As of December 30, 2023, we had awards outstanding under the Fortune Brands Home & Security, Inc. 2022 Long-Term Incentive Plan (the "2022 Plan") and the Fortune Brands Home & Security, Inc. 2013 Long-Term Incentive Plan (the “2013 Plan”) (collectively, the "Plans"). In 2022, stockholders approved the 2022 Plan, which provides for the granting of stock options, performance share awards ("PSAs"), restricted stock units ("RSUs") and other equity-based awards to employees, directors and consultants. No new stock-based awards can be made under the 2013 Plan, but there are outstanding unvested RSUs, unvested PSUs and stock options that continue to be exercisable. 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 awards under the Plans, may be recycled back into the total numbers of shares available for issuance under the 2022 Plan. Upon the exercise or payment of stock-based awards, shares of common stock are issued from authorized common shares. As of December 30, 2023, approximately 4.2 million shares of common stock remained authorized for issuance under the 2022 Plan.

Stock-based compensation expense was as follows:


(In millions)	2023		2022		2021
Restricted stock units	$	22.1	$	16.6	$	17.8
Stock option awards		5.3		6.6		5.3
Performance awards		6.1		15.6		20.7
Director awards		1.7		1.3		1.3
Total pre-tax expense		35.2		40.1		45.1
Tax benefit		7.9		9.2		7.9
Total after tax expense	$	27.3	$	30.9	$	37.2

Included in compensation costs are cash-settled RSUs of $1.3 million, $0.3 million and $3.3 million that are classified as a liability as of December 30, 2023, December 31, 2022 and December 31, 2021, respectively. Compensation costs that were capitalized in inventory were not material.

In connection with the Separation, outstanding equity awards granted to Company service providers were adjusted to preserve the intrinsic value of the awards held immediately before and after the Separation, with unvested annual PSAs converting into time-based RSUs (“Adjusted RSUs”). All outstanding equity awards granted to MasterBrand service providers were converted into replacement awards of MasterBrand equity under the same methodology and ceased to represent equity awards with respect to the Company.

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, with the exception of the RSUs that were converted from PSAs, which vest at the end of the original three-year performance cycles. 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 30, 2023 was as follows:


	Number of Restricted Stock Units			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2022		1,178,326		$	69.65
Granted		281,945		$	62.98
Vested		(558,999	)	$	64.32
Forfeited		(53,343	)	$	70.06
Non-vested at December 30, 2023		847,929		$	70.93

The remaining unrecognized pre-tax compensation cost related to RSUs at December 30, 2023 was approximately $20.5 million, and the weighted-average period of time over which this cost will be recognized is 1.5 years. The fair value of RSUs that vested during 2023, 2022 and 2021 was $35.8 million, $16.8 million and $15.6 million, respectively.

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 expire 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:


	2023			2022			2021
Current expected dividend yield		1.5	%		1.2	%		1.2	%
Expected volatility		34.8	%		34.8	%		35.1	%
Risk-free interest rate		4.2	%		2.3	%		0.6	%
Expected term	5.4 years			5.2 years			5.2 years

In 2023, the determination of expected volatility is based on the volatility of Fortune Brands common stock and a blended peer group volatility for companies in similar industries, at a similar stage of life and with similar market capitalization. In 2022 and 2021, the determination of expected volatility is based on the volatility of Fortune Brands common stock. 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 30, 2023, December 31, 2022 and December 31, 2021 was $20.39, $24.50 and $24.55, 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 30, 2023 was as follows:


	Options			Weighted- Average Exercise Price
Outstanding at December 31, 2022		2,326,427		$	56.84
Granted		303,319		$	60.79
Exercised		(376,785	)	$	47.90
Expired/forfeited		(48,932	)	$	67.23
Outstanding at December 30, 2023		2,204,029		$	58.68

Options outstanding and exercisable at December 30, 2023 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
$20.00 to $100.00		2,204,029		5.90	$	58.68		1,647,550	$	56.50

(a)

At December 30, 2023, the aggregate intrinsic value of options outstanding was $38.7 million.

(b)

At December 30, 2023, the weighted-average remaining contractual life of options exercisable was 4.9 years and the aggregate intrinsic value of options exercisable was $32.5 million.

The remaining unrecognized compensation cost related to unvested awards at December 30, 2023 was $6.4 million, and the weighted-average period of time over which this cost will be recognized is 1.6 years. The fair value of options that vested during 2023, 2022 and 2021 was $6.3 million, $26.2 million and $4.8 million, respectively. The intrinsic value of Fortune Brands stock options exercised in 2023, 2022 and 2021 was $8.5 million, $1.1 million and $40.1 million, respectively.

PSAs 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 cumulative EBITDA margin percent and cumulative return on invested capital 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 PSA is based on the average of the high and low stock prices on the date of grant.


	Number of Performance Share Awards			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2022		20,572		$	75.59
Granted		207,193		$	61.79
Vested		(4,709	)	$	60.86
Forfeited		(12,252	)	$	66.32
Non-vested at December 30, 2023		210,804		$	62.89

The remaining unrecognized pre-tax compensation cost related to PSAs at December 30, 2023 was approximately $10.9 million, and the weighted-average period of time over which this cost will be recognized is 2.0 years. The fair value of PSAs that vested during 2023 was $0.3 million (4,709 shares).

Stock awards are used as part of the compensation provided to outside directors under the Plans. Awards are issued annually in the second quarter. In addition, outside directors can elect to have director cash compensation paid in stock and 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 2023, 2022 and 2021, we awarded 27,094, 17,649 and 12,114 shares of Company common stock to outside directors with a weighted-average fair value on the date of the award of $64.13, $73.94 and $107.73, respectively.