Total compensation expense related to share-based arrangements was $48 million, $40 million and $32 million for fiscal years 2021, 2020 and 2019, 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 Statements of Comprehensive Income was $10 million, $8 million and $8 million for fiscal years 2021, 2020 and 2019, 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 $4 million of share-based compensation expense for fiscal years 2021, 2020 and 2019, respectively, associated with the employee stock purchase plan.

Stock Options—Certain directors, executive 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 a period of three to four years, from the date of the grant. Share-based compensation expense related to the Time-Based Options was $12 million, $10 million and $8 million for fiscal years 2021, 2020 and 2019, respectively.

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

The Company recorded no share-based compensation expense attributable to Performance Options in fiscal years 2020 and 2019 as a result of the performance conditions for fiscal years 2019 and 2018, respectively, were not met and the Performance Options related to these performance periods were subsequently forfeited. There was no share-based compensation expense recorded in fiscal year 2021 related to the Performance Options.

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 $9.86 to $38.17 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.


	2021		2020		2019
Expected volatility	53.0	%	29.3	%	23.7	%
Expected dividends	—		—		—
Risk-free interest rate	1.1	%	0.5	%	2.3	%
Expected term (in years)	6.1		6.1		5.6

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 January 2, 2021	5,126,908	358,829	5,485,737	$	6.85	$	21.10
Granted	966,251	—	966,251	$	18.59	$	36.85
Exercised	(709,819)	(91,843)	(801,662)	$	6.65	$	19.97
Forfeited	(199,168)	(3,343)	(202,511)	$	6.77	$	19.03
Outstanding as of January 1, 2022	5,184,172	263,643	5,447,815	$	8.96	$	24.14	7.2
Vested and exercisable as of January 1, 2022	2,426,951	263,643	2,690,594	$	8.50	$	25.05	5.9

During fiscal years 2021, 2020 and 2019, Options were exercised with total intrinsic values of $14 million, $3 million and $21 million, respectively, representing the excess of fair value over the exercise price.

There was $15 million of total unrecognized compensation costs related to unvested Options expected to vest as of January 1, 2022, which is expected to be recognized over a weighted-average period of two years.

Restricted Stock Awards—Certain executive 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 of which vest to the extent certain performance conditions are met (the “Performance RSAs”).

The Performance RSAs were granted assuming the maximum level of performance and vest on the third anniversary of the grant date if specific performance conditions 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 conditions. 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, and to what extent, it is probable that performance conditions will be met.


	Time-Based RSAs	Performance RSAs	Total RSAs	Weighted- Average Fair Value
Unvested as of January 2, 2021	77,811	462,874	540,685	$	34.14
Granted	—	—	—	$	—
Vested	(38,902)	(32,356)	(71,258)	$	34.11
Forfeited	(3,216)	(19,292)	(22,508)	$	—
Performance adjustment(1)	—	(197,092)	(197,092)	$	33.56
Unvested as of January 1, 2022	35,693	214,134	249,827	$	34.56

The weighted-average grant date fair value for the RSAs granted in fiscal year 2019 was $34.56. There were no RSAs granted in fiscal years 2020 and 2021. There was $1 million of unrecognized compensation expense related to the RSAs as of January 1, 2022, that is expected to be recognized over a weighted average period of one year.

Restricted Stock Units—Certain directors, executive officers and other eligible employees have been granted time-based restricted stock units (the “Time-Based RSUs”), performance-based restricted stock units (the “Performance RSUs”) and, market performance-based restricted stock units (the “Market Performance RSUs” and collectively with the Time-Based RSUs

and Performance RSUs, the “RSUs”). The Time-Based RSUs generally vest ratably over three years, starting on the anniversary date of the grant. For fiscal years 2021, 2020 and 2019, the Company recognized $26 million, $23 million and $14 million, respectively, in share-based compensation expense related to the Time-Based RSUs.

The Performance RSUs generally vest over a three year period, as and to the extent predetermined performance conditions are met. 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 $1 million, $1 million and $2 million of share-based compensation expense in fiscal years 2021, 2020 and 2019, respectively, for the Performance RSUs.

During fiscal year 2021, the Company granted Market Performance RSUs to certain executive officers and other eligible employees. These Market Performance RSUs awards vest at the end of a four-year performance period contingent on our achievement of certain total shareholder return performance (“TSR”) targets during the performance period. The grant date fair value of the Market Performance RSUs was estimated using a Monte-Carlo simulation. The Company recognized $3 million of share-based compensation expense in fiscal years 2021 for the Market Performance RSUs. There were no Market Performance RSUs outstanding prior to fiscal year 2021 and therefore no share-based compensation expense was recorded in 2020 and 2019 related to the Market Performance RSUs.


	Time-Based RSUs	Performance RSUs	Market Performance RSUs	Total RSUs	Weighted- Average Fair Value
Unvested as of January 2, 2021	2,692,450	209,737	—	2,902,187	$	18.16
Granted	857,273	—	357,755	1,215,028	$	37.74
Vested	(1,058,863)	(27,423)	—	(1,086,286)	$	19.46
Forfeited	(185,564)	(6,648)	(7,612)	(199,824)	$	22.05
Performance adjustment(1)	—	(69,603)	—	(69,603)	$	33.56
Unvested as of January 1, 2022	2,305,296	106,063	350,143	2,761,502	$	25.60

As of January 1, 2022, there was $41 million of unrecognized compensation cost related to the RSUs that is expected to be recognized over a weighted-average period of two years.