SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
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|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Goulds Pumps, Incorporated
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
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Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
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*Set forth the amount on which the filing fee is calculated and state how it was
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<PAGE>
[LOGO] GOULDS PUMPS, INC.
FAIRPORT, NEW YORK 14450
March 28, 1996
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 1, 1996
-----------------
To the Stockholders of Goulds Pumps, Incorporated:
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) on Wednesday, May 1, 1996, at 10:00 a.m. for
the following items of business:
1. Election of Directors;
2. Ratification of the appointment of Deloitte & Touche LLP as
independent auditors for 1996; and
3. Such other business as may properly come before the meeting or any
adjournment thereof.
These matters are described more fully in the attached Proxy Statement.
Stockholders of record at the close of business on March 6, 1996 are entitled to
notice of and to vote at the meeting.
By Order of the Board of Directors
MICHAEL T. TOMAINO
Secretary
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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.
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<PAGE>
[LOGO] GOULDS PUMPS, INC.
FAIRPORT, NEW YORK 14450
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS, MAY 1, 1996
The accompanying proxy is solicited by the Board of Directors for use at
the Annual Meeting of Stockholders of Goulds Pumps, Incorporated (the
"Company"), 300 WillowBrook Office Park, Fairport, New York 14450-4285, to be
held at the time and place stated in the Notice of Meeting which accompanies
this Proxy Statement. Proxy materials are first being mailed on or about March
28, 1996. The shares represented by properly completed proxies received prior to
the vote will be voted FOR the election as Directors of the nominees named
herein and FOR ratifying the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 1996, unless
specific instructions to the contrary are given or an abstention from voting is
indicated by the stock holder. The proxy may be revoked at any time before it is
exercised.
On March 6, 1996, the record date, there were 21,292,612 shares of Common
Stock outstanding, each of which entitles the holder to one vote on each matter
to come before the meeting. One-third of the outstanding shares, present in
person or by proxy, will constitute a quorum at the meeting. Abstentions and
broker non-votes are counted for purposes of determining whether a quorum is
present. A plurality vote is required for the election of Directors.
Accordingly, abstentions and broker non-votes will not affect the outcome of the
election of Directors.
ELECTION OF DIRECTORS
Eight 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 about, the
persons nominated by the Board of Directors for election as Directors follow.
The Board of Directors believes that all of the nominees will be available and
able to serve as Directors, but if for any reason any nominee becomes
unavailable for election, the persons named in the proxies may exercise
discretionary authority to vote for substitutes proposed by the Board of
Directors. All eight of the nominees are presently serving as Directors of the
Company. Seven were elected at the 1995 Annual Meeting and one of the nominees,
Mr. David P. Gruber, was elected a Director by the Board in December of 1995.
<PAGE>
DIRECTORS
WILLIAM W. GOESSEL
Mr. Goessel, 68, 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. From 1986 to 1992, he was Chairman and Chief Executive Officer of
Harnischfeger. He is a Director of Measurex Corporation and Twin Disc,
Incorporated. He is a member of the Human Resources Committee and the Committee
on Directors.
DAVID P. GRUBER
Mr. Gruber, 54, a Director since 1995, has been a Director, and President
and Chief Executive Officer of Wyman-Gordon Company, North Grafton,
Massachusetts, an aerospace and industrial man ufacturing company, since 1994.
He had been Director, and President and Chief Operating Officer of Wyman-Gordon
since 1991.
MELVIN HOWARD
Mr. Howard, 61, a Director since 1984, has been Chairman of Sector
Management, Inc., West port, Connecticut, an investment firm, since 1993. From
1991 to 1992, he was President of Erlich Bober Financial Corporation. He 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 Audit and Pension
Committees.
BARBARA B. LUCAS
Ms. Lucas, 50, a Director since 1992, has, since 1985, been Vice
President-Public Affairs and Corporate Secretary of The Black & Decker
Corporation, Towson, Maryland, a global manufacturer and marketer of power tools
and home improvement products. She is a member of the Human Resources Committee
and the Committee on Directors.
THOMAS C. McDERMOTT
Mr. McDermott, 59, a Director since 1988, has been Chairman of the Board of
Directors since 1995, and Chief Executive Officer and President 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 Executive and Pension Committees. He is
a Director of A.T. Cross Company and Augat, Inc.
JAMES C. MILLER III
Mr. Miller, 53, a Director since 1990, is counselor to Citizens for a Sound
Economy, Washington, D.C., and from 1989 to 1993 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 a member of the Pension Committee and the
Committee on Directors. He is Chairman and Director of Economic Impact Analysts,
Inc., and a Director of Atlantic Coast Airlines, Washington Mutual Investors,
Inc. and The Union Corporation.
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PETER ODDLEIFSON
Mr. Oddleifson, 63, 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 Company. He is a member of
the Executive and Audit Committees. He is a Director of Rochester Midland Corp.
ARTHUR M. RICHARDSON
Mr. Richardson, 69, 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 Executive, Human Resources and Audit Committees. He is a
Director of the Raymond Corporation, Rochester Gas and Electric Corporation, and
Transmation, Inc.
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The Board of Directors recommends a vote "FOR" the election as Directors of
the nominees listed above.
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Additional Information Relating to the Board of Directors
Non-employee Directors are paid an annual retainer of $20,000 per year. For
Directors who are first elected or appointed to the Board in 1995 or later,
one-half of this annual retainer is paid in Company stock, until the new
Director meets the Company's stock ownership goals for non-employee Directors,
which is one-and-one-half times the annual retainer amount. In addition,
non-employee Directors are paid $1,000 per day for attendance at Board meetings,
$800 per day for attendance at each committee meeting which is held on other
than a Board meeting date and $400 per day for attendance at each committee
meeting held on a Board meeting date. Committee chairs are paid an additional
retainer of $2,800 per year. Employee Directors do not receive any additional
remuneration for their services as Directors.
Each non-employee Director of the Company receives, on the first stock
trading day following each Annual Meeting of Stockholders, an option to purchase
1,500 shares of the Company's Common Stock at the closing price per
share as reported on the NASDAQ on that date.
Non-employee Directors are participants in the Retirement Plan for
Non-Employee Directors which became effective on June 21, 1994. A Director who
retires with a minimum of ten years of service is entitled to receive an annual
retirement benefit equaling his or her final annual retainer, which is presently
$20,000, for a term equal to the period of service. Plan benefits vest 50% after
five years of service and an additional 10% for each year of service from six
through ten.
The Board of Directors held nine meetings during 1995. All of the Directors
attended more than 75% of the meetings of the Board and committees on which they
served in 1995.
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AUDIT COMMITTEE AND COMMITTEE ON DIRECTORS
The Audit Committee recommends to the Board of Directors the appointment of
independent auditors, reviews the plan and results of the audit performed by the
auditors and the plan and scope of the Company's internal auditing procedures,
approves professional services provided by the auditors, considers the range of
audit and non-audit fees, reviews the adequacy of the Company's internal
accounting controls, and directs and supervises investigations into the
foregoing matters. The Audit Committee held two meetings during 1995.
The Committee on Directors recommends to the Board 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. Under the procedure, stockholders shall
submit written recommendations of nominees for election to the Board of
Directors to the Secretary of the Company no later than the December 10th
preceding the Annual Meeting of Stockholders at which the election is to be
held. Stockholder recommendations must be 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 meetings
during 1995.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 15, 1996, stock ownership
information by beneficial owners of more than five percent of the Company's
Common Stock (based on reports filed by them with the Securities and Exchange
Commission ("SEC")) and, as of March 10, 1996, by Directors and the executive
officers listed in the Summary Compensation Table on page 13 and by all
Directors and executive officers as a group, each of whom has sole voting and
investment power over such shares, except as indicated.
Percent of
Name No. of Shares Class
---- ------------- -----
FMR Corp. .......................................... 2,763,900(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
Mario J. Gabelli ................................... 1,078,300(3) 5.1%
c/o Gabelli Funds, Inc.
One Corporate Center
Rye, New York
William W. Goessel ................................. 11,804(4) *
David P. Gruber .................................... 1,000 *
Melvin Howard ...................................... 10,981(5) *
Barbara B. Lucas ................................... 6,983(6) *
Thomas C. McDermott ................................ 49,027(7) *
James C. Miller III ................................ 9,138(8) *
Peter Oddleifson ................................... 12,728(9) *
Arthur M. Richardson ............................... 11,366(10) *
Frank J. Zonarich .................................. 76,616(11) *
John P. Murphy ..................................... 15,056(12) *
Mary Ann Lambertsen ................................ 17,364(13) *
John J. Scanlon .................................... 24,746(14) *
All Directors and Executive Officers (15 persons) .. 252,690(15) 1.2%
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(1) Sole voting power with respect to 518,0000 shares and sole dispositive
power with respect to 2,763,900 shares.
(2) Sole voting power and sole dispositive power with respect to 1,653,200
shares.
(3) Sole voting power with respect to 932,300 shares, sole dispositive power
with respect to 1,078,300 shares.
(4) Includes exercisable options to purchase 9,781 shares.
(5) Includes exercisable options to purchase 9,781 shares.
(6) Includes exercisable options to purchase 5,486 shares.
(7) Includes exercisable options to purchase 43,998 shares.
(8) Includes exercisable options to purchase 8,137 shares.
(9) Includes exercisable options to purchase 9,781 shares.
(10) Includes exercisable options to purchase 9,781 shares.
(11) Includes exercisable options to purchase 70,895 shares.
(12) Includes exercisable options to purchase 13,532 shares.
(13) Includes exercisable options to purchase 15,252 shares.
(14) Includes exercisable options to purchase 22,191 shares.
(15) Includes exercisable options to purchase 223,251 shares.
* Less than 1.0%.
5
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The Company's Directors and executive officers are required to file reports
with the Securities and Exchange Commission concerning ownership of Company
stock. Based on its review of such reports, the Company believes that all filing
requirements were met by its Directors and executive officers in 1995.
EXECUTIVE COMPENSATION
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors' Human Resources Committee (the "Committee")
provides the following information about its charter, executive compensation
philosophy and program, and 1995 compensation-related decisions.
The Human Resources Committee is responsible for all compensation-related
decisions of the Company. As such, it 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 approves all stock option grants and cash bonus awards to officers and other
executives including executives named in the Summary Compensation Table on page
13 ("named executives"). The Committee also reviews and approves all salary
arrangements and other remuneration for executives, evaluates executive
performance, and considers related matters. The Committee, consisting of three
non-em ployee Directors who have no "interlocking" relationships as defined by
the SEC, met three times during 1995.
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 total 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 should 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 1995 Committee Actions
The Committee annually evaluates the Company's financial performance and
executive compensation plans in the context of publicly-traded comparator
companies consisting of pump industry competi tors and a broader group of major
durable goods manufacturers. Total annual cash payments (base salary plus annual
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cash bonuses) reflect Company financial performance, business unit financial
performance, and individual executive performance against previously established
goals and objectives. Over time, and with above average financial and individual
performance, the Company targets its total cash compensation at the 60th
percentile of the total cash 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
12. This is based on the Committee's belief that the Company's competitors for
executive talent are greater in number than the companies included in the
industry peer group. However, 30% of the companies in the comparator group are
also in the industry peer group.
The key elements of the Company's executive compensation program are base
salary, annual cash bonuses, stock options, and restricted stock grants vesting
upon achievement of long-term Company performance goals. 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 structure is reviewed regularly by the Committee. In prior
years, the executives' base salary range midpoints had been targeted at the 55th
percentile of comparator companies. During 1995, the target for salary range
midpoints was adjusted downward, to the 50th percentile. The base salary range
midpoints 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 1995 and base salary range
midpoints were adjusted accordingly.
The Committee reviewed executive base salaries in 1995 and increases were
awarded or withheld based on Company financial performance in general,
individual executive performance, and the com parator companies' compensation
levels. The salaries remain within the defined salary ranges, and the named
executives' base pay generally falls less than 2% above the new, lower targeted
percentile.
The Executive Incentive Plan ("EIP"), which provides for annual cash
bonuses based on Company and business unit financial performance, and on
individual 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 50th percentile of comparator companies in order to
reflect the Committee's intention to place a greater percentage of executive
compensation at risk.
For 1995, the Company financial performance used to determine EIP payouts
for Corporate staff was based on sales (30%), earnings per share (50%) and
return on assets (20%). The Committee believes these performance measures are
contributing determinants of stock price over time. The business units'
performance used to determine EIP payouts was based on sales, operating
earnings, margin, inventory turns, and meeting quarterly performance objectives.
All of the named executives have a minimum of 25% of their award tied to Company
financial performance to reinforce the need for teamwork and to focus attention
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on overall Company objectives. The named executives who are heads of business
units also have a majority of their award linked to business unit financial
performance.
Target cash bonus opportunities for the named executives range from 35% to
55% of base salary. Depending on performance results, the EIP cash bonus can
vary from 50% to 150% of target cash bonus opportunity. A minimum threshold of
Company or business unit financial performance must be achieved for any portion
of the EIP payout to occur. In general, performance in 1995 fell short of target
goals and, accordingly, bonus payments were below target payment levels.
Including the named executives, there were approximately 90 key managers
who participated in the EIP in 1995. Receipt of cash incentive awards under the
EIP may be deferred to a subsequent date or retirement.
The 1988 Stock Incentive Plan, approved by stockholders in 1988, and the
1994 Incentive Plan to Increase Stockholder Value, approved by stockholders in
1994, are in keeping with the Company's commitment to provide total compensation
which favors at-risk components of pay and closely links the interests of
management with those of stockholders. These are the Company's only long-term
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' data, past grants made to executives, and current Company
stock holdings of the executives. The stock option program targets its awards at
the 60th percentile 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. In addition to the normal annual stock option award given in January,
the named executives were also granted a prorated award in June to accommodate
the transition to a single grant date for all option participants. The named
executives will next be considered for an option award in June 1996. The Option
Grants in Last Fiscal Year table on page 14 gives a summary of stock option
shares granted in fiscal 1995 to the named executives under the 1988 Stock
Incentive Plan and the 1994 Incentive Plan to Increase Stockholder Value.
Under the 1994 Incentive Plan To Increase Stockholder Value,
performance-based restricted stock awards were made to key executives subject to
the Company's achievement of pre-established levels of Company performance over
a three-year period. The three-year period enhances the Company's ability to
maintain a stable executive team and focus on long-term success. The value of
the awards will vary based on the degree to which Company Earnings Per Share
("EPS") goals are attained over the three-year cycle. Below a threshold level of
performance, no award is earned. The EPS goal was approved by the Committee
because it is believed to be most reflective of stockholder value creation. All
earned awards are paid in Company stock. During the performance period,
dividends on the performance-based shares are paid currently in stock, rather
than cash, further aligning executives' interests with those of stockholders.
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In determining the size of performance-based share awards, the Committee
considers existing stock option grants, competitive practices, and the level of
responsibility of each executive. Grant sizes were at a medium level, as
compared against similar programs at the comparator companies.
Compensation for the Chief Executive Officer
The CEO's compensation package is consistent with the spirit and objectives
of the Company's executive compensation program.
Mr. McDermott's base salary was not increased during 1995 in keeping with
the terms specified in the memorandum of understanding when he was hired in June
1994. His base salary will be adjusted for the first time in 1996.
Mr. McDermott's EIP target cash bonus opportunity is 55% of base salary.
His actual bonus payment was less than the target cash bonus opportunity because
the Company's financial performance in 1995 fell short of target goals.
The stock option grants given to Mr. McDermott are disclosed in the table
on page 14 . The full grant made in January 1995 and the prorated grant made in
June 1995 are within competitive norms for the CEO position and at the medium
level in comparison to the comparator companies.
Under the 1994 Incentive Plan To Increase Stockholder Value, Mr. McDermott
received a performance-based restricted stock award subject to the Company's
achievement of pre-established levels of Company performance over a three-year
period. The three-year period enhances the Company's ability to retain Mr.
McDermott and ensures his focus on long-term success. The value of his award
will vary based on the degree to which Company EPS goals are attained over the
three-year cycle. Below a threshold level of performance, no award is earned.
The EPS goal was approved by the Committee because it is believed to be most
reflective of stockholder value creation. All earned awards are paid in Company
stock. During the performance period, dividends on the performance-based shares
are paid currently in stock, rather than cash, further aligning Mr. McDermott's
interests with those of stockholders.
In determining the size of Mr. McDermott's performance-based share award,
the Committee considered existing stock option grants and competitive practices.
The grant size was at a medium level in comparison to the comparator companies.
Company Response to Potential Limits to Deductibility of Executive Pay
Since no employee in 1996 is expected to reach the annual $1 million 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 undertake the substantial revisions to
compensation programs that would be necessary to respond to the Code. The
Committee will continue to evaluate the advisability of amending or changing its
compensation programs in this respect in future years.
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Summary
The Committee believes the executive compensation program, through the
Committee's administration of the component plans and structures, 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 link 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 Human Resources Committee
Arthur M. Richardson, Chairman
William W. Goessel
Barbara B. Lucas
Pension Plan Table(1)
<TABLE>
<CAPTION>
Years of Service
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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
$650,000 ........ $ 65,000 $130,000 $195,000 $260,000 $325,000 $357,000 $390,000
$750,000 ........ $ 75,000 $150,000 $225,000 $300,000 $375,000 $412,000 $450,000
</TABLE>
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(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 13 are participants. Taken together, the two plans provide
participants with a monthly retirement benefit based on the
participant|scquote|s final average compensation and years of service. The
monthly benefit is reduced by one-half the participant|scquote|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, 1995: Mr. McDermott, 1.5 years;
Mr. Zonarich, 25.8 years; Mr. Murphy, 2.3 years; Ms. Lambertsen, 4.1 years; Mr.
Scanlon, 36.8 years. Benefits are computed as straight-life annuity amounts
which may be paid in various forms.
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Employment Contracts and Change-in-Control Arrangements
The Company has outstanding agreements with the named executives listed in
the Summary Compensation Table on page 13, which provide that the named
executives will not, in the event of the commencement of steps 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),
voluntarily leave the employ of the Company until a third person has terminated
efforts to effect a Change-in-Control 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.
In September of 1995, Eric L. Steenburgh joined the Company as Senior Vice
President and President--Industrial Products. Previously, Mr. Steenburgh was
President and Chief Operating Officer for Ricoh Corporation in Fairfield, New
Jersey. In connection with the relocation of his principal residence, the
Company has provided a short-term interest-free loan to Mr. Steenburgh, to be
repaid upon the sale of his primary residence in New Jersey. The total amount of
Mr. Steenburgh's indebtedness to the Company under this loan reached $180,000 in
1995.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has recommended that the appointment of Deloitte &
Touche LLP as independent auditors for the year ending December 31, 1996 be
ratified by the stockholders. Deloitte & Touche LLP and their predecessors have
served as auditors of the Company since 1908. Represen tatives of Deloitte &
Touche LLP 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 ratification of the
appointment of independent auditors.
- --------------------------------------------------------------------------------
11
<PAGE>
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 1990 through December 1995
[The following table was represented by a line chart in the printed material.]
Fortune
Industrial and
Farm Equipment
Goulds Industry
Date Pumps Peer Group S&P 500
---- ----- ---------- -------
December 1990 $100.00 $100.00 $100.00
December 1991 125.93 105.69 130.34
December 1992 137.83 117.95 140.25
December 1993 143.85 162.41 154.32
December 1994 129.66 159.13 156.42
December 1995 153.79 197.55 214.99
Assumes $100 is invested on December 31, 1990 in Goulds Pumps, Incorporated
common stock, the S&P 500 Index, and common stock of the peer group identified
on page 13. Cumulative total return assumes reinvestment of dividends.
12
<PAGE>
Fortune Industrial and Farm Equipment Companies(1)(3)
Caterpillar Inc.
Tenneco Inc.
Deere & Company
Dresser Industries, Inc.
The Black & Decker Corporation
Cummins Engine Company, Inc.
Ingersoll-Rand Company
Parker-Hannifin Corporation
Dover Corporation
Baker Hughes Incorporated
York International Corporation
Western Atlas International(2)
The Timken Company
NACCO Industries Inc.
TRINOVA Corporation
Detroit Diesel Corporation(2)
Crane Company
Pentair, Inc.
Tecumseh Products Company
Agco Corporation(2)
Briggs & Stratton Corporation
Cincinnati Milacron Inc.
Harnischfeger Industries, Inc.
Stewart & Stevenson Services, Inc.
Outboard Marine Corporation
Kennametal Inc.(2)
Lincoln Electric Co.
Teleflex Incorporated
The Toro Company
Terex Corporation
Actava Group, Inc.(2)
IMO Industries Inc.
Figgie International, Inc.
- ----------
(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:
Applied Materials, Inc.
Clark Equipment Company
Nortek Inc.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- -------------------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Position Year Salary Bonus(a) Compensation Awards(i) Options(#) Payouts Compensation
- --------------------------- ---- ------ -------- ------------ --------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. McDermott 1995 $500,000 $227,000 $-- -- 111,600 -- $22,018(b)
Chairman, CEO and 1994(c) 255,769 140,672 -- -- 76,500 -- 205,284
President
Frank J. Zonarich 1995 239,417 86,500 -- -- 28,500 -- 2,799(d)
Vice President and 1994 227,350 67,827 -- -- 14,915 -- 2,332
President--Water 1993 216,419 0 -- -- 14,990 -- 3,372
Technologies
John P. Murphy 1995 191,458 55,000 -- -- 26,100 -- 2,885(e)
Vice President--Finance 1994 183,125 50,100 -- -- 12,663 -- 3,701
and Chief Financial Officer 1993(f) 70,384 63,000 9,121 -- 5,000 -- 39,423
Mary Ann Lambertsen 1995 175,042 44,000 -- -- 14,900 -- 2,536(g)
Vice President-- 1994 167,417 45,803 -- -- 6,271 -- 2,013
Human Resources 1993 159,542 0 7,670 -- 6,303 -- 23,660
John J. Scanlon 1995 147,533 40,000 -- -- 12,400 -- 3,381(h)
Vice President and
President--Asia Pacific
</TABLE>
- --------------
(a) Includes amounts paid or deferred in the year following for services
rendered in the year indicated.
(b) Includes premiums paid on the executive's behalf for a life insurance policy
provided by the Executive Security Plan--$7,018, and executive financial
services.
(c) Date of hire 06-28-94
(d) Includes premiums paid on the executive's behalf for a life insurance policy
provided by the Executive Security Plan--$1,812, and executive financial
services.
(e) Includes premiums paid on the executive's behalf for a life insurance policy
provided by the Executive Security Plan--$2,302, and executive financial
services.
(f) Date of hire 08-11-93.
(g) Includes premiums paid on the executive's behalf for a life insurance policy
provided by the Executive Security Plan--$2,013.
(h) Includes premiums paid on the executive's behalf for a life insurance policy
provided by the Executive Security Plan--$2,893.
(i) Restricted Performance Shares outstanding, valued as of 12/31/95, are: Mr.
McDermott, 9,524 shares valued at $238,100; Mr. Zonarich, 4,011 shares
valued at $100,275; Mr. Murphy 2,857 shares valued at $71,425; Ms.
Lambertsen 2,613 shares valued at $65,325; Mr. Scanlon, 2,438 shares valued
at $60,950.
13
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of
Securities % of Total
Underlying Options Exercise Grant Date
Options Granted to Price Expiration Present
Name Granted Employees Per Share ($) Date Value ($)(a)
---- ------- --------- ------------- ---- ------------
<S> <C> <C> <C> <C> <C>
Thomas C. McDermott .. 76,200 14.71% 21.000 Jan 3, 2005 291,091
35,400 6.84% 22.625 Jun 21, 2005 145,728
Frank J. Zonarich .... 19,500 3.77% 21.000 Jan 3, 2005 74,492
9,000 1.74% 22.625 Jun 21, 2005 37,050
John P. Murphy ....... 18,800 3.63% 21.000 Jan 3, 2005 71,818
7,300 1.41% 22.625 Jun 21, 2005 30,051
Mary Ann Lambertsen .. 10,200 1.97% 21.000 Jan 3, 2005 38,965
4,700 0.91% 22.625 Jun 21, 2005 19,348
John J. Scanlon ...... 8,500 1.64% 21.000 Jan 3, 2005 32,471
3,900 0.75% 22.625 Jun 21, 2005 16,055
</TABLE>
- -----------
(a) 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 on the options of $21.000 (January grant) and
$22.625 (June grant) equal to the fair market value of the underlying
stock on the dates of grant;
* An interest rate (7.0%) that represents the interest rate on a U.S.
Treasury security with a maturity date corresponding to that of the
option term;
* Volatility (31.40%) calculated using daily stock prices for the
one-year period prior to the grant dates;
* A dividend yield of 3.70%, representing the annualized dividends paid
with respect to a share of common stock as of the dates of grant;
* Reduction of approximately 21.7% to reflect the probability of
forfeiture due to termination prior to vesting and approximately 12.6%
to reflect the probability of a shortened option term due to
termination of employment prior to the option expiration date;
* An option term of ten years.
The ultimate values of the options will depend on the future market price of
Goulds Pumps' stock, which cannot be forecast with reasonable accuracy. The
actual value, if any, an optionee will realize upon exercise of an option will
depend on the excess of the market value of the Company's common stock on the
date the option is exercised over the exercise price.
14
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options Held at in-the-Money Options Held
Shares Fiscal Year End at Fiscal Year End
Acquired on Value ---------------------------- ------------------------------------
Name Exercise Realized ($) Exercisable Unexercisable Exercisable ($) Unexercisable ($)
---- -------- ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. McDermott ........... 1,288 2,174 24,948 167,850 98,619 642,000
Frank J. Zonarich ............. 0 0 54,768 50,955 213,880 109,253
John P. Murphy ................ 0 0 5,666 38,097 396 93,725
Mary Ann Lambertsen ........... 1,075 1,209 7,946 24,366 6,630 56,159
John J. Scanlon ............... 4,800 40,200 17,267 18,064 75,711 45,666
</TABLE>
Long-Term Incentive Plan Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Estimated Future Payouts(b)
Number of ------------------------------------
Shares Total Value Period Until Threshold Target Maximum
Name Granted(a) of Grant($) Payout Shares Shares Shares
---- ---------- ----------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas C. McDermott ....... 9,524 208,338 2yrs 183 days 9,524 9,524 19,048
Frank J. Zonarich ......... 4,011 87,741 2yrs 183 days 4,011 4,011 8,022
John P. Murphy ............ 2,857 62,497 2yrs 183 days 2,857 2,857 5,714
Mary Ann Lambertsen ....... 2,613 57,159 2yrs 183 days 2,613 2,613 5,226
John J. Scanlon ........... 2,438 53,331 2yrs 183 days 2,438 2,438 4,876
</TABLE>
- -------------
(a) Performance share target awards are for a number of "Restricted shares" and
are based on a participant's salary, salary grade multiplier, and market
price of the Common Stock. Final awards are determined by multiplying the
number of Restricted shares by a performance multiplier from 0% to 200%,
based on the EPS performance during the performance cycle. At the time of
payout the value of Restricted shares is based on the market price of Common
Stock.
(b) Estimated future payouts are predicated upon the achievement of corporate
EPS over the period from January 1, 1995 to December 31, 1997. The
achievement of 100% of goals will result in a payout of the threshold and
target amounts (they are the same). Exceeding the goal by approximately 15%
will result in payment of the maximum amount.
15
<PAGE>
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
All proposals by stockholders intended to be presented at the next Annual
Meeting of Stockholders must be received by the Company by November 30, 1996, in
order to be considered for inclusion in the Company's Proxy Statement for the
1997 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 will vote on them in accordance with their best judgment.
All costs of soliciting proxies will be borne by the Company. In addition
to soliciting proxies by use of the mails, some of the officers and regular
employees of the Company (without extra compensation) may solicit proxies
personally and by telephone and telefax from brokerage houses and other
stockholders. In addition, the Company will reimburse the reasonable expenses
incurred by banks and brokers who hold shares in their names or in custody, or
in the names of nominees for others, in forwarding copies of the proxy material
to those persons for whom they hold such shares. The Company will pay the firm
of D. F. King & Co., Inc. a fee of $10,000 plus expenses for soliciting proxies.
By Order of the Board of Directors
MICHAEL T. TOMAINO
Secretary
Fairport, New York
March 28, 1996
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 stockholders. 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 Michael
T. Tomaino, Secretary, Goulds Pumps, Inc., 300 Willow Brook Office Park,
Fairport, New York 14450-4285.
16
