Total compensation expense related to share-based arrangements was $32 million, $28 million and $21 million for fiscal years 2019, 2018 and 2017, respectively, and is reflected in distribution, selling and administrative costs in the Company's Consolidated Statements of Comprehensive Income. The total income tax benefit associated with share-based compensation recorded in the Company's Consolidated Statement of Comprehensive Income was $8 million, $6 million and $7 million for fiscal years 2019, 2018 and 2017, respectively.

In addition, the Company sponsors an employee stock purchase plan to provide eligible employees with the opportunity to acquire shares of our common stock at a discount of 15% of the fair market value of the common stock on the date of purchase, and as such, the plan is considered compensatory for federal income tax purposes. The Company recorded $4 million, $3 million and $3 million of share-based compensation expense for fiscal years 2019, 2018 and 2017, respectively, associated with the employee stock purchase plan.

Stock Options—Certain directors, officers and other eligible employees have been granted time-based stock options (the “Time-Based Options”) and performance-based options (the “Performance Options” and, together with the Time-Based Options, the “Options”) to purchase shares of our common stock.

The Time-Based Options generally vest and become exercisable ratably over periods of three to four years, from the date of the grant. Share-based compensation expense related to the Time-Based Options was $8 million, $7 million and $4 million for fiscal years 2019, 2018 and 2017, respectively.

The Performance Options generally vest and become exercisable ratably over four years, from the date of the grant, provided that the Company achieves a predetermined financial performance goal established by the Compensation Committee of our Board of Directors (the “Committee”) for the respective award tranche.

The Company recorded share-based compensation expense of $1 million and $3 million for fiscal years 2018 and 2017, respectively, related to the expected vesting of the Performance Options. No share-based compensation expense attributable to Performance Options was recorded for fiscal year 2019 as the final tranche of those awards was not expected to vest since the performance goal was not met.

The Options are nonqualified, with exercise prices equal to the estimated fair value of a share of common stock as of the date of the grant. Exercise prices range from $8.51 to $38.12 per share and generally have a 10-year life. The fair value of each Option is estimated as of the date of grant using a Black-Scholes option-pricing model.



	2019		2018		2017
Expected volatility	23.7	%	35.7	%	31.8	%
Expected dividends	—		—		—
Risk-free interest rate	2.3	%	2.6	%	1.9	%
Expected term (in years)	5.6		5.4		5.8

Expected volatility is calculated leveraging the historical volatility of public companies similar to US Foods. The assumed dividend yield is zero because the Company has not historically paid dividends. The risk-free interest rate is the implied zero-coupon yield for U.S. Treasury securities having a maturity approximately equal to the expected term, as of the grant date. Due to a lack of relevant historical data, the simplified approach was used to determine the expected term of the options.



	Time Options		Performance Options		Total Options		Weighted- Average Fair Value		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Years
Outstanding as of December 29, 2018	2,713,564		1,222,832		3,936,396		$	9.45	$	22.44
Granted	922,893		195,692		1,118,585		$	10.63	$	32.60
Exercised	(688,964	)	(443,875	)	(1,132,839	)	$	7.58	$	18.11
Forfeited	(176,643	)	(30,268	)	(206,911	)	$	10.78	$	29.22
Performance adjustment⁽¹⁾	—		(192,929	)	(192,929	)	$	15.31	$	23.19
Outstanding as of December 28, 2019	2,770,850		751,452		3,522,302		$	10.03	$	26.62	7.2
Vested and exercisable as of December 28, 2019	1,132,637		438,297		1,570,934		$	8.43	$	21.89	6.0

During fiscal years 2019, 2018 and 2017, Options were exercised with total intrinsic values of $21 million, $28 million and $86 million, respectively, representing the excess of fair value over exercise price.

There was $11 million of total unrecognized compensation costs related to unvested Options expected to vest as of December 28, 2019, which is expected to be recognized over a weighted-average period of two years.

Restricted Stock Awards—Certain officers have been granted restricted stock awards (“RSAs”), some of which vest ratably over a three-year period from the date of grant (the “Time-Based RSA”) and others which vest to the extent certain performance conditions are met (the “Performance RSAs”).

The Company recorded share-based compensation expense for the Time-Based RSAs of $1 million for fiscal year 2019. No Time-Based RSAs had been issued for periods prior to fiscal year 2019.

The Performance RSAs were granted assuming the maximum level of performance and vest on the third anniversary of the grant date if specific performance goals over a three-year performance period are achieved. The number of shares eligible to vest on the vesting date range from zero to 200% of the target award amount, based on the achievement of the performance goals. The fair value of the Performance RSAs is measured using the fair market value of our common stock on the date of grant and recognized over the three-year vesting period for the portion of the award that is expected to vest. Compensation expense for the Performance RSAs is remeasured as of the end of each reporting period, based on management’s evaluation of whether it is probable that performance conditions will be met.



	Time-Based RSAs	Performance RSAs	Total RSAs	Weighted- Average Fair Value
Unvested as of December 29, 2018	—	448,823	448,823	$	32.01
Granted	116,713	233,426	350,139	$	34.56
Unvested as of December 28, 2019	116,713	682,249	798,962	$	33.13

The weighted-average grant date fair value for the RSAs granted in fiscal years 2019, 2018 and 2017 was $34.56, $33.56 and $30.39, respectively. There was $7 million of unrecognized compensation expense related to the RSAs as of December 28, 2019, that is expected to be recognized over a weighted average period of two years.

Restricted Stock Units—Certain directors, officers and other eligible employees have been granted time-based restricted stock units (the “Time-Based RSUs”) and performance-based restricted stock units (the “Performance RSUs” and, collectively with the Time-Based RSUs, the “RSUs”). The Time-Based RSUs generally vest ratably over three to four years, starting on the anniversary date of the grant. For fiscal years 2019, 2018 and 2017, the Company recognized $14 million, $12 million and $6 million, respectively, in share-based compensation expense related to the Time-Based RSUs.

The fair value of each share underlying the Performance RSUs is measured at the fair market value of our common stock on the date of grant and recognized over the vesting period for the portion of the award that is expected to vest. Compensation expense for the Performance RSUs is remeasured as of the end of each reporting period, based on management’s evaluation of whether it is probable that the performance conditions will be met.

The Company recognized $2 million, $3 million and $3 million of share-based compensation expense in fiscal years 2019, 2018 and 2017, respectively, for the Performance RSUs.



	Time-Based RSUs		Performance RSUs		Total RSUs		Weighted- Average Fair Value
Unvested as of December 29, 2018	1,036,841		356,716		1,393,557		$	30.71
Granted	481,599		186,825		668,424		$	35.09
Vested	(440,604	)	—		(440,604	)	$	28.39
Forfeited	(150,662	)	(65,142	)	(215,804	)	$	32.65
Performance adjustment ⁽¹⁾	—		(46,398	)	(46,398	)	$	32.85
Unvested as of December 28, 2019	927,174		432,001		1,359,175		$	33.24

As of December 28, 2019, there was $25 million of unrecognized compensation cost related to the RSUs that is expected to be recognized over a weighted-average period of two years.