Enpro Inc.NPO
Enpro Inc. Stock Compensation Disclosure
| 17. | Equity Compensation Plans | ||||
We have equity compensation plans (the “Plans”) that provide for the delivery of shares pursuant to various market and performance-based incentive awards. As of December 31, 2025, there are 1.5 million shares available for future awards. Such amount assumes issuance at the maximum performance level for outstanding performance share awards. Our policy is to issue new shares to satisfy share delivery obligations for awards made under the Plans.
The Plans permit awards of restricted share units to be granted to executives and other key employees. Generally, share units awarded vest in equal annual increments over three years. Compensation expense related to the restricted share units is based upon the market price of the underlying common stock as of the date of the grant and is amortized over the applicable vesting period using the straight-line method. As of December 31, 2025, there was $5.5 million of unrecognized compensation cost related to restricted share units expected to be recognized over a weighted-average remaining amortization period of 1.8 years.
Under the terms of the Plans, performance share awards were granted to executives and other key employees during 2025, 2024 and 2023. Each grant will vest to the extent Enpro achieves specific performance objectives at the end of each three-year performance period. Additional amounts under these awards are paid out if objectives are exceeded, but some or all the awards may be forfeited if objectives are not met.
The amount earned at the end of a performance period with respect to performance share awards granted in 2025, 2024 and 2023, if any, are to be paid in shares of our common stock, with the amount to be delivered being reduced by the number of shares equal in value to applicable withholding taxes if the award recipient so chooses. The performance share awards provide for dividend-equivalent rights for the payment of cash equal to the amount of dividends that would be payable on the shares earned under the award as if such shares were held throughout the performance period, with the cash payment being made only following the vesting of the performance share award. Performance share awards are forfeited if a grantee terminates employment during the three-year performance period, except in the case of retirement.
Compensation expense related to the performance shares is computed using the fair value of the awards at the date of grant. Potential shares to be issued for performance share awards granted in 2025, 2024 and 2023 are subject to a market condition based on the performance of our stock, measured based upon a calculation of total shareholder return, compared to a group of peer companies. The fair value of these awards was determined using a Monte Carlo simulation methodology. Compensation expense for these awards based upon this grant date fair value is amortized using the straight-line method over the applicable performance period.
The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each award. We granted performance share awards, payable in shares of our common stock, to eligible participants on February 13, 2025, February 15, 2024 and February 16, 2023. We used the following assumptions in determining the fair value of these awards:
| Expected stock price volatility | Risk free interest rate | |||||||||||||
| Shares granted February 13, 2025 | ||||||||||||||
| Enpro Inc. | 33.85 | % | 4.26 | % | ||||||||||
| S&P 600 Capital Goods Index | 38.91 | % | 4.26 | % | ||||||||||
| Shares granted February 15, 2024 | ||||||||||||||
| Enpro Inc. | 32.89 | % | 4.34 | % | ||||||||||
| S&P 600 Capital Goods Index | 39.67 | % | 4.34 | % | ||||||||||
| Shares granted February 16, 2023 | ||||||||||||||
| EnPro Industries, Inc. | 36.78 | % | 4.34 | % | ||||||||||
| S&P 600 Capital Goods Index | 44.65 | % | 4.34 | % | ||||||||||
The expected volatility assumption for us and each member of the peer group is based on each entity’s historical stock price volatility over a period equal to the length from the valuation date to the end of the performance cycle. The annual expected dividend yield is based on annual expected dividend payments and the stock price on the date of grant. The risk free rate equals the yield, as of the valuation date, on zero-coupon U.S. Treasury STRIPS that have a remaining term equal to the length of the remaining performance cycle.
During the first quarter of calendar years 2021 and 2022, the Company granted performance shares awards to certain key employees which are payable in cash, based on the value of the shares earned under the awards, after a three-year vesting period. The awards granted in 2021 and 2022 were settled in the first quarter of 2024 and 2025, respectively. Actual payments were made to participating employees based on an initial target amount, which is adjusted based on the relative three-year performance of Enpro’s share price versus a set of peer companies. Expense recognized for calendar years 2024 and 2023 related to the cash-settled awards was $2.5 million and $9.1 million respectively.
As of December 31, 2025 there was $6.0 million of unrecognized compensation cost related to nonvested performance share awards. These costs are expected to be recognized over a weighted-average vesting period of 1.7 years.
A summary of award activity under the Plans is as follows:
| Restricted Share Units | Performance Shares - Equity | ||||||||||||||||||||||
| Shares | Weighted- Average Grant Date Fair Value | Shares | Weighted- Average Grant Date Fair Value | ||||||||||||||||||||
| Nonvested at December 31, 2024 | 99,018 | 138.75 | 101,782 | 187.91 | |||||||||||||||||||
| Granted | 41,250 | 189.13 | 45,676 | 264.11 | |||||||||||||||||||
| Vested | (42,158) | 127.63 | (40,580) | 148.97 | |||||||||||||||||||
| Forfeited | (3,411) | 161.00 | (2,510) | 200.44 | |||||||||||||||||||
| Achievement level adjustment | — | — | (15,174) | 148.97 | |||||||||||||||||||
| Shares settled for cash | (3,494) | 127.08 | — | — | |||||||||||||||||||
| Nonvested at December 31, 2025 | 91,205 | $ | 165.22 | 89,194 | $ | 248.90 | |||||||||||||||||
The maximum potential number of shares to be issued at December 31, 2025 is represented by the restricted share units nonvested balance at December 31, 2025. The number of nonvested performance share awards shown in the table above represents the maximum potential shares to be issued. We account for forfeitures when they occur as opposed to estimating the number of awards that are expected to vest as of the grant date.
Non-qualified and incentive stock options were granted in 2025, 2024 and 2023. No stock option has a term exceeding 10 years from the date of grant. All stock options were granted at not less than 100% of fair market value (as defined) on the date of grant. As of December 31, 2025, there was $3.1 million of unrecognized compensation cost related to stock options.
The following table provides certain information with respect to stock options as of December 31, 2025:
| Range of Exercise Price | Stock Options Outstanding | Stock Options Exercisable | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | |||||||||||||||||||
Under $80.00 | 13,882 | 13,882 | $ | 53.78 | 4.16 | ||||||||||||||||||
Over $80.00 and under $100.00 | 36,934 | 36,934 | $ | 80.98 | 5.20 | ||||||||||||||||||
Over $100.00 and under $120.00 | 93,921 | 78,432 | $ | 108.36 | 6.58 | ||||||||||||||||||
Over $120.00 and under $140.00 | 2,908 | 1,936 | $ | 120.79 | 7.83 | ||||||||||||||||||
Over $140.00 | 69,092 | 9,670 | $ | 176.58 | 8.62 | ||||||||||||||||||
| Total | 216,737 | 140,854 | $ | 122.12 | 6.86 | ||||||||||||||||||
We determine the fair value of stock options using the Black-Scholes option pricing formula. Key inputs into this formula include expected term, expected volatility, expected dividend yield, and the risk-free interest rate. We use the closing stock price on the grant date for determining the fair value. This fair value is amortized on a straight line basis over the vesting period. All options issued vest in equal annual increments over three years.
The expected term represents the period that our stock options are expected to be outstanding, and is determined based on historical experience of similar awards, given the contractual terms of the awards, vesting schedules, and expectations of future employee behavior. The fair value of stock options reflects a volatility factor calculated using historical market data for Enpro's common stock. The dividend assumption is based on our current expectations for our dividend policy. We base the risk-free
interest rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining life equal to the option's expected life.
The following assumptions were used to estimate the indicated fair value of the 2025 option awards:
| Grant Date | ||||||||
| February 25, 2025 | ||||||||
| Fair-value at grant date (per share) | $ | 85.99 | ||||||
| Assumptions: | ||||||||
| Average expected term | 6 years | |||||||
| Expected volatility | 40.49 | % | ||||||
| Risk-free interest rate | 4.17 | % | ||||||
| Expected dividend yield | 0.62 | % | ||||||
The following assumptions were used to estimate the indicated fair value of the 2024 option awards:
| Grant Date | |||||||||||
| February 15, 2024 | February 27, 2024 | ||||||||||
| Fair-value at grant date (per share) | $ | 66.29 | $ | 66.84 | |||||||
| Assumptions: | |||||||||||
| Average expected term | 6 years | 6 years | |||||||||
| Expected volatility | 40.58 | % | 40.61 | % | |||||||
| Risk-free interest rate | 4.24 | % | 4.33 | % | |||||||
| Expected dividend yield | 0.77 | % | 0.77 | % | |||||||
The following assumptions were used to estimate the indicated fair value of the 2023 option awards:
| Grant Date | |||||||||||||||||
| February 16, 2023 | March 2, 2023 | October 30, 2023 | |||||||||||||||
| Fair-value at grant date (per share) | $ | 47.27 | $ | 45.13 | $ | 48.88 | |||||||||||
| Assumptions: | |||||||||||||||||
| Average expected term | 6 years | 6 years | 6 years | ||||||||||||||
| Expected volatility | 39.59 | % | 39.75 | % | 40.38 | % | |||||||||||
| Risk-free interest rate | 4.02 | % | 4.22 | % | 4.84 | % | |||||||||||
| Expected dividend yield | 0.99 | % | 1.05 | % | 1.01 | % | |||||||||||
A summary of option activity under the Plans as of December 31, 2025, and changes during the year then ended, is presented below:
| Stock Options Outstanding | Weighted Average Exercise Price | ||||||||||
| Balance at December 31, 2024 | 211,868 | $ | 105.17 | ||||||||
| Granted | 32,311 | 199.78 | |||||||||
| Exercised | (27,442) | 82.77 | |||||||||
| Forfeited | — | — | |||||||||
| Balance at December 31, 2025 | 216,737 | $ | 122.12 | ||||||||
The year-end intrinsic value related to stock options is presented below:
| December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Options outstanding | $ | 19.9 | $ | 14.3 | $ | 14.7 | |||||||||||
| Options exercisable | $ | 16.2 | $ | 10.5 | $ | 8.6 | |||||||||||
We recognized the following equity-based employee compensation expenses and benefits related to our options and RSUs:
| Years Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Compensation expense | $ | 8.9 | $ | 9.1 | $ | 8.8 | |||||||||||
| Related income tax benefit | $ | 2.2 | $ | 2.5 | $ | 2.4 | |||||||||||
Equity-based employee compensation expenses related to our performance shares awards granted in 2025, 2024 and 2023 were $4.5 million for 2025, $3.1 million for 2024 and $0.6 million for 2023. Related income tax benefits were $1.1 million, $0.8 million and $0.2 million, respectively.
Each non-employee director received an annual grant of common stock (or, at the directors' election, phantom shares) equal in value to $125,000 in the years ended December 31, 2025 and 2024, and $110,000 in the year ended December 31, 2023. With respect to certain phantom shares awarded in prior years, we will pay each non-employee director in cash the fair market value of the director's phantom shares upon termination of service as a member of the board of directors. The remaining phantom shares granted will be paid out in the form of one share of our common stock for each phantom share, with the value of any fractional phantom shares paid in cash. Expense recognized in the years ended December 31, 2025, 2024 and 2023 related to these share and phantom share grants was $1.3 million, $1.1 million and $1.2 million, respectively. No cash payments were used to settle phantom shares in 2025, 2024 or 2023.
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.