WATERS CORP /DE/ Stock Compensation Disclosure

5.8ten yearsfive-year

150.80.8three months1The purchase price for each share of stock is the lesser of 90% of the market price on the first day of the plan period or 100% of the market price on the last day of the plan period.1

The Company accounts for stock-based compensation costs in accordance with the accounting standards for stock-based compensation, which require that all share-based payments to employees be recognized in the

statements of operations, based on their grant date fair values. The Company recognizes the expense using the straight-line attribution method. The stock-based compensation expense recognized in the consolidated statements of operations is based on awards that ultimately are expected to vest; therefore, the amount of expense has been reduced for estimated forfeitures. Forfeitures are estimated based on historical experience. If actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations could be materially impacted. In addition, if the Company employs different assumptions in the application of these standards, the compensation expense that the Company records in the future periods may differ significantly from what the Company has recorded in the current period.

The consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023 include the following stock-based compensation expense related to stock option awards, restricted stock awards, restricted stock unit awards, performance stock unit awards and the employee stock purchase plan (in thousands):

 

		2025				2024				2023
Cost of sales		$	3,539			$	2,587			$	2,014
Selling and administrative expenses			42,742				36,160				31,012
Research and development expenses			7,846				5,962				3,842
Total stock-based compensation		$	54,127			$	44,709			$	36,868

In determining the fair value of the stock options, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected stock option lives. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The Company uses implied volatility on its publicly traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on historical experience for the population of stock option exercises. The risk-free interest rate is the yield currently available on U.S. Treasury issues with a remaining term approximating the expected term used as the input to the Black-Scholes model. The relevant data used to determine the value of the stock options granted during the twelve months ended December 31, 2025, 2024 and 2023 are as follows:

 

 

The following table details the options outstanding at December 31, 2025 by range of exercise prices (in thousands, except per share data):

 

During 2025, 2024 and 2023, the total intrinsic value of the stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was $9 million, $14 million and $11 million, respectively. The total cash received from the exercise of these stock options was $10 million, $21 million and $18 million for the years ended December 31, 2025, 2024 and 2023, respectively.

271.74251.63223.375.235

At December 31, 2025, the Company had 0.6 million stock options that are vested and expected to vest. The intrinsic value, weighted-average exercise price and remaining contractual life of the vested and expected to vest stock options were $47 million, $302.88 and 6.3 years, respectively, at December 31, 2025.

The amount of compensation costs recognized for the years ended December 31, 2025, 2024 and 2023 on the stock options expected to vest were $13 million, $11 million and $10 million, respectively. As of December 31, 2025, there were $24 million of total unrecognized compensation costs related to unvested stock option awards that are expected to vest. These costs are expected to be recognized over a weighted-average period of 3 years.

During the each of the years ended December 31, 2025, 2024 and 2023, the Company granted three thousand shares of restricted stock. The weighted-average fair value per share on the grant date of the restricted stock granted in 2025, 2024 and 2023 was $368.26, $329.00 and $341.04, respectively. The Company has recorded1

three

The following table summarizes the unvested restricted stock unit award activity for the twelve months ended December 31, 2025 (in thousands, except per share data):

 

Restricted stock units are generally granted annually in February and vest in equal annual installments over a five-year period. The amount of compensation costs recognized for the years ended December 31, 2025, 2024 and 2023 on the restricted stock units expected to vest were $27 million, $22 million and $19 million, respectively. As of December 31, 2025, there were $66 million of total unrecognized compensation costs related to the restricted stock unit awards that are expected to vest. These costs are expected to be recognized over a weighted-average period of 3.3 years.

The Company’s performance stock units are equity compensation awards with a market vesting condition based on the Company’s Total Shareholder Return (“TSR”) relative to the TSR of the components of the S&P Health Care Index. TSR is the change in value of a stock price over time, including the reinvestment of dividends. The vesting schedule ranges from 0% to 200% of the target shares awarded. Beginning with the grants made in 2020, the vesting conditions for performance stock units now include a performance condition based on future sales

 determining the fair value of the performance stock units, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected terms. The fair value of each performance stock unit grant was estimated on the date of grant using the Monte Carlo simulation model. The Company uses implied volatility on its publicly traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on the performance period of the underlying performance stock units. The risk-free interest rate is the yield currently available on U.S. Treasury issues with a remaining term approximating the expected term used as the input to the Monte Carlo simulation model. The correlation coefficient is used to model the way in which each company in the S&P Health Care 

 

The following table summarizes the unvested performance stock unit award activity for the twelve months ended December 31, 2025 ( thousands, except per share data):

 

The amount of compensation costs recognized for the years ended December 31, 2025, 2024 and 2023 on the performance stock units expected to vest were $13 million, $9 million and $5 million, respectively. As of December 31, 2025, there were $20 million of total unrecognized compensation costs related to the performance stock unit awards that are expected to vest. These costs are expected to be recognized over a weighted-average period of 1.9 years.