The Company uses various equity-based compensation programs to provide long-term performance incentives for its officers and certain employees. Currently, these incentives consist principally of restricted stock units and performance stock units. The Company also sponsors an employee discounted stock purchase plan in the United States and Canada. Additionally, the Company awards shares of common restricted stock to its outside directors as part of their compensation for serving on the Board.

Prior to the Spin-Off, certain Company employees participated in Kellanova's restricted stock unit and performance incentive plan. In connection with the Spin-Off, the Company's Board of Directors approved the 2023 Long-Term Incentive Plan (“2023 Plan”). The 2023 Plan provides for a grant consisting of incentive performance units, restricted stock or restricted stock units, and stock appreciation rights.

Under the Company’s 2023 Plan, 10.1 million shares have been authorized to be granted to employees and officers. As of December 28, 2024, there were 6.7 million remaining authorized, but unissued shares under the 2023 Plan.

Also, in connection with the Spin-Off, the Company's Board of Directors approved the WK Kellogg Co 2023 Employee Stock Purchase Plan (“ESPP”). The plan is a tax-qualified employee stock purchase plan made available to substantially all U.S. employees, which allows participants to acquire WK Kellogg Co stock at a discounted price. The purpose of the plan is to encourage employees at all levels to purchase stock and become share owners.

Under the terms of the Employee Matters Agreement between the Company and Kellanova, in connection with the Spin-Off, performance stock unit awards granted to Company employees under the Kellanova's Plan were converted to performance stock units under the Company's 2023 Plan. Adjustments to the underlying shares and terms of performance units were made to preserve the intrinsic value of the awards immediately before the Spin-Off. The adjustment of the underlying shares and exercise prices, as applicable, was determined using a conversion ratio of 4.44 based on the relative values of the Kellanova's pre-Spin-Off stock price and the Company's post-Spin-Off stock price. The outstanding awards continue to vest over their original vesting periods and otherwise remain subject to the same terms and conditions that applied prior to the Spin-Off.

In addition, Company employees who have been granted performance share unit awards and restricted stock unit awards prior to 2023 under the previous Kellanova Long Term Incentive Plan, will receive these awards in the form of Kellanova stock under existing terms and conditions of vesting and settlement. The associated compensation expense of these awards will be recognized by the Company in accordance with the Employee Matters Agreement.

For the periods prior to the Spin-Off, stock compensation expense related to employees have been allocated to the Company and recorded in cost of goods sold ("COGS") and selling general and administrative ("SGA") expense in the Consolidated Statement of Income. The non-cash stock compensation expense allocated to the Consolidated Financial Statements prior to the Spin-Off was related to the Company's dedicated employees that were specifically identified based on awards received under Kellanova’s plans. Stock compensation expense for corporate or shared employees was allocated to WK Kellogg Co primarily based on gross sales value.


(millions)	2024		2023		2022
Pre-tax compensation expense - direct	$	21	$	10	$	3
Pre-tax compensation expense - allocated	$	—	$	11	$	17
Pre-tax compensation expense - direct and allocated	$	21	$	21	$	20
Related income tax benefit	$	5	$	5	$	5

As of December 28, 2024, total stock-based compensation cost related to non-vested awards not yet recognized was $27 million and the weighted-average period over which this amount is expected to be recognized was 2 years.

In connection with the Spin-Off, the Company converted previously granted performance stock units to restricted stock units which entitle these employees to receive a specified number of shares of the Company's common stock upon vesting, as well as dividend equivalent shares. The number of shares at conversion was 100% of the target amount. The associated dividend equivalents accrue and vest in accordance with the underlying award. Modification charges related to the conversion of awards were immaterial.

In the first quarter of 2024, the Company granted performance stock units to eligible employees, which entitle these employees to receive a specified number of shares of the Company's common stock upon vesting, as well as, dividend equivalent shares. The number of share earned could range between 0% and 200% of the target amount depending upon performance achieved over the three year performance period. The performance conditions of the award include net sales growth and cash flow related targets. Dividend equivalent shares accrue and vest in accordance with the underlying award. The 2024 target performance share unit currently corresponds with approximate 637,000 shares, with a grant-date fair value of $15 per share.

Based on the market price of the Company's common stock at year-end 2024, the maximum future values that could be awarded on the vesting date was $22 million for the 2024 award.

Restricted stock units typically have a three-year cliff vesting earning dividend equivalent units for awards granted beginning in 2023. Dividend equivalents accrue and vest in accordance with the underlying award. Management estimates the fair value of restricted stock grants based on the market price of the underlying stock on the date of grant.


Employee restricted stock units	Shares (thousands)	Weighted-average grant-date fair value
Non-vested, beginning of year	1,997	$	13
Granted	1,419	15
Vested	(86)	14
Forfeited	(69)	15
Non-vested, end of year	3,261	$	14

Additionally, restricted stock unit activity for 2023, including the converted performance stock units, is presented in the following table:



Employee restricted stock units	2023
Shares (in thousands):
Non-vested, beginning of year	—
Granted	2,007
Vested	—
Forfeited	(10)
Non-vested, end of year	1,997
Weighted-average exercise price:
Non-vested, beginning of year	$	—
Granted	13
Vested	—
Forfeited	11
Non-vested, end of year	$	13