<PAGE>
GOULDS PUMPS, INC.
FAIRPORT, NEW YORK 14450
March 31, 1995
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 1995
To the Stockholders of Goulds Pumps, Incorporated:
Please Take Notice that the Annual Meeting of the Stockholders of
Goulds Pumps, Incorporated will be held at the Holiday Inn, Seneca Falls, New
York (1/4 mile north of the intersection of NY 414 and US 20, midway between
Seneca Falls and Waterloo, New York) on Wednesday, May 3, 1995, at ten
o'clock A.M., E.D.T., for the following purposes:
1. To elect seven Directors.
2. To ratify the appointment of Deloitte & Touche as independent
certified public accountants for 1995.
3. To act on a stockholder proposal to authorize and request that the
Board of Directors reduce the number of authorized shares of Common
Stock ($1 par value) from 90 million to 25 million.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
All of the above items are more fully described in the attached Proxy
Statement. Only holders of stock of record at the close of business on March
7, 1995 will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Eugene B. Bradshaw
Secretary
The Board of Directors will appreciate your marking, signing and
returning promptly the accompanying proxy card, no matter how large or how
small your holdings may be.
<PAGE>
GOULDS PUMPS, INC.
FAIRPORT, NEW YORK 14450
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS, MAY 3, 1995
The accompanying form of proxy is solicited by the Board of Directors
for use at the Annual Meeting of Stockholders of Goulds Pumps, Incorporated,
300 WillowBrook Office Park, Fairport, New York 14450-4285 ("Corporation" or
"Company"), to be held on May 3, 1995. Solicitation of proxies by mail is
expected to commence on March 31, 1995. The shares represented by the proxies
received prior to the vote will be voted FOR the election of Directors as set
forth herein (unless authority to vote is withheld), FOR the ratification of
the appointment of Deloitte & Touche as auditors for the year 1995 and
AGAINST the Stockholder Proposal, unless specific instructions to the
contrary are given or an abstention from voting is indicated by the
stockholder. The enclosed form of proxy is revocable at any time prior to the
exercise thereof by delivery of written notice of revocation to the
Secretary.
The Company has one class of stock outstanding, its Common Stock, and
the holders of record at the close of business on March 7, 1995 are entitled
to vote at the meeting. On the record date, there were 21,217,092 shares of
Common Stock outstanding, and each share entitles the holder to one vote on
each matter to come before the meeting.
One-third of the outstanding shares will constitute a quorum at the
meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum at the meeting. Abstentions
are counted as present in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted as
present. Accordingly, abstentions will have the effect of a negative vote on
the Stockholder Proposal. Broker non-votes will have no effect on the outcome
of the votes on the Stockholder Proposal or on the election of Directors.
ELECTION OF DIRECTORS
Seven Directors, constituting the entire Board, are to be elected to
hold office until the next Annual Meeting of Stockholders and until their
successors are elected and qualified. The names of, and certain information
with respect to, the persons nominated by the Board of Directors for election
as Directors follow. Shares represented by proxies solicited by the Board of
Directors will be voted for the election of these nominees unless otherwise
indicated on the proxy card. The Board of Directors believes that all of the
nominees will be available, willing and able to serve as Directors, but if
for any reason any nominee becomes unavailable for election, discretionary
authority may be exercised to vote for substitutes proposed by the Board of
Directors. All of the nominees are presently serving as Directors of the
Corporation and were elected at the 1994 Annual Meeting.
<PAGE>2
DIRECTORS
WILLIAM W. GOESSEL
Mr. Goessel, 67 years of age, a Director since 1976, retired in 1993
from Harnischfeger Industries, Inc., Milwaukee, Wisconsin, a manufacturer of
mining equipment, material handling systems and paper making machines and a
designer and integrator of automated material handling systems, where he had
been Chairman since 1992, and Chairman and Chief Executive Officer since
1986. He is a member of the Company's Human Resources Committee and the
Committee on Directors. He is a Director of Measurex Corporation and Twin
Disc, Incorporated.
MELVIN HOWARD
Mr. Howard, 60 years of age, a Director since 1984, has been Chairman
of Sector Management, Inc., Westport, Connecticut, an investment firm, since
1993. He had retired in 1990 from Xerox Corporation, Stamford, Connecticut,
where he had been Vice Chairman of the Board from 1986 to 1990. He is a
member of the Company's Audit and Pension Committees.
BARBARA B. LUCAS
Ms. Lucas, 49 years of age, a Director since 1992, has been Vice
President-Public Affairs and Corporate Secretary of The Black & Decker
Corporation, Towson, Maryland, a global manufacturer of power tools and home
improvement products, since 1985. She is a member of the Company's Human
Resources Committee and the Committee on Directors.
THOMAS C. McDERMOTT
Mr. McDermott, 58 years of age, a Director since 1988, has been
President and Chief Executive Officer of the Company since 1994. He retired
in 1993 from Bausch & Lomb, Incorporated, Rochester, New York, a health care
and optics company, where he had been President and Chief Operating Officer
from 1986 to 1993. He is a member of the Company's Executive and Pension
Committees. He is a Director of A.T. Cross Company and Revere Copper
Products, Inc.
JAMES C. MILLER III
Mr. Miller, 52 years of age, a Director since 1990, is Counsellor to
Citizens for a Sound Economy, Washington, D.C., and from 1989 to 1993 had
served as Chairman of that organization's Board of Directors. Since 1988, he
has also been John M. Olin Distinguished Fellow at the Center for Study of
Public Choice at George Mason University, Fairfax, Virginia. He is Chairman
and Director of Economic Impact Analysts, Inc., and a Director of Ameribanc
Investors Group, Washington Mutual Investors, Inc. and The Union Corporation.
He is a member of the Company's Pension Committee and the Committee on
Directors.
<PAGE>3
PETER ODDLEIFSON
Mr. Oddleifson, 62 years of age, a Director since 1974, is a Partner in
the law firm of Harris Beach & Wilcox, Rochester, New York, which firm has
been and is currently engaged in performing various legal services for the
Corporation. He is a member of the Company's Executive and Audit Committees.
He is a Director of Rochester Midland Corp.
ARTHUR M. RICHARDSON
Mr. Richardson, 68 years of age, a Director since 1980, has been
President of Richardson Capital Corporation, Rochester, New York, an
investment enterprise, since 1985. He is a member of the Company's Executive,
Human Resources and Audit Committees. He is a Director of Raymond
Corporation, Rochester Gas and Electric Corporation and Transmation, Inc.
The Company's Directors and officers are required to file reports with
the Securities and Exchange Commission concerning ownership of Company stock.
Diana R. Kurty became subject to reporting upon her election as an officer
on December 15, 1994, however, the filing of her initial report was
inadvertently delayed beyond the ten-day period due to a clerical error.
Based on its review of such reports and related written representations, the
Company believes that all other filing requirements were met by its Directors
and officers.
ADDITIONAL INFORMATION RELATING TO THE BOARD OF DIRECTORS
Non-employee Directors are paid an annual retainer of $20,000 per year.
In addition, they are paid $1,000 per day for attendance at each board
meeting, $800 per day for attendance at each committee meeting provided the
committee meeting is held on other than a regular board meeting date and $400
per day for attendance at each committee meeting held on a regular board
meeting date. The Chairman of the Board is paid an additional retainer of
$60,000 per year and is provided with the use of a Company car. All committee
chairpersons are paid an additional retainer of $2,800 per year. Employee
Directors do not receive any additional remuneration for their services as
a Director.
Each non-employee Director of the Company receives, on the first stock
trading day following each annual Stockholder's Meeting, an option to
purchase one thousand five hundred (1,500) shares of the Company's Common
Stock at the closing sale price per share as reported on the NASDAQ on that
date.
Non-employee Directors are participants in the Retirement Plan for
Non-employee Directors (the "Plan") which became effective on June 21, 1994.
A Director who retires with a minimum of ten years of service is entitled to
receive a retirement benefit in an amount equal to his or her final annual
retainer, which is presently $20,000, for a term equal to the period of
service. Plan benefits vest as follows: 50% after five years of service with
an additional 10% for each year of service from six through ten.
The Board of Directors held nine (9) meetings during 1994, and all of
the Directors attended more than 75% of the meetings of the Board and
Committees on which they served.
<PAGE>4
AUDIT COMMITTEE AND COMMITTEE ON DIRECTORS
The Audit Committee of the Board of Directors recommends to the Board
of Directors the appointment of auditors, reviews the plan and results of the
audit performed by the auditors and the plan and scope of the Corporation's
internal auditing procedures, approves each professional service provided by
the auditors, considers the range of audit and non-audit fees, reviews the
adequacy of the Corporation's internal accounting controls and directs and
supervises investigations into the foregoing matters. The Audit Committee
held two (2) meetings during 1994.
The Board of Directors also has a Committee on Directors which
recommends nominees for election as Directors and considers the performance
of incumbent Directors in determining whether to nominate them to stand for
re-election. In addition, the Committee on Directors will consider nominees
recommended by stockholders and has established a procedure to consider such
nominees whereby stockholders shall submit written recommendations of
nominees for election to the Board of Directors to the Secretary of the
Corporation no later than the December 10th immediately preceding the Annual
Meeting of Stockholders at which the election is to be held, accompanied by
the written consent of the recommended person to serve if elected and his or
her complete biographical data, particularly with respect to business or
other experience bearing upon such person's qualifications. The Committee on
Directors held four (4) meetings during 1994.
<PAGE>5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth security ownership information, with
respect to beneficial owners of more than five percent of the Company's
Common Stock, by Directors, by the Executive Officers listed in the Summary
Compensation Table on page 14 and by all Directors and Executive Officers as
a group, each of whom has sole voting and investment powers over such shares.
<TABLE>
<CAPTION>
Percent of
Name No. of Shares Class
---- ------------- -----
<S> <C> <C>
FMR Corp. 2,753,970 (1) 13.0%
82 Devonshire Street
Boston Massachusetts
The State Teachers Retirement Board of Ohio 1,653,200 (2) 7.8%
275 Broad Street
Columbus, Ohio
SunTrust Banks, Inc. 1,232,600 (3) 5.8%
25 Park Place, N.E.
Atlanta, Georgia
Thompson, Siegel & Walmsley, Inc. 1,135,700 (4) 5.4%
5000 Monument Avenue
Richmond, Virginia
William W. Goessel 9,304 (5) *
Melvin Howard 9,381 (6) *
Barbara B. Lucas 5,432 (7) *
Thomas C. McDermott 10,381 (8) *
James C. Miller III 7,638 (9) *
Peter Oddleifson 11,228 (10) *
Arthur M. Richardson 9,866 (11) *
Frank J. Zonarich 63,401 (12) *
John M. Morphy 52,037 (13) *
John P. Murphy 4,666 (14) *
Mary Ann Lambertsen 10,057 (15) *
All Directors and Executive Officers (14 persons) 238,200 (16) 1.1%
-----
(1) Sole voting power with respect to 601,000 shares and sole dispositive
power with respect to 2,753,970 shares.
(2) Sole voting power and sole dispositive power with respect to 1,653,200
shares.
(3) Sole voting power with respect to 846,500 shares, sole dispositive power
with respect to 1,225,400 shares and shared dispositive power with
respect to 5,100 shares.
(4) Sole voting power with respect to 556,675 shares, shared voting power
with respect to 384,475 shares, sole dispositive power with respect to
1,129,500 shares and shared dispositive power with respect to 6,200
shares.
(5) Includes options to purchase 8,281 shares.
(6) Includes options to purchase 8,281 shares.
(7) Includes options to purchase 3,986 shares.
(8) Includes options to purchase 7,486 shares.
(9) Includes options to purchase 6,637 shares.
(10) Includes options to purchase 8,281 shares.
(11) Includes options to purchase 8,281 shares.
(12) Includes options to purchase 54,767 shares.
(13) Includes options to purchase 47,145 shares.
(14) Includes options to purchase 4,666 shares.
(15) Includes options to purchase 9,020 shares.
(16) Includes options to purchase 199,720 shares.
* Less then 1.0%.
</TABLE>
<PAGE>6
TRANSACTIONS WITH DIRECTORS AND OTHERS
The Corporation obtained legal services from the law firm of Harris
Beach & Wilcox, of which Mr. Oddleifson is a partner, during the calendar
year 1994.
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has recommended that the appointment of Deloitte
& Touche as auditors for the year 1995 be ratified by the stockholders.
Deloitte & Touche and their predecessors have served as auditors of the
Corporation since 1908. Representatives of Deloitte & Touche are expected to
be present at the Annual Meeting and will have an opportunity to make a
statement, if they so desire, and are expected to be available to respond to
appropriate questions.
The Board of Directors recommends a vote "FOR" the approval of auditors,
and proxies solicited will be so voted unless stockholders specify a contrary
vote or abstain.
STOCKHOLDER PROPOSAL
The Company has been informed by Roger F. Murray II, who states that he
owns, directly and indirectly, 53,978 shares of the Company's Common Stock,
that he will propose the following for action at the Annual Meeting:
"WHEREAS, the number of authorized shares was increased to 90,000,000
to accommodate a 'poison pill' which was effectively rescinded by the 1993
repurchase of the rights issued under the 1988 Stockholder Rights Plan;
WHEREAS, an authorization of 25,000,000 would provide an ample number
of shares for all stock option and incentive plans;
WHEREAS, stockholders, especially since they do not have preemptive
rights, are entitled to have reasonable control over the issuance of shares;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors be, and
hereby is, authorized and requested to take the steps necessary for an
amendment of the Company's Certificate of Incorporation to reduce the number
of the Company's authorized shares of Common Stock, $1.00 par value, from
90,000,000 to 25,000,000."
Dr. Murray has submitted the following statement in support of his
proposal:
"There is no existing reason for the present huge amount of authorized
shares. Whenever a material number of authorized shares has been required for
an acquisition or for a stock split, stockholders have always authorized
them in a timely manner. The Directors should support this proposal as
evidence of their good faith in rescinding the 'poison pill' and to affirm
their intention to treat stockholders as responsible owners and not as
adversaries."
The affirmative vote of a majority of the votes cast on the proposal
would be necessary to approve it.
<PAGE>7
The Board of Directors believes that the proposal is not in the best
interests of the Company and its shareholders and recommends that
shareholders vote AGAINST it.
The presently authorized number of Common Shares was approved by the
shareholders when they authorized an amendment to the Company's Certificate
of Incorporation at the 1989 Annual Meeting by an 80% vote increasing the
number from 30,000,000 to 90,000,000. The Proxy Statement for that meeting
stated that "Under the amendment, the additional Common Shares would be
available, in the discretion of the Board, for such purposes as acquisitions,
stock dividends, stock splits, financings, public or private sales, present
and future employee benefit plans, and any other appropriate corporate
purpose that the Board may determine is necessary or desirable in the best
interests of the Corporation and its shareholders." Those reasons remain true
today, and, as was also stated in the 1989 Proxy Statement, "the ability to
issue additional authorized Common Shares without additional shareholder
approval will afford the Corporation greater flexibility to take advantage
of favorable market, economic or other circumstances in taking future actions
such as those listed above."
The Stockholder Rights Plan was only one purpose, among those listed
above, for which the additional shares might be used, and it rescission is
not reason for reducing the authorized shares. The Company presently has
approximately 24,000,000 shares issued or reserved for issuance so that, if
the authorized number were reduced, as the proposal would urge, it would only
leave approximately 1,000,000 shares for the purposes described above. The
Board believes that that would be highly unusual and undesirable. The Board
in no way treats shareholders as adversaries and is mindful of its
responsibility to act in what it believes to be the best interests of the
Company and its shareholders. It believes that the loss of flexibility that
would result from such a reduction would not be in their best interests.
The Board of Directors recommends a vote "AGAINST" the proposal and
proxies solicited will be so voted unless stockholders specify a contrary
vote or abstain.
EXECUTIVE COMPENSATION
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Board") was
responsible for all of the Company's compensation-related decisions prior to
its dissolution on September 19, 1994. At the beginning of 1994 the members
of that Committee were William R. Fenoglio, William W. Goessel, Barbara B.
Lucas, Thomas C. McDermott and Arthur M. Richardson. They had no
"interlocking" relationships as defined by the Securities and Exchange
Commission ("SEC") and met four times between January 1 and September 19,
1994. Mr. McDermott resigned from the Compensation Committee on June 27,
1994, prior to becoming a Company employee. Mr. Fenoglio resigned from the
Board and the Committee on September 18, 1994.
Effective September 19, 1994, the Human Resources Committee (the
"Committee") of the Board, which had previously been composed of all of the
non-employee Directors, was reduced in size from nine members to three
members and thereafter became responsible for all compensation-related
<PAGE>8
decisions. The Human Resources Committee, composed of William W. Goessel,
Barbara B. Lucas, and Arthur M. Richardson, had no "interlocking"
relationships as defined by the SEC, and met twice between September 19 and
December 31, 1994.
The Committee approves the design of, assesses the effectiveness of and
administers the executive compensation program and certain benefit plans. The
Committee administers the 1988 Stock Incentive Plan, the 1994 Incentive Plan
to Increase Stockholder Value and the Executive Incentive Plan, and in this
capacity, it approves all stock option grants and cash bonus awards to
officers and other executives including executives named ("named executives")
in the tables found herein. The Committee also reviews and approves all
salary arrangements and other remuneration for executives, evaluates
executive performance and considers related matters.
THE OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Committee is committed to implementing an executive compensation
program which supports the Company's mission and facilitates the achievement
of the Company's business strategies.
It is the intent that:
(1) the executive compensation program should strengthen the
relationship between pay and performance by emphasizing variable,
at-risk compensation that is dependent upon the achievement of
specified Company and individual performance goals;
(2) some of the at-risk components of pay be equity-based to encourage
a close identification with the Company and align executives' interests
with those of stockholders; and
(3) the executive compensation program should enhance the Company's
ability to attract, retain and encourage the development of
exceptionally knowledgeable and experienced executives upon whom, in
large part, the successful operation and management of the Company
depends.
AN OVERVIEW OF GOULDS' EXECUTIVE COMPENSATION PLANS AND 1994 COMMITTEE
ACTIONS
The Committee annually evaluates the Company's executive compensation
plans in the context of comparator companies consisting of pump industry
competitors and a broader group of major durable goods manufacturers with a
median size approximately equal to Goulds Pumps, Inc. Total annual pay levels
(base salary plus annual cash bonuses) reflect Company financial performance,
business unit financial performance and individual executive performance.
Over time, and with above average financial and individual performance, the
Company targets its total cash executive compensation to approximate the
60th percentile of the total cash executive compensation of the comparator
companies
adjusted for size.
The number of companies in the comparator group used for compensation
purposes is larger than the number of companies which comprise the industry
peer group index in the Performance Graph included in this proxy statement
on page 13. However, over half of the companies in the industry peer group
index are also in the compensation comparator group. The Committee believes
that the Company's competitors for executive talent are not necessarily the
same companies that would be included in the industry peer group index
established for comparing stockholder returns.
<PAGE>9
The key elements of the Company's executive compensation program are
base salary, annual cash bonuses and long-term stock price appreciation.
These are addressed separately below. In determining each element of
compensation, the Committee considers all components of compensation,
including retirement plans, insurance and other benefits.
The Base Salary Plan is regularly reviewed by the Committee.
Executives' base salary range midpoints are targeted at the 55th percentile
of comparator companies and are designed to recognize varying levels of
responsibility, experience and breadth of knowledge required and internal
equity. The comparator companies are surveyed periodically to determine
specific compensation levels for similar executive positions. Such a review
was conducted in 1994 and base salary range midpoints were adjusted
accordingly.
The Committee reviewed executive salaries and increases were awarded
based on Company financial performance in general, individual executive
performance and the comparator companies' compensation levels. The salaries
remain within the defined salary ranges. In general the named executives'
base pay falls slightly below the targeted percentile.
The Executive Incentive Plan ("EIP"), which provides for annual cash
bonuses based on Company and business unit financial performance, promotes
the Company's pay-for-performance philosophy. The annual bonus opportunity
allows the Company to communicate specific goals that are of primary
importance during the coming year and to motivate executives to achieve these
goals.
The EIP cash bonus opportunity is a percentage of base salary that
increases with level of responsibility, thereby increasing the portion of
compensation at risk. Annual cash bonus opportunities at target are designed
to be slightly higher than the median with respect to competitive data from
the comparator companies.
For 1994, the Company and business unit financial performance used to
determine EIP payouts was based on contribution to earnings (60%), working
capital utilization (15% to 25%), and personal objectives (15% to 25%). The
Committee believes these performance measures are contributing determinants
of stock price over time. Including the named executives, there are
approximately 80 key managers who participate in the EIP. Receipt of cash
bonuses under the EIP may be deferred to a subsequent date or retirement.
Financial performance ranging from 85% to 120% of budgeted financial
performance will result in an EIP cash bonus of 50% to 150% of target cash
bonus opportunity. Target cash bonus opportunities range from 35% to 55% of
base salary. Participants have part of their award tied to Company financial
performance and part tied to business unit financial performance. Weighting
for business unit financial performance varies by executive at the
Committee's discretion with respect to the executive's relative
responsibility for the business unit. A minimum threshold of Company
financial performance must be achieved for any portion of the EIP payout to
occur. In general, performance in 1994 fell short of targeted goals and
accordingly, bonus payments were below targeted payment levels.
The 1988 Stock Incentive Plan, approved by the stockholders in 1988,
and the 1994 Incentive Plan to Increase Stockholder Value, approved by the
stockholders in 1994, are in keeping with the Company's commitment to
provide total compensation which favors at-risk components of pay and
directly links the interests of management with those of stockholders. These
are the Company's only long-term
<PAGE>10
incentive vehicles and are designed to provide competitive long-term
incentive compensation opportunities, to tie executive long-term financial
gain to increases in the Company's stock price and to increase Company stock
ownership among key managers.
Stock options are normally granted annually based on an assessment of
the comparator companies' competitive data, past grants made to executives,
and current Company stock holdings of the executives. The long-term
incentive program targets its awards at the median of similar awards at the
comparator companies. Stock options are granted at an option price not less
than the fair market value of the Common Stock on the date of grant and will
have value only if the stock price appreciates from the date the options are
granted. The stock option grants vest at 25% per year for four years to aid
in the retention of executives and key managers. The Option Grants in Last
Fiscal Year table on page 15 gives a summary of stock option shares granted
under the 1988 Stock Incentive Plan in fiscal 1994 to the named executives.
No awards were granted under the 1994 Incentive Plan to Increase Stockholder
Value.
COMPENSATION AND SEPARATION PAYMENTS FOR THE FORMER CHIEF EXECUTIVE OFFICER
Mr. Stephen V. Ardia terminated his employment on June 22,1994 and was
granted the severance benefits shown on the Summary Compensation Table on
page 14. The severance benefits, which include two years' base salary and
Company provided insurance and miscellaneous benefits, took into
consideration Mr. Ardia's level of responsibility and 24 years of service.
During the severance period, payments will be reduced by any compensation Mr.
Ardia may receive from another employer. Benefits payable after the severance
period include Mr. Ardia's earned retirement benefit as calculated under the
normal provisions of the Company's retirement plan and the Supplemental
Executive Pension Plan, a supplementary cash payment until the Social
Security age of 62 and an amount associated with the election of a joint and
survivor annuity. Stock options already held by Mr. Ardia will be treated
according to the provisions of those plans.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
In seeking a new CEO, the Board of Directors sought a person with a
proven record of strong leadership and success, who could build on the
Company's strengths and enhance its performance. They chose Thomas C.
McDermott who had served as President and Chief Operating Officer of Bausch
& Lamb Incorporated and also served on the Goulds Pumps, Inc. Board of
Directors for the preceding six years.
On June 28, 1994, the Board of Directors and Goulds Pumps, Inc. entered
into an agreement with Mr. McDermott to become the Chief Executive Officer
of the Company. Mr. McDermott's 1994 compensation was governed by a
memorandum of understanding, the terms of which are in keeping with the
Company's executive compensation philosophy as described above. The material
details of the memorandum of understanding are set forth on page 12 of this
proxy statement.
COMPANY RESPONSE TO POTENTIAL LIMITS TO DEDUCTIBILITY OF EXECUTIVE PAY
Since no employee in 1995 is expected to reach the annual $1 million
dollar limit for deductibility under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), the Committee has determined that it
is not in the Company's current interest to substantially revise compensation
<PAGE>11
programs in response to the Code. The Committee will continue to evaluate the
advisability of amending or changing its compensation programs in this
respect in future years.
SUMMARY
The Committee believes the executive compensation program, through the
Committee's administration of the component plans, continues to ensure the
Company's ability to attract, retain, and motivate the executive resources
required to enhance stockholder value. The Committee's competitive pay
philosophy facilitates the employment and retention of talented executives.
The emphasis on variable pay and the tie to both short- and long-term
financial results and stock performance, directly links compensation to
critical measures of Company performance. We believe these elements, in
combination, further the best interests of the Company's stockholders.
Respectfully submitted,
The Compensation Committee
Thomas C. McDermott (resigned from the Committee June 27, 1994),Chairman
William W. Goessel
Barbara B. Lucas
Arthur M. Richardson, Chairman beginning June 27, 1994
The Human Resources Committee
Arthur M. Richardson, Chairman
William W. Goessel
Barbara B. Lucas
Pension Plan Table(1)
<TABLE>
<CAPTION>
Years of Service
Final Average --------------------------------------------------------------------------------
Compensation(2) 5 10 15 20 25 30 35
--------------- - -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000 ....... $15,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 82,500 $ 90,000
$250,000 ....... $25,000 $ 50,000 $ 75,000 $100,000 $125,000 $137,500 $150,000
$350,000 ....... $35,000 $ 70,000 $105,000 $140,000 $175,000 $192,500 $210,000
$450,000 ....... $45,000 $ 90,000 $135,000 $180,000 $225,000 $247,500 $270,000
$550,000 ....... $55,000 $110,000 $165,000 $220,000 $275,000 $302,500 $330,000
(1) Estimated annual pension plan benefits shown are prior to adjustment for Social Security benefits.
(2) Final Average Compensation is the sum of salary and bonus from the Summary Compensation Table.
The Company maintains a Pension Plan and a Supplemental Executive Pension Plan in which all of the
Executive Officers listed in the Summary Compensation Table on page 14 are participants. Taken together, the
two plans provide participants with a monthly retirement benefit based on the participant's final average
compensation and years of service. The monthly benefit is reduced by the participant's primary Social Security
benefit amount. The chart above shows the estimated benefit (stated in annual amounts) payable (prior to
reduction for Social Security) beginning at age 62 for the years of credited service and final average
compensation amounts shown.
Years of Credited Service used in determining benefits for the named executives are as follows through
December 31, 1994: Mr. McDermott, 0.5 years; Mr. Ardia, 24.6 years; Mr. Zonarich, 24.8 years; Mr. Morphy,
9.7 years; Mr. Murphy, 1.5 years; Ms. Lambertsen, 3.1 years. Benefits are computed as straight-life annuity
amounts which may be paid in various forms.
</TABLE>
<PAGE>12
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has outstanding agreements with the named executives listed in
the Summary Compensation Table on page 14, which provide that the named
executives will not, in the event of the commencement of steps to effect a
Change-in-Control, voluntarily leave the employ of the Company until a third
person has terminated his or its efforts to effect a Change-in-Control (defined
generally as acquisition of 20% or more of the outstanding voting shares or a
change in a majority of the Board of Directors) or until three months after a
Change-in-Control has occurred.
In the event of a qualifying termination of the named executive's
employment within two years of a Change-in-Control, he or she is entitled to
three years' compensation including bonus, retirement benefits equal to the
benefits he or she would have received had he or she completed three additional
years of employment, continuation of all life, accident, health, savings and
other fringe benefit plans for three years, and relocation assistance. In
addition, the named executives are covered by a non-Change- in-Control
severance policy equal to one year's base salary.
The Company also has agreements with certain of its executives providing
for a death benefit equal to one year's full salary, and half salary thereafter
until the employee would have reached age 65, with a minimum aggregate payment
of 1.5 times salary, if death occurs while the executive is actively employed,
disabled, or retired. If death occurs after age 65, the employee's beneficiary
will receive a sum equal to 1.5 times the employee's salary during the last
year worked. Insurance policies, each for $100,000, have been purchased by the
Company naming the employee as the owner. The remaining obligations of the
Company are insured. The continuation payments provided by the Company are net
of the $100,000 policy provided to the executive and referred to on page 14 in
the Summary Compensation Table footnotes.
Mr. Ardia terminated his employment on June 22,1994 and was granted the
severance benefits shown on the Summary Compensation Table on page 14. The
severance benefits, which include two years' base salary and Company provided
insurance and miscellaneous benefits, took into consideration Mr. Ardia's level
of responsibility and 24 years of service. During the severance period,
payments will be reduced by any compensation Mr. Ardia may receive from another
employer. Benefits after the severance period include Mr. Ardia's earned
retirement benefit as calculated under the normal provisions of the Company's
retirement plan and the Supplemental Executive Pension Plan, a supplementary
cash payment until the Social Security age of 62 and an amount associated with
the election of a joint and survivor annuity. Stock options already held by
Mr. Ardia will be treated according to the provisions of those plans.
The arrangements for hiring Mr. McDermott as the Chief Executive Officer of
the Company were specified in a memorandum of understanding dated June 28, 1994.
The agreement provides Mr. McDermott with: an annual salary of $500,000 with a
salary review on January 1, 1996; an annual incentive target award opportunity
under the Executive Incentive Plan of 55% of base salary with the amount in 1994
(prorated for his time in the job) to be the greater of target or actual full
year Company financial performance; stock options granted upon date of
employment under the 1988 Stock Incentive Plan in the amount of 75,000 shares
at a price equal to the closing price of the stock on June 27, 1994; and
relocation assistance.
<PAGE>13
GOULDS PUMPS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
VS. S&P 500 AND PEER GROUP INDICES
The following performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
Comparison of Five-Year Cumulative Total Return
December 1989 through December 1994
[CHART]
Assumes $100 is invested on December 31, 1989 in Goulds Pumps, Inc. common
stock, the S&P 500 Index, and peer group common stock. Cumulative total return
assumes reinvestment of dividends.
Fortune
Industrial and
Farm Equipment
Goulds Industry-
Date Pumps Peer Group(1) S&P 500
---- ----- ------------- -------
December 1989 $100.00 $100.00 $100.00
December 1990 111.17 84.00 96.89
December 1991 139.99 88.98 126.28
December 1992 153.23 100.49 135.88
December 1993 159.92 142.25 149.52
December 1994 144.15 139.95 151.55
<PAGE>14
<TABLE>
<CAPTION>
FORTUNE INDUSTRIAL AND FARM EQUIPMENT COMPANIES(1)(3)
<S> <C> <C>
Tenneco Inc. The Timken Company Cincinnati Milacron
Caterpillar Inc. TRINOVA Corporation Clark Equipment Company
Deere & Company Detroit Diesel(2) Lincoln Electric Co.
The Black & Decker Corporation NACCO Industries Inc. IMO Industries Inc.
Cummins Engine Company, Inc. Tecumseh Products Company Stewart & Stevenson Services, Inc.
Dresser Industries, Inc. Pentair, Inc. Figgie International, Inc.
Ingersoll-Rand Company Crane Co. Nortek Inc.
Baker Hughes Incorporated Harnischfeger Industries, Inc. Terex Corporation
Parker-Hannifin Corporation Briggs & Stratton Corporation The Toro Company
Dover Corporation Applied Materials, Inc. Teleflex Incorporated(2)
York International Corporation Outboard Marine Corporation
-----
(1) Ranked by sales size.
(2) New to peer group list.
(3) Removed from prior year peer group list by virtue of no longer being included in the Fortune Industrial
and Farm Equipment Companies published list:
Great American Management & Investment
Dresser-Rand Company
Giddings & Lewis, Inc.
AM International
Kennametel Inc.
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
----------------------------------------- --------------------------------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Position Year Salary($)(a) Bonus($)(b) Compensation($) Awards Options(#) Payouts Compensation
--------------------------- ---- ------------ ----------- --------------- ------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. McDermott 1994 $255,769 $140,672 - - 76,500 - $205,284(c)
President and CEO
(eff. 06/28/94)
Stephen V. Ardia 1994 228,050 98,044 - - 55,883 - 1,335,031(d)
President and CEO 1993 434,400 0 - - 56,165 - 2,101(e)
(until 06/22/94) 1992 426,924 103,785 - - 55,700 - 2,101(e)
Frank J. Zonarich 1994 227,350 67,827 - - 14,915 - 2,332(e)
Group Vice President 1993 216,419 0 - - 14,990 - 3,372(e)
Water Technologies 1992 209,001 65,208 - - 15,100 - 3,372(e)
John M. Morphy 1994 224,250 73,697 - - 14,774 - 1,564(e)
Group Vice President 1993 214,375 0 - - 14,848 - 1,564(e)
Industrial Products 1992(f) 192,869 45,671 - - 13,500 - 1,564(e)
John P. Murphy 1994 183,125 50,100 - - 12,663 - 3,701(g)
Vice President Finance and 1993(h) 70,384 63,000 9,121(i) - 5,000 - 39,423(j)
Chief Financial Officer
Mary Ann Lambertsen 1994 167,417 45,803 - - 6,271 - 2,013(e)
Vice President 1993 159,542 0 7,670(i) - 6,303 - 23,660(k)
Human Resources 1992 154,500 32,012 - - 6,450 - 1,846(e)
(a) Includes amounts paid and deferred.
(b) Includes amounts paid or deferred in the year following for services rendered in the year indicated.
(c) Relocation expense reimbursement-$202,754; Executive Security Plan premium-$2,530-the premium associated
with a whole life policy paid for by the Company on the executive's behalf.
(d) Represents the total severance payment to be made to S. V. Ardia in installments. See Termination of
Employment on page 12.
(e) Executive Security Plan-the premium associated with a whole life policy paid for by the Company on the
executive's behalf.
(f) Job change from CFO to Group Vice President in 1992.
(g) Executive Security Plan-$2,302; relocation expense reimbursement-$1,399.
(h) Date of hire 08-11-93.
(i) Relocation expense tax gross-ups; a one time reimbursement.
(j) Executive Security Plan-$959; relocation expense reimbursement-$38,464.
(k) Executive Security Plan-$2,013; relocation expense reimbursement-$21,647.
<PAGE>15
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Number of
Securities % of Total
Underlying Options Exercise Grant Date
Options Granted to Price Expiration Present
Name Granted Employees Per Share Date Value(b)
---- ------- --------- --------- ---- --------
<S> <C> <C> <C> <C> <C>
Thomas C. McDermott 1,500(a) n/a $21.875 May 5, 2004 $ 8,160
75,000 23.03% 20.500 Jun 27, 2004 378,750
Stephen V. Ardia 55,883 17.16% 24.875 Jan 4, 2004 321,327
Frank J. Zonarich 14,915 4.58% 24.875 Jan 4, 2004 85,761
John M. Morphy 14,774 4.54% 24.875 Jan 4, 2004 84,951
John P. Murphy 12,663 3.89% 24.875 Jan 4, 2004 72,812
Mary Ann Lambertsen 6,271 1.93% 24.875 Jan 4, 2004 36,034
(a) Shares granted as a non-employee Director.
(b) Black-Scholes Assumption Disclosure:
The estimated grant date present value reflected in the above table is determined using the Black-Scholes
Model. The material assumptions and adjustments incorporated in the Black-Scholes Model in estimating the
value of the options reflected in the above table include the following:
* An exercise price of the options ($21.875, $20.500, $24.875) equal to the fair market value of the
underlying stock on the dates of grant;
* An interest rate (6.7%) that represents the interest rate on a U.S. Treasury security with a maturity
date corresponding to that of the option term;
* Volatility (29.63%) calculated using daily stock prices for the one-year period prior to the grant
dates;
* A dividend yield of 3.59%, representing the annualized dividends paid with respect to a share of
common stock as of the dates of grant; and
* A 25% reduction to reflect both the probability of forfeiture due to termination prior to vesting and
the probability of a shortened option term due to termination of employment prior to the option
expiration date.
* An option term of ten years.
The ultimate values of the options will depend on the future market price of Goulds Pumps' stock, which
cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise
of an option will depend on the excess of the market value of the Company's common stock over the exercise
price on the date the option is exercised.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
Number of Securities
Number of Underlying Unexercised Value of Unexercised
Shares Options Held at in-the-Money Options Held
Acquired on Value Fiscal Year End at Fiscal Year End
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. McDermott 795 -398 5,986 76,500 $2,385 $84,375
Stephen V. Ardia 6,667 68,337 142,249 132,299 290,073 15,299
Frank J. Zonarich 0 0 40,562 36,661 75,971 7,015
John M. Morphy 4,881 33,616 33,801 35,224 60,356 6,089
John P. Murphy 0 0 2,000 15,663 0 0
Mary Ann Lambertsen 537 806 4,264 14,223 0 0
</TABLE>
<PAGE>16
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
All proposals by stockholders intended to be presented at the next Annual
Meeting of Stockholders (1996) must be received by the Corporation by December
2, 1995, in order to be included in the Corporation's proxy statement and form
of proxy for the 1996 Annual Meeting.
OTHER MATTERS AND SOLICITATION OF PROXIES
The Board of Directors does not know of any matters other than those
discussed herein which will be presented at the meeting. However, if any
matters properly come before the meeting, the person or persons voting the
enclosed proxy form intend to vote in accordance with their best judgment
on any such matters.
In addition to the solicitation of proxies by use of the mails, the
Company will utilize the services of some of its Executive Officers and regular
employees (who will receive no compensation therefor in addition to their
regular remuneration) to solicit proxies personally and by telephone and
telefax from brokerage houses and other stockholders. The Company intends to
request banks and brokers who hold shares in their names or in custody, or in
the names of nominees for others, to forward copies of the proxy material to
those persons for whom they hold such shares and to request authority for the
execution of proxies. The Company will reimburse such banks and brokers for
their out-of-pocket expenses incurred in connection therewith. The Company has
also retained the firm of D.F. King & Co., Inc. to assist in obtaining proxies.
That fee, in the amount of $10,000 plus reasonable expenses, as well as all
other costs of soliciting proxies, will be borne by the Company.
By Order of the Board of Directors
EUGENE B. BRADSHAW
Secretary
Seneca Falls, New York
March 31, 1995
A copy of the Annual Report of the Company on Form 10-K for its most recent
fiscal year, as filed with the Securities and Exchange Commission, will be
furnished upon request and without charge to beneficial holders of the stock of
the Company. Such request must set forth a good faith representation that, as
of the record date for the Annual Meeting of Stockholders, the person making
the request was a beneficial owner of securities entitled to vote at such
meeting, and should be addressed to Mr. Eugene B. Bradshaw, Secretary, Goulds
Pumps, Inc., 300 WillowBrook Office Park, Fairport, New York 14450-4285.
<PAGE>
PROXY
GOULDS PUMPS, INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 3, 1995
I/(We) hereby appoint Robert L. Tarnow, Thomas C. McDermott and Peter
Oddleifson, or the majority of them, as Proxies, with full power of
substitution, to represent me (us) and to vote all my (our) stock in Goulds
Pumps, Incorporated, on all matters which may come before the 1995 Annual
Meeting of Stockholders of the Company and any adjournment thereof. Said
Proxies are directed to vote as hereafter indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2 AND "AGAINST"
PROPOSAL 3.
Nominees: William W. Goessel, Melvin Howard, Barbara B. Lucas, Thomas C.
McDermott, James C. Miller III, Peter Oddleifson and Arthur M.
Richardson.
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary) [ ] listed [ ]
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
-------------------------------------------------------------------------------
2. Proposal to ratify the appointment of Deloitte & Touche as independent
auditors for 1995.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued and to be signed on the other side)
<PAGE>
3. Stockholder proposal to authorize and request that the Board of Directors
reduce the number of authorized shares of Common Stock ($1 par value)
from 90 million to 25 million.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Proxy, when properly executed, will be voted in the manner directed
hereon. If no direction is made, it will be voted "FOR" proposals 1 and 2 and
"AGAINST" proposal 3.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
Dated:...................... , 1995
------------------------------------
------------------------------------
------------------------------------
(Please sign as name appears at left)
