Prior to the Separation, certain of Cabinets’ associates participated in stock-based compensation plans sponsored by Fortune Brands. In connection with the Separation, stock compensation awards granted under the Fortune Brands’ Long-Term Incentive Plans were adjusted as follows:

•The adjustment to the stock options was intended to generally preserve the intrinsic value of each original option grant and the ratio of the exercise price to the fair market value of Fortune Brands’ common shares on December 14, 2022.

•For unvested performance share awards, progress against the targets was projected as of the conclusion of our fiscal third quarter of 2022. The unvested performance share awards were then converted into awards of restricted stock units.

•Unvested restricted stock awards were replaced with adjusted, substitute awards for restricted shares or units, as applicable, of MasterBrand, Inc. common shares. The new awards of restricted stock were intended to generally preserve the intrinsic value of the original award determined as of December 14, 2022.

Subsequent to the Separation, certain of the Company’s associates participate in a stock-based compensation plan sponsored by MasterBrand, Inc. Our stock-based compensation plan, the MasterBrand, Inc. 2022 Long-Term Incentive Plan (the “Plan”), includes stock options, restricted stock, restricted stock units, performance shares, performance units, other types of stock-based awards, and other cash-based compensation. As of December 31, 2023, approximately 9.7 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 Plan 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 of MasterBrand, Inc.


(U.S. Dollars presented in millions)	2023		2022		2021
Performance awards	$	1.2	$	3.2	$	2.3
Restricted stock units	15.6		6.2		6.2
Stock option awards	1.0		1.5		0.8
Total pre-tax expense	17.8		10.9		9.3
Tax benefit	4.2		3.0		2.0
Total after tax expense	$	13.6	$	7.9	$	7.3

Compensation expense for 2022 included the recognition of $0.7 million of incremental compensation expense in the fourth quarter of 2022 resulting from the adjustment and substitution of Fortune Brands awards settled in MasterBrand, Inc. stock.

Performance share awards were granted to officers and certain associates of the Company and represent the right to earn shares of MasterBrand, Inc. common stock based on the achievement of their company-wide non-GAAP performance conditions, including average adjusted return on net tangible assets and cumulative adjusted 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.

Upon Separation, the progress against the targets for all outstanding performance share awards was projected as of the conclusion of our fiscal third quarter of 2022, and were converted into awards of Restricted Stock Units, and the vesting periods of the performance share awards were unaffected by the adjustment and substitution. The fair value of performance share awards that vested during 2022 was $1.5 million (245,111 shares, as converted to MasterBrand, Inc. common stock). As of December 25, 2022, there were no unvested performance share awards outstanding that had been awarded under the Fortune Brands’ Long-Term Incentive Plans.

During the first quarter of fiscal 2023, we granted 411,647 performance share awards. The following table summarizes activity with respect to performance share awards outstanding under the MasterBrand, Inc. Plan:


	Number of Performance Share Awards	Weighted- Average Grant- Date Fair Value
Non-vested at December 25, 2022	—	$	—
Granted	411,647	$	9.91
Vested	(9,332)	$	10.71
Forfeited	—	$	—
Non-vested at December 31, 2023	402,315	$	9.92

The remaining unrecognized pre-tax compensation cost related to PSAs at December 31, 2023 was approximately $2.8 million (based on the current estimated probability of meeting performance targets), and the weighted-average period of time over which this cost will be recognized is 2.09 years. The fair value of PSAs that vested during 2023 was $0.1 million.

Restricted stock units (“RSUs”) have been granted to officers and certain associates of the Company and represent the right to receive shares of MasterBrand, Inc. common stock subject to continued employment through each vesting date. RSUs generally vest ratably over a three-year period (i.e., 1/3 vests on the 1st anniversary of the grant date, 1/3 vests on the 2nd anniversary of the grant date, and 1/3 vests on the 3rd anniversary of the grant date). In addition, certain associates 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.


	Number of Restricted Stock Units	Weighted- Average Grant- Date Fair Value
Non-vested at December 25, 2022	3,924,976	$	8.98
Granted	1,254,704	$	10.28
Vested	(1,019,865)	$	9.19
Forfeited	(160,496)	$	9.19
Non-vested at December 31, 2023	3,999,319	$	9.32

The remaining unrecognized pre-tax compensation cost related to RSUs at December 31, 2023 was approximately $19.3 million, and the weighted-average period of time over which this cost will be recognized is 1.78 years. The fair value of RSUs that vested (including RSUs that had been awarded under the Fortune Brands’ Long-Term Incentive Plans that vested prior to the Separation) during 2023, 2022 and 2021 was $10.6 million, $6.1 million and $6.6 million, respectively.

Stock options have been granted to officers and certain associates of the Company and represent the right to purchase shares of MasterBrand, Inc. common stock subject to continued employment through each vesting date. Stock options granted under the Plan generally vest over a three-year period and generally have a maturity of ten years from the grant date.

All stock-based compensation to associates 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.

MasterBrand, Inc. did not grant any stock options in fiscal 2023 or 2022, subsequent to the Separation. The fair value of MasterBrand, Inc. options granted in future periods will be estimated at the date of grant using a Black-Scholes option pricing model with assumptions for current expected dividend yield, expected volatility, risk-free interest rate, and an expected term.


	Options	Weighted- Average Exercise Price
Outstanding at December 25, 2022	1,334,292	$	9.36
Granted	—	$	—
Exercised	—	$	—
Expired/forfeited	—	$	—
Outstanding at December 31, 2023	1,334,292	$	9.36


	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
$5.92 to $10.76	1,334,292	6.60	$	9.36	1,022,298	$	8.94

(b) At December 31, 2023 the weighted-average remaining contractual life of options exercisable was 6.2 years (as compared to 6.7 years at December 25, 2022) and the aggregate intrinsic value of options exercisable was $6.0 million (as compared to $0.2 million at December 25, 2022.