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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-Based Compensation | 12. Stock-Based Compensation As of December 31, 2021, we had awards outstanding under two Long-Term Incentive Plans, the Fortune Brands Home & Security, Inc. 2013 Long-Term Incentive Plan (the “Plan”) and the 2011 Long-Term Incentive Plan (the “2011 Plan”, and together with the Plan - the “Plans”). No new stock-based awards can be made under the 2011 Plan, but there are outstanding stock options under the 2011 Plan that continue to be exercisable. Our stockholders approved the Plan in 2013, which provides for the granting of stock options, performance share awards, restricted stock units, and other equity-based awards, to employees, directors and consultants. As of December 31, 2021, approximately 2.2 million shares of common stock remained authorized for issuance under the Plan. In addition, shares of common stock that were granted and subsequently expired, terminated, cancelled or forfeited, or were used to satisfy the required withholding taxes with respect to existing awards under the Plans may be recycled back into the total numbers of shares available for issuance under the Plan. Upon the exercise or payment of stock-based awards, shares of common stock are issued from authorized common shares. Stock-based compensation expense was as follows:
(In millions) |  | 2021 |  |  |  | 2020 |  |  |  | 2019 |
Restricted stock units |  | $ | 24.0 |  |  |  | $ | 21.5 |  |  |  | $ | 19.4 |
Stock option awards |  |  | 6.1 |  |  |  |  | 5.3 |  |  |  |  | 7.0 |
Performance awards |  |  | 23.0 |  |  |  |  | 22.6 |  |  |  |  | 4.2 |
Director awards |  |  | 1.3 |  |  |  |  | 0.9 |  |  |  |  | 1.2 |
Total pre-tax expense |  |  | 54.4 |  |  |  |  | 50.3 |  |  |  |  | 31.8 |
Tax benefit |  |  | 9.9 |  |  |  |  | 8.7 |  |  |  |  | 6.0 |
Total after tax expense |  | $ | 44.5 |  |  |  | $ | 41.6 |  |  |  | $ | 25.8 |
Included in compensation costs are cash-settled restricted stock units of $3.3 million, $2.3 million and $1.4 million that are classified as a liability as of December 31, 2021, 2020 and 2019, respectively. Compensation costs that were capitalized in inventory were not material. Restricted Stock Units Restricted stock units (“RSUs”) have been granted to officers and certain employees of the Company and represent the right to receive shares of Company common stock subject to continued employment through each vesting date. RSUs generally vest ratably over a three-year period. In addition, certain employees can elect to defer receipt of a portion of their RSU awards upon vesting. Compensation cost is recognized over the service period. We calculate the fair value of each RSU granted by using the average of the high and low share prices on the date of grant. A summary of activity with respect to RSUs outstanding under the Plans for the year ended December 31, 2021 was as follows:
|  | Number of Restricted Stock Units |  |  | Weighted-Average Grant-Date Fair Value |
Non-vested at December 31, 2020 |  |  | 708,338 |  |  | $ | 61.48 |
Granted |  |  | 263,536 |  |  | $ | 90.02 |
Vested |  |  | (359,290 | ) |  | $ | 59.98 |
Forfeited |  |  | (39,982 | ) |  | $ | 74.20 |
Non-vested at December 31, 2021 |  |  | 572,602 |  |  | $ | 74.92 |
The remaining unrecognized pre-tax compensation cost related to RSUs at December 31, 2021 was approximately $21.4 million, and the weighted-average period of time over which this cost will be recognized is 1.8 years. The fair value of RSUs that vested during 2021, 2020 and 2019 was $22.2 million, $24.0 million and $15.2 million, respectively. Stock Option Awards Stock options were granted to officers and certain employees of the Company and represent the right to purchase shares of Company common stock subject to continued employment through each vesting date. Stock options granted under the Plans generally vest over a three-year period and generally have a maturity of ten years from the grant date. All stock-based compensation to employees is required to be measured at fair value and expensed over the requisite service period. We recognize compensation expense on awards on a straight-line basis over the requisite service period for the entire award. The fair value of Fortune Brands options was estimated at the date of grant using a Black-Scholes option pricing model with the assumptions shown in the following table:
|  |  | 2021 |  |  |  | 2020 |  |  |  | 2019 |
Current expected dividend yield |  |  |  | 1.2 | % |  |  |  | 1.4 | % |  |  |  | 1.5 | %
Expected volatility |  |  |  | 35.1 | % |  |  |  | 25.9 | % |  |  |  | 27.0 | %
Risk-free interest rate |  |  |  | 0.6 | % |  |  |  | 1.2 | % |  |  |  | 2.5 | %
Expected term |  |  | 5.2 years |  |  |  | 5.3 years |  |  |  | 5.0 years |
Beginning in 2020, the determination of expected volatility is based on the volatility of Fortune Brands common stock. The determination of expected volatility in prior years is based on a blended peer group volatility for companies in similar industries, at a similar stage of life and with similar market capitalization. The risk-free interest rate is based on U.S. government issues with a remaining term equal to the expected life of the stock options. The expected term is the period over which our employees are expected to hold their options. The expected term was determined based on the historical employee exercise behavior and the contractual term of the options. The dividend yield is based on the Company’s estimated dividend over the expected term. The weighted-average grant date fair value of stock options granted under the Plans during the years ended December 31, 2021, 2020 and 2019 was $24.55, $15.21 and $11.36, respectively. A summary of Fortune Brands stock option activity related to Fortune Brands and former employees of Fortune Brands, Inc., the Company from which we spun off from in 2011, for the year ended December 31, 2021 was as follows:
|  | Options |  |  | Weighted- Average Exercise Price |
Outstanding at December 31, 2020 |  |  | 2,539,029 |  |  | $ | 55.54 |
Granted |  |  | 277,038 |  |  | $ | 86.94 |
Exercised |  |  | (848,895 | ) |  | $ | 49.27 |
Expired/forfeited |  |  | (20,378 | ) |  | $ | 72.54 |
Outstanding at December 31, 2021 |  |  | 1,946,794 |  |  | $ | 62.56 |
Options outstanding and exercisable at December 31, 2021 were as follows:
|  | Options Outstanding (a) |  |  | Options Exercisable (b) |
Range Of Exercise Prices |  | Options Outstanding |  |  | Weighted- Average Remaining Contractual Life |  |  | Weighted- Average Exercise Price |  |  | Options Exercisable |  |  | Weighted- Average Exercise Price |
$13.00 to $20.00 |  |  | 4,556 |  |  |  | 0.15 |  |  | $ | 19.46 |  |  |  | 4,556 |  |  | $ | 19.46 |
$20.01 to $87.54 |  |  | 1,942,238 |  |  |  | 6.69 |  |  | $ | 62.67 |  |  |  | 1,217,180 |  |  | $ | 56.22 |
|  |  | 1,946,794 |  |  |  | 6.68 |  |  | $ | 62.56 |  |  |  | 1,221,736 |  |  | $ | 56.07 |
(a) At December 31, 2021, the aggregate intrinsic value of options outstanding was $86.3 million. (b) At December 31, 2021 the weighted-average remaining contractual life of options exercisable was 5.6 years and the aggregate intrinsic value of options exercisable was $62.1 million. The remaining unrecognized compensation cost related to unvested awards at December 31, 2021 was $6.4 million, and the weighted-average period of time over which this cost will be recognized is 1.7 years. The fair value of options that vested during the years ended December 31, 2021, 2020 and 2019 was $5.5 million, $9.4 million and $7.1 million, respectively. The intrinsic value of Fortune Brands stock options exercised in the years ended December 31, 2021, 2020 and 2019 was $42.7 million, $64.0 million and $26.0 million, respectively. Performance Share Awards Performance share awards were granted to officers and certain employees of the Company and represent the right to earn shares of Company common stock based on the achievement of company-wide non-GAAP performance conditions, including average return on net tangible assets and cumulative EBITDA during the three-year performance period. Compensation cost is amortized into expense over the performance period, which is generally three years, and is based on the probability of meeting performance targets. The fair value of each performance share award is based on the average of the high and low stock price on the date of grant. The following table summarizes information about performance share awards as of December 31, 2021, as well as activity during the year then ended. The number of performance share awards granted are shown below at the target award amounts:
|  | Number of Performance Share Awards |  |  | Weighted-Average Grant-Date Fair Value |
Non-vested at December 31, 2020 |  |  | 576,459 |  |  | $ | 57.54 |
Granted |  |  | 194,644 |  |  | $ | 90.57 |
Vested |  |  | (30,295 | ) |  | $ | 63.42 |
Forfeited |  |  | (102,072 | ) |  | $ | 65.06 |
Non-vested at December 31, 2021 |  |  | 638,736 |  |  | $ | 66.12 |
The remaining unrecognized pre-tax compensation cost related to performance share awards at December 31, 2021 was approximately $20.3 million, and the weighted-average period of time over which this cost will be recognized is 1.6 years. The fair value of performance share awards that vested during 2021 was $1.9 million (30,295 shares). Director Awards Stock awards are used as part of the compensation provided to outside directors under the Plan. Awards are issued annually in the second quarter. In addition, outside directors can elect to have director cash compensation paid in stock or can elect to defer payment of stock. Compensation cost is expensed at the time of an award based on the fair value of a share at the date of the award. In 2021, 2020 and 2019, we awarded 12,114, 20,181 and 21,746 shares of Company common stock to outside directors with a weighted-average fair value on the date of the award of $107.73, $46.82 and $54.48, respectively.

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