STANDARD MOTOR PRODUCTS, INC.SMP
STANDARD MOTOR PRODUCTS, INC. Stock Compensation Disclosure
Stock-Based Compensation Plans
Our stock-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. In addition, members of our Board of Directors participate in our stock-based compensation program in connection with their service on our board.
In May 2025 our Shareholders approved the Standard Motor Products, Inc. 2025 Omnibus Incentive Plan (the “Plan”) which supersedes the 2016 Omnibus Incentive Plan, as amended (the “2016 Plan”). The Plan will terminate in May 2035, unless terminated sooner as provided for within the Plan. The Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards. The maximum number of shares that may be issued under the Plan is 1,050,000, subject to adjustment as provided under the Plan. At December 31, 2025, there were 773,511 shares of common stock available for future grants.
Awards previously granted under the 2006 and 2016 Omnibus Incentive Plans remain outstanding, while shares not yet granted under these plans are not available for future issuance.
We account for our stock-based compensation plans using grant-date fair value, net of estimated forfeitures, to measure the cost of employee services received in exchange for an award of equity instruments. The grant-date fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in our consolidated statements of operations. The service period is the period of time that the grantee must provide services before the award vests.
The service period is generally three years for standard restricted shares and performance-based restricted shares. Standard restricted shares granted in 2025 generally vest in equal amounts annually over three years. Standard restricted shares granted prior to 2025 and performance-based restricted shares generally cliff vest after three years. The service period for long-term retention restricted shares varies based on the age of the executive as the awards vest ratably at 25% when an executive reaches the ages of 60 and 63, with the remainder vesting when an executive reaches the age of 65. Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period up to the date the employee becomes eligible to retire and is no longer required to provide service to earn the award. Restricted shares granted to directors cliff vest after one year.
The number of performance-based shares issued to eligible employees upon vesting at the end of a -year measuring period is based upon the achievement of performance targets. Each period we evaluate the probability of achieving the applicable targets, and adjust our expense accordingly.
Before a restricted share becomes fully vested or a performance share is issued, the awardees cannot transfer, pledge, hypothecate or encumber such shares. Prior to the time a restricted share is fully vested, the awardees have all other rights of a stockholder, including the right to vote, but do not receive dividends. Prior to the time a performance share is issued, the awardees have no rights as a stockholder. All shares and rights are subject to forfeiture if certain employment conditions are not met.
The fair value of awards is measured at the stock market price on the date of grant, reduced by the present value of dividends expected to be paid on the shares during the requisite service period discounted at a risk-free interest rate based on U.S. Treasury rates. A further discount for the lack of marketability reduces the fair value of grants issued to certain key executives and directors subject to a or two year post vesting holding period.
The following table shows stock-based compensation expense, which is primarily recorded in selling, general and administrative expenses in the consolidated statements of operations (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock-based compensation expense | $ | 7.5 | $ | 5.8 | $ | 6.2 | |||||||||||
| Income tax benefits related to stock-based compensation | 2.1 | 1.5 | 1.4 | ||||||||||||||
| Stock-based compensation expense, net of tax | $ | 5.4 | $ | 4.3 | $ | 4.8 | |||||||||||
As of December 31, 2025, there was $16.1 million of unrecognized stock-based compensation expense, net of estimated forfeitures that is expected to be recognized over a weighted-average period of 3.4 years for employees and 0.3 years for directors.
Our restricted and performance-based share activity was as follows for the years ended December 31, 2025 and 2024:
Shares | Weighted Average Grant Date Fair Value per Share | Aggregate Intrinsic Value (in thousands) | |||||||||||||||
| Balance at December 31, 2024 | 929,024 | $ | 26.82 | ||||||||||||||
| Granted | 277,018 | 32.44 | |||||||||||||||
| Vested | (200,480) | 27.75 | |||||||||||||||
| Performance Shares Target Adjustment | (27,087) | 28.19 | |||||||||||||||
| Forfeited | (13,303) | 26.90 | |||||||||||||||
| Balance at December 31, 2025 | 965,172 | $ | 28.28 | $ | 35,567 | ||||||||||||
The weighted-average grant date fair value of restricted shares granted during the years ended December 31, 2025, 2024 and 2023 was $9.0 million, $6.7 million, and $6.2 million, respectively. The fair value of shares vested during the years ended December 31, 2025, 2024 and 2023 was $7.3 million, $6.1 million and $8.9 million, respectively.
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.