Fortrea Holdings Inc.FTRE
Fortrea Holdings Inc. Stock Compensation Disclosure
STOCK COMPENSATION PLANS
Stock Incentive Plans
Prior to the Separation, certain Company employees were covered by the Former Parent-sponsored stock compensation arrangements. The stock compensation expense for the periods prior to the Separation has been derived from the equity awards granted by Labcorp to the Company’s employees who are specifically identified in the plans, as well as an allocation of expense related to corporate employees of Labcorp. The Former Parent-sponsored stock compensation arrangements are approved under the Laboratory Corporation of America Holdings 2016 Omnibus Incentive Plan (the “Labcorp Plan”).
In June of 2023, Fortrea’s pre-Spin Board of Directors approved Fortrea’s Omnibus Incentive Plan and Employee Stock Purchase Plan (the “Plans”) and the post-Spin Board of Directors of Fortrea ratified the Plans by a unanimous written consent dated July 3, 2023. Under the Plans, the Company may grant incentive stock options, restricted stock units, and performance shares, as well as other forms of stock-based compensation to the Company’s employees, officers, and non-employee directors. During 2025, Fortrea’s Board of Directors approved the 2025 Inducement Award Plan (the “Inducement Plan”). The Inducement Plan provides for, among other things, the grant of awards of options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards to eligible grantees as a material inducement to such grantees commencing employment with Fortrea or its affiliates.
On July 18, 2023, all Labcorp equity incentive awards held by Fortrea employees that were outstanding on the distribution date were converted to 2.5 shares of Fortrea restricted stock units and 0.1 shares of Fortrea performance shares. Additionally, during the remainder of 2023 and in 2024, the Company granted awards under the Plans, as indicated below.
As of December 31, 2025, there are 17.5 shares authorized for issuance and 7.9 shares available for grant under Fortrea’s Omnibus Incentive Plan, 1.8 shares authorized for issuance and available for grant under the Employee Stock Purchase Plan, and 5.0 shares authorized for issuance and 2.2 shares available for grant under the Inducement Plan.
The Company measures stock compensation cost for all equity awards at fair value on the date of grant and recognizes compensation expense over the service period for awards expected to vest. The fair value of restricted stock units (“RSUs”) is determined based on the number of shares granted and the quoted price of Fortrea’s common stock on the grant date. The grant date fair value of performance share awards is based on a Monte Carlo simulated fair value for the relative (as compared to the peer companies) total stockholder return component of the performance awards. Such value is recognized as an expense over the service period, net of estimated forfeitures and Fortrea’s determination of whether it is probable that the performance targets will be achieved. At the end of each reporting period, the Company reassesses the probability of achieving performance targets. The estimation of equity awards that will ultimately vest requires judgment and Fortrea considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Forfeitures are recognized as a reduction of compensation expense in earnings in the period in which they occur.
Stock Options
The following table summarizes grants of non-qualified options made by the Company to officers, key employees, or non-employee directors under all plans. Stock options are generally granted at an exercise price equal to or greater than the fair market price per share on the date of grant. Options vest ratably over a period of 3 years on the anniversaries of the grant date and have a contractual exercise period of 10 years subject to their earlier expiration or termination. No stock options were issued in 2025 or 2024.
| Number of Options | Weighted-Average Exercise Price per Option | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at December 31, 2024 | 0.8 | $ | 26.52 | ||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | — | — | |||||||||||||||||||||
| Cancelled | (0.8) | 26.52 | |||||||||||||||||||||
| Outstanding at December 31, 2025 | — | $ | — | — | $ | — | |||||||||||||||||
| Exercisable at December 31, 2025 | — | $ | — | — | $ | — | |||||||||||||||||
Restricted Stock Units and Performance Shares
The Company grants RSUs to officers, key employees, and non-employee directors. RSUs typically vest annually in equal one-third increments beginning on the first anniversary of the grant.
The Company grants performance shares to officers and key employees. Performance share awards are subject to a 3-year cliff vesting period in addition to certain revenue and adjusted EBITDA targets and a total stockholder return multiplier, the achievement of which may increase or decrease the number of shares which the grantee earns and therefore receives upon vesting. Unearned RSU and performance share compensation is amortized to expense, when probable, over the applicable vesting periods.
The following table shows a summary of RSU and performance share award activity for the year ended December 31, 2025:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||||||||||||||
| Restricted Stock Units | Performance Shares | Restricted Stock Units | Performance Shares | ||||||||||||||||||||
| Outstanding at December 31, 2024 | 3.2 | 0.1 | $ | 29.10 | $ | 41.55 | |||||||||||||||||
| Granted | 7.5 | 1.8 | 9.83 | 6.56 | |||||||||||||||||||
| Vested | (3.4) | — | 23.59 | — | |||||||||||||||||||
| Forfeited | (0.8) | — | 16.38 | — | |||||||||||||||||||
| Outstanding at December 31, 2025 | 6.5 | 1.9 | $ | 13.16 | $ | 9.20 | |||||||||||||||||
As of December 31, 2025, there was $55.5 of total unrecognized compensation cost related to non-vested restricted stock, restricted stock unit and performance share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted average period of 1.3 and will be included in direct costs and selling, general and administrative expenses.
All Stock Awards
Total stock-based compensation expense and the associated income tax benefits recognized by the Company in the consolidated and combined statements of operations was as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Direct costs | $ | 57.2 | $ | 43.8 | $ | 24.4 | |||||||||||
| Selling, general and administrative | 17.2 | 13.4 | 15.9 | ||||||||||||||
| Stock compensation expense | $ | 74.4 | $ | 57.2 | $ | 40.3 | |||||||||||
| Income tax benefits | $ | 11.0 | $ | 9.1 | $ | 7.1 | |||||||||||
Of the total stock-based compensation expense recognized by the Company for the year ended December 31, 2023, $37.8 related directly to Company employees and $2.5 related to allocations of Labcorp’s corporate and shared employee stock compensation expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 13, 2024 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.