At the annual meeting of stockholders of the Company held on May 4, 2023, the Company’s stockholders approved the Trex Company, Inc. 2023 Stock Incentive Plan (Plan). The Company’s board of directors unanimously approved the Plan on April 10, 2023, subject to stockholder approval. The Plan, which is administered by the compensation committee of the board of directors, provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and unrestricted stock, which are referred to collectively as “awards.” Awards may be granted under the Plan to officers, directors (including non-employee directors) and other employees of the Company or any subsidiary thereof, to any adviser, consultant, or other provider of services to the Company (and any employee thereof), and to any other individuals who are approved by the board of directors as eligible to participate in the Plan. Only employees of the Company or any subsidiary thereof are eligible to receive incentive stock options. Subject to certain adjustments as provided in the Plan, the total number of shares of common stock available for future grants under the Plan is 3,657,745 shares.

The following table summarizes the Company’s stock-based compensation grants for the six months ended June 30, 2025:


	Stock Awards Granted		Weighted- Average Grant Price Per Share
Time-based restricted stock units		70,320	$	66.54
Performance-based restricted stock units (a)		102,049	$	64.85
Stock appreciation rights		46,126	$	66.67

(a)

Includes 80,196 of target performance-based restricted stock unit awards granted during the six months ended June 30, 2025, and adjustments of 1,093, and 20,760 to grants due to the actual performance level achieved for restricted stock and restricted stock units awarded in 2024 and 2023, respectively.

The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing formula. For SARs issued in the six months ended June 30, 2025 and June 30, 2024, the data and assumptions shown in the following table were used:


	Six Months Ended June 30, 2025			Six Months Ended June 30, 2024
Weighted-average fair value of grants	$	33.06		$	44.83
Dividend yield		0	%		0	%
Average risk-free interest rate		4.3	%		4.3	%
Expected term (years)		5			5
Expected volatility		51.4	%		51.2	%

The Company recognizes stock-based compensation expense ratably over the period from the grant date to the earlier of: (1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock and performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures. For the employee stock purchase plan, compensation expense is recognized related to the discount on purchases. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Comprehensive Income. The following table summarizes the Company’s stock-based compensation expense (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Stock appreciation rights	$	330	$	408	$	624	$	680
Time-based restricted stock and restricted stock units		1,578		1,452		2,404		2,526
Performance-based restricted stock and restricted stock units		967		1,919		2,106		3,561
Employee stock purchase plan		59		60		113		225
Total stock-based compensation	$	2,934	$	3,839	$	5,247	$	6,992

Total unrecognized compensation cost related to unvested awards as of June 30, 2025 was $15.3 million. The cost of these unvested awards is being recognized over the requisite vesting period of each award.