$	54.11	1.6 years
Exercised	—	37.02
Canceled	(0.2)	52.08
Outstanding at end of year	0.3	—		1.1 years	$	—
Exercisable at end of year	0.3	$	55.46	1.1 years	$	—

The aggregate intrinsic value of options exercised during fiscal 2023, 2022 and 2021 was $0 million, $2 million and $1 million, respectively.

Supervalu Replacement Awards

Pursuant to the Agreement and Plan of Merger, dated July 25, 2018, by and among Supervalu, SUPERVALU Enterprises, Inc., the company and Jedi Merger Sub, Inc., dated as of July 25, 2018, as amended on October 10, 2018 (the “Merger Agreement”), each outstanding Supervalu stock option, whether vested or unvested, that was unexercised immediately prior to the effective time of the merger (“SVU Option”) was converted, effective as of the effective time of the merger, into a stock option exercisable for shares of common stock of the Company (“Supervalu Replacement Options”) in accordance with the adjustment provisions of the Supervalu stock. In addition, each outstanding Supervalu restricted share award, restricted stock unit award, deferred share unit award and performance share unit award (“SVU Equity Award”) was converted, effective as of the effective time of the merger, into time-vesting awards (“Supervalu Replacement Award”) with a settlement value equal to the merger consideration of $32.50 per share multiplied by the number of shares of Supervalu common stock subject to such SVU Equity Award. The Supervalu Replacement Awards were liability classified awards as they were ultimately settled in cash or shares at the discretion of the employee. The Supervalu Replacement Awards liabilities were expensed over the service period based on the fixed value of $32.50 per share. As of the end of fiscal 2022, there were no longer any outstanding Supervalu Replacement Awards.