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SHARE-BASED COMPENSATION | 12 Months Ended
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Jul. 01, 2023
Share-Based Payment Arrangement, Noncash Expense [Abstract] |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Sysco provides compensation benefits to employees under several share-based payment arrangements including various long-term employee stock incentive plans and the 2015 Employee Stock Purchase Plan (ESPP). Stock Incentive Plans In November 2018, Sysco’s Omnibus Incentive Plan (2018 Plan) was adopted and reserved up to 51,500,000 shares of Sysco common stock for share-based awards to employees, non-employee directors and key advisors. Of the 51,500,000 authorized shares, the full 51,500,000 shares may be issued as options or stock appreciation rights and up to 17,500,000 shares may be issued as restricted stock, restricted stock units or other types of stock-based awards. To date, Sysco has issued options, restricted stock units and performance share units under the 2018 Plan. Vesting requirements for awards under the 2018 Plan vary by individual grant and may include either time-based vesting or time-based vesting subject to acceleration based on performance criteria for fiscal periods of at least one year. The contractual life of all options granted under the 2018 Plan are and will be no greater than ten years. As of July 1, 2023, there were 39,928,758 remaining shares authorized and available for grant in total under the 2018 Plan, of which the full 39,928,758 shares may be issued as options or stock appreciation rights, or as a combination of up to 12,114,046 shares that may be issued as restricted stock, restricted stock units or other types of stock-based awards, with the remainder available for issuance as options or stock appreciation rights. Sysco has also granted employee options under several previous employee stock option plans for which previously granted options remain outstanding as of July 1, 2023. No new options will be issued under any of the prior plans. Future grants to employees will be made through the 2018 Plan or subsequently adopted plans. Awards under these plans are subject to time-based vesting with vesting periods that vary by individual grant. The contractual life of all options granted under these plans is ten years. Sysco’s policy is to utilize treasury stock for issuing shares upon share option exercise or share unit conversion. Performance Share Units During fiscal 2023 and 2022, 460,672 and 475,883 performance share units (PSUs), respectively, were granted to employees. Based on the jurisdiction in which the employee resides, some of these PSUs were granted with forfeitable dividend equivalents. The fair value of each PSU award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For PSUs granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the vesting period. The weighted average grant-date fair value per performance share unit granted during fiscal 2023 and 2022 was $84.87 and $76.75, respectively. The PSUs will convert into shares of Sysco common stock at the end of the performance period based on actual performance targets achieved as well as the market-based return of Sysco’s common stock relative to that of the S&P 500 index companies. Stock Options Sysco’s option awards are subject to graded vesting over a requisite service period with compensation cost recognized on a straight-line basis through the requisite service period over the duration of the award. In addition, certain of Sysco’s options provide that the options continue to vest as if the optionee continued as an employee or director if the optionee meets certain age and years of service thresholds upon retirement. In these cases, Sysco will recognize compensation cost for such awards over the period from the grant date to the date the employee or director first becomes eligible to retire with the options continuing to vest after retirement. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. Expected dividend yield is estimated based on the historical pattern of dividends and the average stock price for the year preceding the option grant. Expected volatility is based on historical volatility of Sysco’s stock, implied volatilities from traded options on Sysco’s stock, and other factors. The risk-free rate for the expected term of the option is based on the United States Treasury yield curve in effect at the time of grant. Sysco utilizes historical data to estimate option exercise and employee termination behavior in determining the expected life of awards for valuation purposes. The weighted average assumptions discussed above are noted in the table below for relevant periods as follows:
| 2023 |  | 2022 |  | 2021
Dividend yield | 2.4 | % |  | 2.5 | % |  | 2.7 | %
Expected volatility | 32.6 | % |  | 30.1 | % |  | 32.1 | %
Risk-free interest rate | 3.0 | % |  | 1.0 | % |  | 0.5 | %
Expected Life | 6.6 years |  | 6.6 years |  | 7.0 years
The following summary presents information regarding outstanding options as of July 1, 2023 and changes during the fiscal year then ended with regard to options under all stock incentive plans:
| Shares Under Option |  | Weighted Average Exercise Price Per Share |  | Weighted Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding as of July 2, 2022 | 9,634,493 |  |  | $ | 62.74 |  |  |  |  |
Granted | 954,249 |  |  | 84.97 |  |  |  |  |
Exercised | 570,578 |  |  | 54.80 |  |  |  |  |
Forfeited | 267,981 |  |  | 75.03 |  |  |  |  |
Expired | — |  |  | — |  |  |  |  |
Outstanding as of July 1, 2023 | 9,750,183 |  |  | $ | 65.05 |  |  | 5.71 |  | $ | 104,397 |
Expected to vest as of July 1, 2023 | 2,036,563 |  |  | $ | 75.56 |  |  | 8.32 |  | $ | 8,142 |
Exercisable as of July 1, 2023 | 7,644,880 |  |  | $ | 62.10 |  |  | 4.99 |  | $ | 96,209 |
The total number of employee options granted was 954,249, 1,224,150 and 1,975,413 in fiscal years 2023, 2022 and 2021, respectively. During fiscal 2023, 384,212 options were granted to 13 executive officers and 570,037 options were granted to 167 other key employees. During fiscal 2022, 499,554 options were granted to 11 executive officers and 724,596 options were granted to 145 other key employees. During fiscal 2021, 706,229 options were granted to 13 executive officers and 1,269,184 were granted to 117 other key employees. The weighted average grant date fair value of options granted in fiscal 2023, 2022 and 2021 was $24.46, $17.39 and $13.72, respectively. The total intrinsic value of options exercised during fiscal 2023, 2022 and 2021 was $1.2 million, $5.1 million and $6.7 million, respectively. Restricted Stock Units During fiscal 2023, 2022 and 2021, 917,560, 758,934 and 975,886 restricted stock units, respectively, were granted to employees. The majority of which will vest ratably over a three-year period. Some of these restricted stock units were granted with dividend equivalents. The fair value of each restricted stock unit award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For restricted stock unit awards granted without dividend equivalents, the fair value was reduced by the present value of expected dividends as of the grant date during the vesting period. The weighted average grant date fair value per share of restricted stock units granted during fiscal 2023, 2022 and 2021 was $75.66, $80.31 and $66.55, respectively. The total fair value of restricted stock units vested during fiscal 2023, 2022 and 2021 was $44.0 million, $41.6 million and $34.8 million, respectively. The total intrinsic value of restricted stock units vested during fiscal 2023, 2022 and 2021 was $46.8 million, $52.6 million and $42.6 million, respectively. Non-Employee Director Awards During fiscal 2023, 2022 and 2021, 22,055, 22,293 and 28,419 restricted equity awards, respectively, were granted to non-employee directors (NEDs), which will vest over a one-year period. NEDs may elect to receive these awards in restricted stock shares that will vest at the end of the award stated vesting period or as deferred units that convert into shares of Sysco common stock on a date subsequent to the award stated vesting date selected by the NED. The fair value of the restricted awards is based on the company’s stock price as of the date of grant. The weighted average grant date fair value of the shares granted during fiscal 2023, 2022 and 2021 was $84.10, $74.93 and $71.99, respectively. The total fair value of restricted stock shares vested and deferred units distributed during fiscal 2023, 2022 and 2021 was $1.9 million, $1.7 million and $2.0 million, respectively. Restricted stock shares are valued on their vesting date. Vested deferred units are valued on their subsequent conversion and distribution date. NEDs may elect to receive up to 100% of their annual directors’ fees in Sysco common stock on either an annual or deferred basis. As a result of such elections, a total of 6,974, 6,002 and 5,887 shares with a weighted-average grant date fair value of $78.82, $78.35 and $57.19 per share were issued in fiscal 2023, 2022 and 2021, respectively, in the form of fully vested common stock or deferred units. The total fair value of common stock issued as a result of election shares and deferred units distributed during fiscal 2023, 2022 and 2021 was $0.5 million, $0.5 million and $0.3 million, respectively. Common stock shares are valued on their vesting date. Vested deferred units are valued on their subsequent conversion and distribution date. As of July 1, 2023, there were 108,822 fully vested deferred units outstanding that will convert into shares of Sysco common stock upon dates selected by the respective NED. Summary of Equity Instruments Other Than Stock Options The following summary presents information regarding outstanding non-vested awards as of July 1, 2023 and changes during the fiscal year then ended with regard to these awards under the stock incentive plans. Award types represented include restricted stock units granted to employees, restricted awards granted to non-employee directors and PSUs.
| Shares |  | Weighted Average Grant Date Fair Value Per Share
Non-vested as of July 2, 2022 | 3,065,295 |  |  | $ | 69.10 |
Granted | 1,514,501 |  |  | 79.26 |
Vested | (1,863,721) |  |  | 59.59 |
Forfeited | (262,171) |  |  | 74.25 |
Non-vested as of July 1, 2023 | 2,453,904 |  |  | $ | 82.05 |
2015 Employee Stock Purchase Plan The Sysco ESPP permits employees to invest in Sysco common stock by means of periodic payroll deductions at a discount of 15% from the closing price on the last business day of each calendar quarter. The total number of shares that may be sold pursuant to the ESPP may not exceed 79,000,000 shares, of which 2,219,109 remained available as of July 1, 2023. During fiscal 2023, 1,032,545 shares of Sysco common stock were purchased by the participants, as compared to 868,439 shares purchased in fiscal 2022 and 1,029,113 shares purchased in fiscal 2021. The weighted average fair value of employee stock purchase rights issued pursuant to the ESPP was $11.15, $12.10 and $4.84 per share during fiscal 2023, 2022 and 2021, respectively. The fair value of the stock purchase rights was calculated as the difference between the stock price at date of issuance and the employee purchase price. All Share-Based Payment Arrangements The total share-based compensation cost included in operating expenses in the consolidated results of operations was $95.7 million, $122.3 million and $95.8 million for fiscal 2023, 2022 and 2021, respectively. The company’s expense related to its PSUs decreased, as the performance metrics are trending below target for awards not yet paid. The total income tax benefit for share-based compensation arrangements was $16.1 million, $19.1 million and $17.8 million for fiscal 2023, 2022 and 2021, respectively. As of July 1, 2023, there was $127.4 million of total unrecognized share-based compensation cost, which is expected to be recognized over a weighted-average period of 1.9 years. Cash received from option exercises and ESPP participation was $79.2 million, $128.2 million and $130.4 million during fiscal 2023, 2022 and 2021, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $1.9 million, $12.9 million and $11.0 million during fiscal 2023, 2022 and 2021, respectively.

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