SHARE-BASED AWARDS

12 Months Ended

Jul. 31, 2021

Share-based Payment Arrangement [Abstract]

NOTE 12—SHARE-BASED AWARDS

As of July 31, 2021, the Company has restricted stock awards and performance share units and stock options under four equity incentive plans: the 2002 Stock Incentive Plan; the 2004 Equity Incentive Plan, as amended; the 2012 Equity Incentive Plan, as amended and restated; and the Amended and Restated 2020 Equity Incentive Plan. The terms of each stock-based award will be determined by the Board of Directors or the Compensation Committee thereof. During fiscal 2021, the Company authorized for issuance and registered an additional 3.6 million shares of common stock under the Amended and Restated 2020 Equity Incentive Plan. As of July 31, 2021, the Company has 3.9 million shares authorized and available for grant under the Amended and Restated 2020 Equity Incentive Plan. The authorization for new grants under the 2002 Plan, 2004 Plan and 2012 Equity Incentive Plan has expired.

Share-Based Compensation Expense

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


(in millions)	2021		2020		2019
Restricted stock awards	$	36	$	23	$	23
Supervalu replacement awards(1)	5		9		14
Performance-based share awards	8		2		3
Share-based compensation expense recorded in Operating expenses	49		34		40
Income tax benefit	(13)		(9)		(10)
Share-based compensation expense, net of tax	$	36	$	25	$	30

Share-based compensation expense recorded in Restructuring, acquisition and integration related expenses(2)	$	1	$	1	$	33
Income tax benefit	—		—		(9)
Share-based compensation expense recorded in Restructuring, acquisition and integration related expenses, net of tax	$	1	$	1	$	24

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

(2)Includes equity classified awards of $1 million for fiscal 2021, liability classified awards of $1 million for fiscal 2020, and liability classified awards of $32 million and equity classified awards of $1 million for fiscal 2019.

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 31, 2021, there was $41 million of total unrecognized compensation cost related to outstanding share-based compensation arrangements (including stock options, restricted stock units, Supervalu replacement awards and performance-based restricted stock units). Unrecognized compensation cost related to Replacement Options is de minimis. This cost is expected to be recognized over a weighted-average period of 1.8 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 stock units:


	Number of Shares (in millions)	Weighted Average Grant-Date Fair Value
Outstanding at July 28, 2018	1.3	$	41.78
Supervalu replacement awards	4.3	32.50
Granted	1.7	23.30
Vested	(2.0)	34.81
Forfeited/Canceled	(0.9)	30.83
Outstanding at August 3, 2019	4.4	31.11
Granted	6.0	7.67
Vested	(1.0)	20.59
Forfeited/Canceled	(2.0)	12.39
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


(in millions)	2021		2020		2019
Intrinsic value of restricted stock units vested	$	51	$	21	$	36

Performance-Based Share Awards

During fiscal 2021, the Company granted 0.5 million performance share units to its executives (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 are tied to fiscal 2021, 2022 and 2023 performance metrics, including adjusted EPS growth, adjusted return on invested capital (“ROIC”) and adjusted EBITDA leverage. No performance share units granted in fiscal 2021 were forfeited during the current year.

During fiscal 2020, the Company granted 1.0 million performance share units to its executives (subject to the issuance of up to 1.0 million additional shares if the Company’s performance exceeds specified targeted levels) with a weighted average grant-date fair value of $8.07. These performance units are tied to fiscal 2020, 2021 and 2022 performance metrics, including adjusted EPS growth, ROIC and adjusted EBITDA leverage. No performance share units granted in fiscal 2020 were forfeited during the current year.

During fiscal 2019, the Company granted 0.3 million performance share units to its executives (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 $22.56. These performance units were tied to fiscal 2020 performance metrics, including adjusted EBITDA and ROIC. During fiscal 2020, 0.3 million of performance share units expired, and as of August 1, 2020, 0.1 million performance share units have been earned and were issued in fiscal 2021.

Stock Options

The Company did not grant stock options in fiscal 2021, 2020 or 2019. The following summary presents information regarding outstanding stock options as of July 31, 2021 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	1.1	$	46.46	4.4 years
Exercised	(0.1)	15.50
Canceled	(0.2)	45.48
Outstanding at end of year	0.8	—		2.2 years	$	—
Exercisable at end of year	0.8	$	49.02	2.2 years	$	—

The aggregate intrinsic value of options exercised during fiscal 2021, 2020 and 2019 was $1 million, $— million and $— million, respectively.

Supervalu Replacement Awards

Pursuant to the Merger Agreement, dated as of July 25, 2018, as amended, 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 (“Replacement Option”) 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 (“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 Merger Agreement originally provided that the Replacement Awards were payable in cash, however, the Merger Agreement was amended on October 10, 2018, to provide that the Replacement Awards could be settled in cash and/or an equal value in shares of common stock of the Company. The Replacement Awards are liability classified awards as they were ultimately settled in cash or shares at the discretion of the employee. The Replacement Awards liabilities are expensed over the service period based on the fixed value of $32.50 per share.

On October 22, 2018, the Company authorized for issuance and registered on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission 5 million shares of common stock for issuance in order to satisfy the Replacement Options and Replacement Awards. During fiscal 2019, the Company issued 2.0 million shares of common stock at an average price of $12.00 per share for $24 million of cash. During fiscal 2020, the Company issued 1.3 million shares of common stock at an average price of $10.66 per share for $14 million of cash.