TIMKEN COTKR
TIMKEN CO Stock Compensation Disclosure
Note 15 - Stock Compensation
Under its long-term incentive plan, the Company's common shares have been made available for grant, at the discretion of the Compensation Committee of the Board of Directors or its designees, to officers, directors and other key employees. Grants can take the form of performance- or time-based restricted stock units, deferred shares and stock options. A summary of the awards granted in 2025 is presented below:
| Expected to be Settled in Equity | Expected to be Settled in Cash | Total Awards Granted | |||||||||
| Performance-based restricted stock units | 281,465 | 7,170 | 288,635 | ||||||||
| Time-based restricted stock units | 273,280 | 4,745 | 278,025 | ||||||||
| Deferred shares | 137,100 | — | 137,100 | ||||||||
Performance-based restricted stock units are calculated and awarded based on the achievement of specified performance objectives and cliff vest three years from the date of grant. Time-based restricted stock units generally vest in 25% increments annually beginning on the first anniversary of the grant. Deferred shares generally cliff vest in a range of to five years from the date of grant. For time-based restricted stock units that are expected to settle in cash, the Company had $1.2 million and $2.1 million accrued in salaries, wages and benefits as of December 31, 2025 and 2024, respectively, on the Consolidated Balance Sheets.
A summary of stock award activity, including performance-based restricted stock units, time-based restricted stock units and deferred shares that will settle in common shares for the year ended December 31, 2025 is as follows:
| Number of Shares | Weighted-average Grant Date Fair Value | |||||||
| Outstanding - beginning of year | 982,010 | $ | 78.43 | |||||
| Granted - new awards | 691,845 | 77.34 | ||||||
Adjusted for performance results achieved (1) | 66,192 | 67.20 | ||||||
| Vested | (389,752) | 71.49 | ||||||
| Canceled or expired | (298,295) | 81.00 | ||||||
| Outstanding - end of year | 1,052,000 | $ | 78.84 | |||||
(1) Adjustments for the number of shares vested under the 2022 performance-based restricted stock unit awards at the end of the three-year period ended December 31, 2024 being higher than the target number of shares. | ||||||||
The Company recognized compensation expense of $28.3 million, $25.9 million and $30.5 million for the years ended December 31, 2025, 2024 and 2023, respectively, relating to performance-based restricted stock units, time-based restricted stock units, deferred shares and restricted shares. The Company granted new awards totaling 691,845 in 2025, 435,125 in 2024 and 342,235 in 2023. The weighted-average grant date fair value of these awards was $77.34 in 2025, $81.23 in 2024 and $84.31 in 2023. The Company distributed shares totaling 389,752 in 2025, 366,427 in 2024 and 376,261 in 2023 due to the vesting of stock awards. The grant date fair value of these vested shares was $27.9 million, $26.7 million and $20.8 million, respectively.
Note 15 - Stock Compensation (continued)
As of December 31, 2025, the Company had unrecognized compensation expense of $28.9 million related to unvested stock awards, which is expected to be recognized over a total weighted-average period of two years.
In addition to performance-based restricted stock units, time-based restricted stock units and deferred shares, the Company has granted stock option awards to officers and key employees. Stock options typically have a ten-year term and generally vest in 25% increments beginning annually on the first anniversary date of grant.
Beginning in 2020, the Company discontinued the use of nonqualified stock options. As such, there were no stock option awards granted in 2025, 2024 or 2023.
A summary of stock option award activity for the year ended December 31, 2025 is presented below:
| Number of Shares | Weighted-average Exercise Price | Weighted-average Remaining Contractual Term | Aggregate Intrinsic Value (millions) | |||||||||||
| Outstanding - beginning of year | 257,729 | $ | 42.53 | |||||||||||
| Exercised | (49,570) | 38.62 | ||||||||||||
| Outstanding - end of year | 208,159 | $ | 43.46 | 3 years | $ | 8.5 | ||||||||
As of December 31, 2025, there were 208,159 stock options outstanding. All of these options are fully vested and are exercisable at December 31, 2025.
The total intrinsic value of stock option awards exercised during the years ended December 31, 2025, 2024 and 2023 was $2.0 million, $5.8 million and $22.2 million, respectively. Net cash proceeds from the exercise of stock option awards were $1.9 million, $5.6 million and $21.8 million, respectively.
There were 3.4 million shares available for future grants for all plans at December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 15, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 15, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 24, 2016 | |
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.