Fortune Brands Innovations, Inc. Stock Compensation Disclosure

12. Stock-Based Compensation

As of December 27, 2025, 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 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 2013 Plan, 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 27, 2025, approximately 3.2 million shares of common stock remained authorized for issuance under the 2022 Plan.

Included in compensation costs are cash-settled RSUs of $0.8 million, $2.0 million and $1.3 million that are classified as a liability as of December 27, 2025, December 28, 2024 and December 30, 2023, respectively. Compensation costs that were capitalized in inventory were not material.

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, 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.

The remaining unrecognized pre-tax compensation cost related to RSUs at December 27, 2025 was approximately $19.4 million, and the weighted-average period of time over which this cost will be recognized is 1.9 years. The fair value of RSUs that vested during 2025, 2024 and 2023 was $22.3 million, $34.1 million and $35.8 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 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.

In 2025 and 2024, the determination of expected volatility is based on the volatility of Fortune Brands common stock. 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. 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 27, 2025, December 28, 2024 and December 30, 2023 was $21.38, $26.13 and $20.39, respectively.

The remaining unrecognized compensation cost related to unvested awards at December 27, 2025 was $5.2 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 2025, 2024 and 2023 was $6.3 million, $5.5 million and $6.3 million, respectively. The intrinsic value of Fortune Brands stock options exercised in 2025, 2024 and 2023 was $1.3 million, $9.1 million and $8.5 million, respectively.

Performance Share Awards

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, 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.

The remaining unrecognized pre-tax compensation cost related to PSAs at December 27, 2025 was approximately $3.7 million, and the weighted-average period of time over which this cost will be recognized is 1.0 years. The fair value of PSAs that vested during 2025 was $0.1 million.

Director Awards

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 2025, 2024 and 2023, we awarded 27,994, 19,148 and 27,094 shares of Company common stock to outside directors with a weighted-average fair value on the date of the award of $54.77, $73.10 and $64.13, respectively.