DEF 14A of Gorman Rupp Co
Filed Mar 25, 2024 · FY20230001193125-24-076013
FOR the election of each of the 2024 director nominees
FOR the election of each of the 2024 director nominees
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
(Proposal No. 1)
(Proposal No. 1) All Directors will be elected to hold office until the next Annual Meeting of Shareholders and until their successors are elected and qualified. Proxies received will be voted in the manner directed therein. If no such direction is provided, proxies received are intended to be voted in favor of fixing the number of Directors at eight and for the election of the nominees named below. Each of the Director nominees has indicated a willingness to serve if elected. However, in the event that any of the nominees should become unavailable, which the Board of Directors does not anticipate, proxies are intended to be voted in favor of fixing the number of Directors at a lesser number equal to the number of available Board-designated nominees or for the election of a substitute nominee or nominees designated by the Board of Directors, in the discretion of the persons appointed as proxy holders. If cumulative voting in the election of directors is invoked at a time when any of the nominees become unavailable, unless contrary instructions are given by a shareholder who signs a proxy, all votes represented by such proxy will be divided evenly among the available candidates nominated by the Board, except that, the proxies may be voted cumulatively for less than the entire number of candidates nominated by the Board if any situation arises which, in the opinion of the proxy holders, makes such action necessary or desirable. The Board of Directors determined not to nominate Charmaine R. Riggins for re-election as a Director at the Meeting, after considering potential commercial conflicts of interest that may arise related to a recent change in her employment. The Board of Directors has proposed that, upon the expiration of Ms. Riggins’ current term at the Meeting, the number of Directors constituting the Board of Directors be fixed at eight.
Director Nominees
Director Nominees
Director Nominees
| | Donald H. Bullock, Jr. Age: 64 Director of the Company since 2020 Independent |
Director Nominees
Donald H. Bullock Jr. is the retired Senior Vice President of Investor Relations of Eaton Corporation (“Eaton”), a New York Stock Exchange publicly-traded diversified industrial manufacturer that provides energy-efficient solutions to help customers manage electrical and mechanical power. Mr. Bullock worked for Eaton in various global business management, information technology and finance roles from 1998 until his retirement in 2019, previously serving as Vice President and General Manager, General Products Divisions from 2006 to 2011; Corporate Vice President, Asia Pacific from 2003 to 2006; Chief Information Officer and Vice President, Information Technology from 2000 to 2003 and Director, Finance from 1998 to 2000. Prior to joining Eaton, Mr. Bullock was employed by the Index Group, a general management consulting firm. Mr. Bullock is a senior executive with over 20 years of experience and qualifies as an “audit committee financial expert” under SEC rules. He has broad experience in international business operations, investor relations and information technology.
Director Nominees
| 2024 Proxy Statement | | | THE GORMAN-RUPP COMPANY | 3 |
Director Nominees
| | Jeffrey S. Gorman Age: 72 Director of the Company since 1989 Executive Chairman |
Director Nominees
Jeffrey S. Gorman is Executive Chairman of the Company, having served as Chairman of the Board since 2019. Mr. Gorman previously served as Chief Executive Officer of the Company from 1998 to 2021. He also served as President from 1998 to 2020 after having served as Senior Vice President since 1996. He also served as General Manager of Gorman-Rupp Pumps USA from 1989 through 2005 after service as Assistant General Manager from 1986 to 1988. Additionally, he held the office of Corporate Secretary from 1982 to 1990. Mr. Gorman is a member of the Board of Directors of Mechanics Bank, Mansfield, Ohio and former Chairman of the Ohio Chamber of Commerce. Mr. Gorman has been instrumental in continuing the Company’s development and growth for more than 30 years, especially with respect to its acquisitions and its international growth. He is highly knowledgeable about the pump industry and the Company’s products, customers and competitors.
Director Nominees
| | M. Ann Harlan Age: 64 Director of the Company since 2009 Independent |
Director Nominees
M. Ann Harlan is the retired Vice President and General Counsel of The J.M. Smucker Company (“Smucker”), a New York Stock Exchange (“NYSE”) publicly-traded food manufacturer. From January 1998 to January 2011, Ms. Harlan was a member of the Smucker executive management team responsible for setting and implementing corporate strategy and has broad experience with corporate governance issues and requirements of the NYSE, the Securities and Exchange Commission (“SEC”) and the Sarbanes-Oxley Act of 2002. In addition, from 2010 until 2023, Ms. Harlan served on the Board of University Hospitals Health System, Inc. From 2012 until 2019, she was a member of the Advisory Board of Gates Group Capital Partners. From 2010 until its sale to Archer Daniels Midland in 2015, Ms. Harlan was also a Director of Eatem Foods Company. Ms. Harlan also previously served on the Board of Directors of privately held FlavorX Corporation and on the Board of Directors of Cleveland Cliffs Inc., a NYSE listed steel and mining company (CLF). Ms. Harlan has 13 years of experience as senior legal counsel at Smucker, which has significant family ownership and family senior management generally comparable to the ownership structure of the Company. She has extensive mergers and acquisition experience with Smucker and 15 years prior related experience with a major law firm. She also has broad experience with public company governance issues, audit matters, executive compensation and equity compensation plan development and administration as well as human resources issues.
Director Nominees
| | Scott A. King Age: 49 Director of the Company since 2021 President and Chief Executive Officer |
Director Nominees
Scott A. King is President and Chief Executive Officer of the Company. In 2004, he joined Gorman-Rupp Pumps USA as Manufacturing Manager and progressed through multiple positions including Director of Manufacturing, Vice President of Operations, General Manager and Chief Operating Officer. Prior to joining the Company, Mr. King served in various capacities with Fortune 500 diversified industrial manufacturers. He is the past President of the Regional Manufacturing Coalition and a member of the Board of Directors for the Hydraulic Institute. Mr. King has been instrumental in the operational leadership of the Company for more than 15 years. He is highly knowledgeable about the pump industry and the Company’s products, customers and competitors.
Director Nominees
| 4 | THE GORMAN-RUPP COMPANY | | | 2024 Proxy Statement |
Director Nominees
| | Christopher H. Lake Age: 59 Director of the Company since 2000 Independent |
Director Nominees
Christopher H. Lake was President and Chief Operating Officer of SRI Quality System Registrar, an international third-party management system registrar and certification audit firm, from January 2006 until its sale in 2023, after having served as Vice President of Sales from February to December 2005. The firm had operations in the United States, Asia and the European Union. Mr. Lake led a regional consulting group that focused on operations and organizational development from 2001 through 2004 for banking, communications, and consumer product companies. Prior to 2001, Mr. Lake was also Principal and Industry Executive for two Fortune 500 companies. Mr. Lake has major corporate service and operations experience with large service, manufacturing, and technology companies. He also has extensive experience providing information technology management, marketing strategy, and business development services to large domestic and international corporations.
Director Nominees
| | Sonja K. McClelland Age: 52 Director of the Company since 2019 Independent |
Director Nominees
Sonja K. McClelland is the Executive Vice President, Treasurer, and Chief Financial Officer of Hurco Companies, Inc. (“Hurco”), a NASDAQ publicly-traded international industrial technology company that designs, manufactures and sells computerized machine tools. Ms. McClelland has worked for Hurco in various finance and accounting roles since September 1996 most recently serving as Executive Vice President since 2017; Treasurer and Chief Financial Officer since March 2014, Corporate Secretary from March 2014 to March 2021, and Principal Financial and Accounting Officer since her appointment as Corporate Controller and Assistant Secretary in November 2004. Prior to joining Hurco, Ms. McClelland was employed by Arthur Anderson LLP following her graduation from college. Ms. McClelland is a senior financial executive with nearly 30 years of experience in public accounting and financial reporting responsibilities and qualifies as an “audit committee financial expert” under SEC rules for service on the Audit Committee. She is a versatile business professional with a diverse background in corporate accounting and finance, manufacturing operations, investor relations, strategic planning, acquisitions and divestitures, complex international organizational structures, transfer-pricing and international tax strategies, foreign currency risk management, SEC reporting, compliance risk management, systems implementations, and corporate governance matters.
Director Nominees
| | Vincent K. Petrella Age: 63 Director of the Company since 2020 Independent |
Director Nominees
Vincent K. Petrella is the retired Executive Vice President, Chief Financial Officer and Treasurer of Lincoln Electric Holdings, Inc. (NASDAQ:LECO) — a role he held from 2004 to 2020. He held prior roles within the finance and internal audit functions at Lincoln Electric from 1995 through 2003 and began his career at an international public accounting firm. Lincoln Electric engages in the design, manufacture, and sale of welding, cutting, and brazing products worldwide. Mr. Petrella is currently a Director of Applied Industrial Technologies, Inc. (NYSE:AIT), a publicly-traded value-added distributor of industrial supplies, and Sotera Health Company (NASDAQ:SHC), a publicly-traded healthcare supplier. Mr. Petrella qualifies as an “audit committee financial expert” under SEC rules with his extensive experience in public accounting and financial reporting responsibilities. He also has broad experience with international acquisitions, business strategy and manufacturing operations.
Director Nominees
| 2024 Proxy Statement | | | THE GORMAN-RUPP COMPANY | 5 |
Director Nominees
| | Kenneth R. Reynolds Age: 65 Director of the Company since 2014 Independent |
Director Nominees
Kenneth R. Reynolds serves on the Board of Directors of Ariel Corporation and, in 2020 retired from being Ariel’s Executive Vice President and Treasurer. He previously served as its Chief Financial Officer from 1997 to 2016. Ariel has been a major designer and manufacturer of a wide variety of compressors for diverse global petroleum markets for over 50 years. Its compressors are in service worldwide in refineries, gas fields, pipeline service and gas gathering, making it a world leader in gas compression. Previously, Mr. Reynolds, a Certified Public Accountant, was a partner with a regional public accounting firm which he joined following his college graduation. Mr. Reynolds has over 30 years of financial systems management and reporting experience and qualifies as an “audit committee financial expert” under SEC rules for service on the Audit Committee. Additionally, Mr. Reynolds has extensive international Fortune 500 customer experience with major petroleum producers and capital goods manufacturers.
Non-Employee Director Compensation
Non-Employee Director Compensation The Compensation Committee is charged with oversight and periodic review of Non-Employee Director compensation and with recommending any changes to the entire Board of Directors. Directors who are employees of the Company (Mr. Jeffrey S. Gorman and Scott A. King) do not receive any compensation for service as Directors. Non-Employee Directors are compensated by the Company for their services as Directors through a combination of annual cash retainers and stock awards. The Company’s Non-Employee Directors compensation for 2023 consisted of annual cash retainers of $55,000 each and stock awards of 2,250 shares each effective as of July 3, 2023. To reflect their additional responsibilities, Chairs of the Compensation Committee and Governance and Nominating Committee received an additional retainer fee of $5,000, and the Chair of the Audit Committee received an additional retainer fee of $10,000. The Lead Independent Director received an additional retainer fee of $15,000. The Company has a stock ownership policy for its Non-Employee Directors to encourage meaningful stock ownership in the Company. The policy requires each Non-Employee Director to own shares of stock equal in value to five times his or her annual cash retainer, and prohibits most sales of shares unless the applicable minimum stock ownership requirement is met. Non-Employee Director Compensation Table The table below summarizes the total compensation paid for service by each of the Non-Employee Directors of the Company for the year 2023.
Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | | Donald H. Bullock, Jr.(2) | $60,000 | $64,080 | $124,080 | | M. Ann Harlan(3) | 70,000 | 64,080 | 134,080 | | Christopher H. Lake | 55,000 | 64,080 | 119,080 | | Sonja K. McClelland(4) | 65,000 | 64,080 | 129,080 | | Vincent K. Petrella(5) | 60,000 | 64,080 | 124,080 | | Kenneth R. Reynolds | 55,000 | 64,080 | 119,080 | | Charmaine R. Riggins(6) | 37,170 | 64,080 | 101,250 | | Rick R. Taylor(7) | 17,830 | - | 17,830 |
Non-Employee Director Compensation
| (1) Each Non-Employee Director received an award of 2,250 Common Shares (from the Company’s treasury shares) under The Gorman-Rupp Company 2016 Non-Employee Directors’ Compensation Plan. Each award of 2,250 Common Shares was made effective as of July 3, 2023 and had a market value of $28.48 per share as of the grant date, computed in accordance with FASB ASC Topic 718. |
Non-Employee Director Compensation
| (2) Mr. Bullock’s “Fees Earned or Paid in Cash” includes additional retainer fees of $5,000 for service as Chair of the Governance and Nominating Committee. |
Non-Employee Director Compensation
| (3) Ms. Harlan’s “Fees Earned or Paid in Cash” includes additional retainer fees of $15,000 for service as Lead Independent Director. |
Non-Employee Director Compensation
| (4) Ms. McClelland’s “Fees Earned or Paid in Cash” includes additional retainer fees of $10,000 for service as Chair of the Audit Committee. |
Non-Employee Director Compensation
| (5) Mr. Petrella’s “Fees Earned or Paid in Cash” includes additional retainer fees of $5,000 for service as Chair of the Compensation Committee. |
Non-Employee Director Compensation
| (6) Ms. Riggins was elected to the Board of Directors effective April 27, 2023. |
Non-Employee Director Compensation
| (7) Mr. Taylor retired from the Board of Directors effective April 27, 2023. |
Non-Employee Director Compensation
| 2024 Proxy Statement | | | THE GORMAN-RUPP COMPANY | 7 |
Compensation Highlights
| • | Annual Peer Group Compensation Market Assessments |
Overview
| • | Review and recommend the annual salaries, annual profit sharing and long-term incentive compensation determinations for the Executive Officers to the Board of Directors; and |
Overview
| • | Review the compensation of Non-Employee Directors (“Directors”) and submit any suggested recommendations for changes to the Directors for review. |
Elements of Compensation
Elements of Compensation The Company’s Officer compensation program consists of four elements: base salary, profit sharing, long-term incentive equity awards and a component of modest miscellaneous benefits. The Company has not entered into employment contracts with any of the Officers. Ownership of the Company’s Common Shares by the Officers has continually been considered a worthy goal within the Company to further align Officers’ interests with those of Shareholders. Toward that end, the Company sponsors opportunities to purchase Common Shares, including a partial Company match, aimed at encouraging the Officers, and substantially all other employees, to voluntarily invest in the Common Shares. The Company has a stock ownership policy which establishes minimum stock ownership requirements for its Officers, group presidents and other corporate and operating officers to encourage meaningful stock ownership in the Company. The policy requires each executive, operating president and designated key employees to own shares of stock equal in value ranging from multiples of one times to three times his or her base salary, and prohibits most sales of shares unless the applicable minimum stock ownership requirement is met. Base Salary — Base salaries are premised upon the relative responsibilities of the given Officers and industry surveys and related data. Initial salaries generally are set below competitive levels paid to comparable officers at other entities engaged in the same or similar businesses as the Company based upon publicly-available peer data, discussed below under “Annual Review”, and Company philosophy. Subsequently, actual salaries are adjusted periodically based on judgments of each person’s performance, qualifications, accomplishments and expected future contributions in his or her Officer role. Profit Sharing — The Company intentionally relies to a significant degree on annual incentive compensation in the form of profit sharing to attract and retain the Officers. This profit sharing opportunity, which is based on annual operating income, provides motivation for them to perform to the full extent of their individual abilities and as a team to build total Company profitability and shareholder value on a continuing, long-term basis. Long-term Incentive Equity Awards — Pursuant to The Company’s employee equity compensation plan, long-term equity incentive compensation is an element of compensation used to enhance the Company’s compensation program in combination with its succession planning for key personnel and to further align the interests of award recipients with shareholders. Equity incentive compensation has also been selected to facilitate the accumulation of additional Company shares of stock by those most accountable for the Company’s operating results and shareholder value. The Compensation Committee may grant equity awards conditioned upon achievement of appropriate performance metrics (Performance Stock Units or PSUs), as well as service-based awards (Restricted Stock Units or RSUs) to certain employees. Recipients of grants of PSU’s receive a target award of performance-based shares that vest at the end of a specified multi-year period, based on the levels of achievement of the performance goals established by the Compensation Committee, which may range from 0% to 150% of the target number of performance-based shares. The performance goals for performance-based shares granted during 2023 are based on targeted adjusted operating income growth and average operating working capital to sales, weighted 67% and 33%, respectively. The Committee believes the combination of these performance goals provides an appropriate balance between earnings-related and growth goals while also focusing on shareholder value growth. Service based restricted stock units enhance the Company’s ability to retain executives and provide value based on the Company’s stock price performance. In determining the mix of performance share units and service based restricted share units included in annual award grants, greater emphasis is placed on performance share units to further motivate executives to pursue goals associated with the Company’s financial performance. Each vested PSU and RSU represents the right to receive one Common Share of the Company. In determining the target amount of PSUs, the number of RSUs and the relative mix of the two awards to be granted to our Executive Officers, the Compensation Committee takes into account several factors, including our Chief Executive Officer’s recommendation for the other Executive Officers, our short-term and long-term financial and strategic objectives, the Executive Officer’s relative job scope, individual performance history and prior and anticipated future contributions to the Company. After considering these factors, the Compensation Committee determines the amount of PSUs and RSUs to be granted at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. Under certain circumstances, including a restatement of financial results by the Company, the grantee may be required to return to the Company share awards and/or pretax income derived from any disposition of shares previously received if the performance shares would not have been earned based upon the restated financial results. To this end, the Board of Directors approved a Clawback Policy which is included as an exhibit in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The two-year performance period for PSUs granted to the Officers in 2022 concluded on December 31, 2023. The performance goals for the 2022-2023 performance period were based on targets for compound annual growth of adjusted operating income and shareholders’ equity growth, weighted 50% each. On February 22, 2024, the Compensation Committee reviewed the Company’s financial results for the two-year period ended December 31, 2023 as compared to the performance goals, and determined that adjusted operating income growth and shareholders’ equity growth both exceeded the maximum goals. Accordingly, if the Officers remain in service to the Company through the December 31, 2024 vesting date, performance-based shares will be awarded to the Officers at 150% of the target under the 2022 grants with amounts as follows: Scott A. King- 9,243 Common Shares; James C. Kerr- 7,395 Common Shares; and Brigette A. Burnell- 6,778 Common Shares. Other Compensation — The Officers receive a variety of miscellaneous benefits, the value of which is represented for the named Executive Officers under the caption “All Other Compensation” in the Summary Compensation Table. These benefits include taxable life insurance, and Company contributions to the Christmas Savings Plan, the 401(k) Plan, and certain partial matching contribution opportunities under the Employee Stock Purchase Plan. The Company also sponsors a defined benefit pension plan in which two of the Company’s Executive Officers participate as explained under the caption “Pension Benefits.” Stock Ownership — The Company has long encouraged the Officers to voluntarily invest in the Company’s Common Shares. As a consequence, the Company makes the purchase of its Common Shares convenient, in some cases with partial cash matching contributions from the Company, and in all cases without brokers’ fees or commissions, under an Employee Stock Purchase Plan, a 401(k) Plan and a Dividend Reinvestment Plan. Although the purchase opportunities available through these plans do not constitute elements of Officer compensation, all of the current Officers are shareholders and participate in one or more of the foregoing plans.
Elements of Compensation
The Committee has the authority if needed to consult with outside accounting, legal and compensation advisors as appropriate in arriving at compensation recommendations, subject to approval by the Board of Directors. The compensation advisors report directly to the Compensation Committee, and the Compensation Committee may replace the advisors or hire additional advisors if needed. The advisors attend meetings of the Compensation Committee, as requested, and communicate with the Compensation Committee between meetings; however, the Compensation Committee makes all decisions regarding the compensation of the Company’s Executive Officers. In 2023, the Compensation Committee retained independent compensation advisor Semler Brossy Consulting Group (“Semler Brossy”). Semler Brossy provided market compensation information from public proxy data, and analysis regarding the Company’s compensation of Executive Officers relative to peers, including low, mean, median and high compensation ranges. The Compensation Committee reviews the services provided by its third-party advisor and believes that Semler Brossy is independent in providing executive compensation consulting services. The Compensation Committee conducted a specific review of its relationship with Semler Brossy, and determined that Semler Brossy’s work for the Committee in 2023 did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Act, or under applicable rules and regulations of the SEC and NYSE. Prior to the Company’s annual February Board meeting, the Committee reviews with the Chief Executive Officer the recommended annual base salary for each of the Executive Officers (other than the Chief Executive Officer and Executive Chairman). The Committee independently reviews the base salary for the Chief Executive Officer and Executive Chairman and develops a recommendation therefor. These salary reviews include consideration of the fact that a significant component of total compensation is variable, performance-based profit sharing. The Committee then reports the results of its Executive Officer compensation reviews and recommendations to the Board of Directors. During October 2023, the Committee reviewed updated peer information compensation details provided by Semler Brossy for 15 other capital goods manufacturing companies listed below. The companies in this peer group are reviewed from time to time and may be changed to account for differences between the Company and specific peers. The peer group is unchanged from the peer group used in 2022.
Elements of Compensation
These peer companies reflect similar size, with median revenue of approximately $736 million and annual revenue ranging from approximately $285 million to $2.1 billion, with The Gorman-Rupp Company ranking in the 29th percentile in annual revenue. The Committee also took into account the favorable outcome of the shareholders’ advisory vote on executive compensation at the Company’s 2023 Annual Meeting of Shareholders. The Board, based on the Committee’s recommendation, approved base salary increases for Executive Officers reflecting the Board’s assessment of all the factors described above. Following the end of each year and the final preparation of the Company’s audited financial statements, management calculates the total amount of profit sharing available for awarding to the Executive Officers based on the Company’s achieved operating income and the award percentage determined at the beginning of the year. The Chief Executive Officer then determines a recommended allocation of the available profit sharing award pool among the Executive Officers based on the respective Executive Officer’s prior profit sharing award history and their current year progress assessment. The Committee reviews with the Chief Executive Officer the recommended profit sharing award for each of the Executive Officers (other than the Chief Executive Officer and Executive Chairman). The Committee independently reviews the profit sharing award for the Chief Executive Officer and Executive Chairman and develops a recommendation therefor. These profit sharing reviews include consideration of the Chief Executive Officer’s progress assessments of the other Officers, and the Committee’s independent progress assessment of the Chief Executive Officer and the Company’s prior profit sharing award history. The Committee then reports the results of its profit sharing reviews and recommendations for the Executive Officers to the Board of Directors for its consideration and approval. During 2023, the Compensation Committee of the Board of Directors of the Company approved grants of PSUs for the Company’s Executive Officers with target amounts as follows: Scott A. King — 10,485 performance-based Common Shares; James C. Kerr — 6,815 performance-based Common Shares; and Brigette A. Burnell — 6,116 performance-based Common Shares. At the time of the 2023 grant, the Compensation Committee established two-year performance goals for the period ending December 31, 2024 based on compound annual growth for adjusted operating income and average operating working capital to sales, weighted 67% and 33% respectively, which were expected to be very challenging to achieve, requiring significant growth from 2022 levels. These PSUs have a three-year vesting period ending December 31, 2025. On February 22, 2023, the Compensation Committee of the Board of Directors of the Company approved RSU awards for the Company’s Executive Officers with amounts as follows: Scott A. King — 6,990 Common Shares; James C. Kerr — 2,796 Common Shares; and Brigette A. Burnell — 2,621 Common Shares. These RSUs vest in annual installments over a three-year vesting period based on continued service of the grantee. The PSU and RSU awards also may vest to a certain extent in the event of a Change of Control (as defined in the Company’s equity compensation plan) of the Company or the death, disability or retirement of the grantee. See “Post-Employment Value of Equity Incentive Compensation.”
Summary Compensation Table
Summary Compensation Table The table below contains information pertaining to the annual compensation of the Company’s principal executive officer, its principal financial officer, and its other named Executive Officers for calendar years 2023, 2022, and 2021.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3) | All Other Compensation ($) (4) | Total ($) | | Jeffrey S. Gorman(5) Executive Chairman | 2023 | 379,167 | 179,300 | - | 125,609 | 25,256 | 709,332 | | | 2022 | 400,000 | 100,000 | - | - | 30,107 | 530,107 | | | 2021 | 450,000 | 220,000 | 250,000 | 125,068 | 33,042 | 1,078,110 | | Scott A. King President and Chief Executive Officer | 2023 | 583,333 | 537,900 | 500,000 | 75,629 | 10,986 | 1,707,848 | | | 2022 | 500,000 | 390,000 | 813,120 | - | 9,698 | 1,712,818 | | | 2021 | 370,833 | 192,000 | 385,150 | 33,242 | 6,870 | 988,095 | | James C. Kerr(6) Executive Vice President and Chief Financial Officer | 2023 | 366,833 | 371,151 | 275,000 | | 32,031 | 1,045,015 | | | 2022 | 351,667 | 257,000 | 255,000 | - | 32,407 | 896,074 | | | 2021 | 332,083 | 169,000 | 296,090 | - | 22,406 | 819,579 | | Brigette A. Burnell(7) Executive Vice President, General Counsel and Corporate Secretary | 2023 | 335,833 | 317,361 | 250,000 | | 25,487 | 928,681 | | | 2022 | 320,833 | 227,000 | 344,530 | - | 24,890 | 917,253 | | | 2021 | 285,417 | 145,000 | 246,090 | - | 21,443 | 697,950 |
Summary Compensation Table
| (1) The amounts in this column reflect the Executive Officer’s annual profit sharing compensation based on operating income. |
Summary Compensation Table
| (2) The amounts in this column reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 of the underlying shares granted during the reported years, which includes both performance-based and service-based shares. For the performance-based share amounts reported in this column, such amounts are based on the probable outcome of the relevant performance conditions as of the grant date and may not reflect the value that is ultimately received by the named Executive Officer in respect of such grants. Assuming that the highest level of performance conditions are achieved, the aggregate grant date fair value of the 2023 PSU awards reported in this column would be: Scott A. King, $450,000; James C. Kerr, $292,500; and Brigette A. Burnell, $262,500. |
Summary Compensation Table
| (3) The amounts reflect the non-cash change in pension value recognized for financial statement reporting purposes for the fiscal year ended December 31, 2023, in accordance with SEC Release Nos. 33-8732A; 34-54302A. In computing the change in pension value, the Company applies the assumptions used for financial reporting purposes and a measurement date of December 31 for benefit plan determinations. The change in pension value is the aggregate increase(decrease) in the actuarial present value of the respective Executive Officer’s accumulated benefit measured on an annual basis from the plan measurement date in 2021 to the measurement date in 2023. The Company does not offer nonqualified deferred compensation earnings to any of its employees. For 2023, Mr. Gorman’s and Mr. King’s pension values increased by $125,609 and $75,629, respectively. |
Summary Compensation Table
| (4) Amounts include taxable life insurance and tax preparation fees, as well as Company contributions to the Company’s 401(k) Plan, Employee Stock Purchase Plan, Health Savings Account and Christmas Savings Plan. |
Summary Compensation Table
| (5) Mr.Gorman’s “All Other Compensation” includes $19,250, $21,575 and $25,000 for calendar years 2023, 2022 and 2021, respectively, for tax planning and preparation fees. |
Summary Compensation Table
| (6) Mr. Kerr’s “All Other Compensation” includes $25,253, $25,529, and $15,760 for calendar years 2023, 2022 and 2021, respectively for the Company’s contributions to his account in the enhanced 401(k) Plan. |
Summary Compensation Table
| (7) Ms. Burnell’s “All Other Compensation” includes $21,052, $20,155, and $15,810 for calendar years 2023, 2022, and 2021, respectively, for the Company’s contributions to her account in the enhanced 401(k) Plan. |
Summary Compensation Table
| 20 | THE GORMAN-RUPP COMPANY | | | 2024 Proxy Statement |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table sets forth information regarding the PSU and RSU awards made during 2023 to the Company’s named Executive Officers.
Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Equity Incentive Plan Awards (1) (2) | | | | | | | | Performance Based | | | | | | Name | Grant Date | Threshold (#) | Target (#) | Maximum (#) | All other Stock Awards: Number of Shares of Stock units (#) (3) | Grant Date Fair Value of Stock and Options Awards ($) (4) | | Scott A. King | 2/22/23 | 5,242 | 10,485 | 15,727 | 6,990 | 500,000 | | James C. Kerr | 2/22/23 | 3,407 | 6,815 | 10,222 | 2,796 | 275,000 | | Brigette A. Burnell | 2/22/23 | 3,058 | 6,116 | 9,174 | 2,621 | 250,000 |
Grants of Plan-Based Awards
| (1) These amounts reflect the threshold, target and maximum number of performance-based share units granted on February 22, 2023 under The Gorman-Rupp Company 2015 Omnibus Incentive Plan (the “2015 Incentive Plan”). These shares vest on December 31, 2025 based upon the achievement of pre-determined financial performance goals for adjusted operating income growth and average operating working capital to sales over a two-year performance period ending December 31, 2024 and the grantee’s continued service through the end of the vesting period. |
Grants of Plan-Based Awards
| (2) Except for certain limited circumstances as set forth in the 2015 Incentive Plan (such as death or a Change in Control), all PSUs granted under the 2015 Incentive Plan vest at the end of a three-year period, and the amount vested and paid is based on the levels of achievement of performance goals established by the Compensation Committee over a two-year performance period and the grantee’s continued service though the end of the vesting period. For the 2023 PSU grants, the two performance goals established for the January 1, 2023 through December 31, 2024 performance period are specific ranges of adjusted operating income growth and average operating working capital to sales, weighted 67% and 33%, respectively. The range of future payouts is 0% to 150% for each performance goal, with the threshold payout occurring at 50%, the target payout occurring at 100% and the maximum payout occurring at 150%. Grantees under the 2015 Incentive Plan do not have any of the rights of a shareholder with respect to any shares underlying PSUs, including the right to vote or receive dividends, until determination of the achievement of the performance goals and payment of the applicable shares after the end of the vesting period in accordance with the 2015 Incentive Plan. |
Grants of Plan-Based Awards
| (3) These amounts represent service-based restricted share units (RSUs) granted under the 2015 Incentive Plan. Except for certain limited circumstances as set forth in the 2015 Incentive Plan (such as death or a Change in Control), these RSUs vest in annual installments over a three year vesting period based on the continued service of the grantee. |
Grants of Plan-Based Awards
| (4) The value of PSUs is calculated assuming achievement of the target level of performance based on the closing market value of the Company’s Common Shares on the grant date in accordance with FASB ASC Topic 718. |
Grants of Plan-Based Awards
| 2024 Proxy Statement | | | THE GORMAN-RUPP COMPANY | 21 |
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table sets forth information regarding the number and value of performance-based share units and service-based restricted share units granted to the Company’s named Executive Officers and outstanding on December 31, 2023.
Outstanding Equity Awards at December 31, 2023
| | | Stock Awards | | | | | Name | Grant Date | Number of Shares of Units of Stock That Have Not Been Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (3) | | Scott A. King | 2/22/23 | 6,990 | 248,355 | 5,242(4) | 186,248 | | | 2/24/22 | 10,739 | 381,557 | 9,243(5) | 328,404 | | James C. Kerr | 2/22/23 | 2,796 | 99,342 | 3,407(4) | 121,051 | | | 2/24/22 | 1,370 | 48,676 | 7,395(5) | 262,744 | | Brigette A. Burnell | 2/22/23 | 2,621 | 93,124 | 3,058(4) | 108,651 | | | 2/24/22 | 3,278 | 116,467 | 6,778(5) | 240,822 |
Outstanding Equity Awards at December 31, 2023
| (1) Amounts shown in this column represent RSU awards. Subject to certain exceptions (such as death or a Change in Control), the RSU awards vest in annual installments over a period of three years based on the continued service of the grantee. |
Outstanding Equity Awards at December 31, 2023
| (2) Amounts shown in this column represent PSU awards. |
Outstanding Equity Awards at December 31, 2023
| (3) The values equal the number of shares underlying the RSUs and PSUs indicated, multiplied by the closing price per share of the Company’s Common Shares of $35.53 on December 31, 2023. |
Outstanding Equity Awards at December 31, 2023
| (4) Represents 2023 PSU grants. These PSU’s vest on December 31, 2025 based upon the continued service of the grantee and achievement of pre-determined performance goals for the performance period ending December 31, 2024. The number and value of the shares underlying the PSUs reflected in the table are based on achievement of the threshold level of performance. |
Outstanding Equity Awards at December 31, 2023
| (5) Represents 2022 PSU grants. These PSU’s vest on December 31, 2024 based upon the continued service of the grantee and achievement of pre-determined performance goals for the performance period ending December 31, 2023. On February 22, 2024, the Compensation Committee reviewed the Company’s financial results over the performance period compared to the performance goals and determined that both adjusted operating income growth as well as shareholder’s equity growth were achieved at levels above maximum goals. The number and value of the shares underlying the PSUs reflected in the table are based on achievement of the maximum level of performance. |
Outstanding Equity Awards at December 31, 2023
| 22 | THE GORMAN-RUPP COMPANY | | | 2024 Proxy Statement |
Pension Benefits
Pension Benefits The pension plan in which two of the Company’s Executive Officers participate is a defined benefit plan covering certain U.S. employees of the Company. New entry into this plan terminated as of December 31, 2007 and, effective January 1, 2008, an enhanced 401(k) Plan benefit was adopted for new employees hired thereafter. The pension plan offers participants upon retirement the option to choose between monthly benefits or a single lump sum payment. The monthly pension benefits are equal to the product of 1.1% of the participant’s final average monthly earnings (based on compensation during the final ten years of service) and the number of years of credited service. A single lump sum amount is equal to the present value of the final monthly pension benefit multiplied by a single premium immediate annuity rate as defined by the plan. Historically, nearly all participants in the plan elect the single lump sum amount at retirement. The single lump sum payment option is used for financial reporting purposes for the fiscal year ended December 31, 2023, computed as of the plan measurement date of December 31, 2023. Actuarial assumptions used by the Company in determining the present value of the accumulated benefit amount consist of a 2.0% ultimate rate, a 4.69% discount rate and the Pri-2012 Total Dataset Employee Mortality with Scale MP-2021 for 12/31/23 remeasurement. Base compensation in excess of $305,000 is not taken into account under the plan. Vesting occurs after five years of credited service.
Pension Benefits
| 2024 Proxy Statement | | | THE GORMAN-RUPP COMPANY | 23 |
Pension Benefits Table
Pension Benefits Table The table below summarizes the number of years of credited service and the present value of accumulated pension benefit for two named Executive Officers of the Company who participated in the pension plan for calendar year 2023.
Pension Benefits Table
| Name | Plan Name | Year | Number of Years Credited Service (1) (#) | Present Value of Accumulated Benefit ($) (2) | Payments During Last Fiscal Year ($) | | Jeffrey S. Gorman | The Gorman-Rupp Company Retirement Plan | 2023 | 45 | 2,347,778 | - | | Scott A. King | The Gorman-Rupp Company Retirement Plan | 2023 | 19 | 386,624 | - |
Pension Benefits Table
| (1) The credited years of service are determined as of a measurement date of December 31, 2023. |
Pension Benefits Table
| (2) The amount represents the actuarial present value of accumulated benefit based on a single sum payment computed as of the plan measurement date of December 31, 2023. The retirement age is assumed to be the normal retirement age of 65 as defined in the plan. |
Pension Benefits Table
| 24 | THE GORMAN-RUPP COMPANY | | | 2024 Proxy Statement |
Pay Versus Performance
Pay Versus Performance The following table summarizes compensation paid to the Company’s principal executive officer (“PEO”) as set forth in the Summary Compensation Table, compensation actually paid to the PEO, average compensation paid to the Company’s Non-PEO named executive officers (“NEOs”) as set forth in the Summary Compensation Table, and average compensation actually paid to the Company’s Non-PEO NEOs, each as calculated in accordance with SEC rules, and certain Company and peer group performance measures for the periods indicated:
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based on (3): | | 000’s | | | Year | Summary Compensation Table Total for PEO ($) (1) | Compensation Actually Paid to PEO ($) (2) | Average Summary Compensation Table Total for Non-PEO NEOs ($) (1) | Average Compensation Actually Paid to Non-PEO NEOs ($) (2) | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) | Net Income ($) (4) | Operating Income ($) (4) | | 2023 | 1,707,848 | 2,109,366 | 894,343 | 1,029,150 | 102.92 | 152.18 | 34,951 | 87,041 | | 2022 | 1,712,818 | 1,231,468 | 781,145 | 450,930 | 72.41 | 120.71 | 11,195 | 40,183 | | 2021 | 1,078,110 | 920,864 | 835,208 | 823,730 | 123.11 | 141.86 | 29,851 | 39,356 | | 2020 | 1,170,814 | 655,926 | 612,641 | 437,188 | 88.13 | 115.38 | 25,188 | 35,753 |
Pay Versus Performance
| (1) For 2020 and 2021, the PEO was Jeffrey S. Gorman. Scott A. King was promoted to Chief Executive Officer on January 1, 2022 and was the PEO for 2022 and 2023. For 2020 and 2021, Non-PEO NEOs include Scott A. King, James C. Kerr and Brigette A. Burnell. For 2022 and 2023, Non-PEO NEOs include Jeffrey S. Gorman, James C. Kerr and Brigette A. Burnell. |
Pay Versus Performance
| (2) The “Reconciliation of Actual Compensation Paid” table below details the additions to and deductions from the Summary Compensation Table totals to calculate the Compensation Actually Paid amounts. |
Pay Versus Performance
| (3) Represents cumulative shareholder total returns (assuming reinvestment of dividends) on $100 invested on December 31, 2019 through December 31, 2023 in the Company’s common shares and the Peer Group, S&P Industrial Machinery index. |
Pay Versus Performance
| (4) 2022 and 2023 results include the acquisition of Fill-Rite, a division of Tuthill, which was acquired on May 31, 2022. As further described in the Company’s Form 10-K, Fill-Rite’s results are included in the Company’s results beginning June 1, 2022. Certain one-time acquisition costs, as well as amortization of the set up in value of acquired inventories and backlog, are also included in the 2022 results. |
CEO Pay Ratio
CEO Pay Ratio Below is: (i) the 2023 annual total compensation of our CEO; (ii) the 2023 annual total compensation of our median employee; (iii) the ratio of the annual total compensation of our CEO to that of our median employee; and (iv) the methodology the Company used to calculate the CEO pay ratio:
CEO Pay Ratio
| CEO Pay Ratio | | | CEO Annual Total Compensation | $1,707,848 | | Median Employee Annual Total Compensation | $63,773 | | CEO to Median Employee Pay Ratio | 26.8 to 1 |
Calculated CEO Pay Ratio —
Calculated CEO Pay Ratio — After identifying the median employee based on total cash compensation, the Company calculated annual total compensation for such employee using the same methodology used for the CEO for 2023 as set forth in the Summary Compensation Table in this Proxy Statement. The Company believes its executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance shareholder value and demonstrate a commitment to internal pay equity. The Compensation Committee monitors the relationship between the pay of our Executive Officers and the pay of our non-executive employees.
Calculated CEO Pay Ratio —
| 2024 Proxy Statement | | | THE GORMAN-RUPP COMPANY | 27 |
Calculated CEO Pay Ratio —
The following table sets forth information pertaining to the beneficial ownership of the Company’s Common Shares as of February 1, 2024, except as otherwise noted, by (i) each Director and each person nominated for election as a Director, (ii) each Officer named in the summary compensation table, (iii) Directors and Executive Officers of the Company as a group, and (iv) any person who is known to the Company to be a beneficial owner of more than five percent of the Company’s outstanding Common Shares. The address of each of the Company’s Directors, nominees for Director and Executive Officers is in care of The Gorman-Rupp Company, P.O. Box 1217, Mansfield, Ohio 44901.
Calculated CEO Pay Ratio —
| Name and Address | Amount and Nature of Beneficial Ownership(1) | Percent of Outstanding Shares | | Independent Directors and Nominees: | | | | Donald H. Bullock, Jr. | 9,500 | * | | M. Ann Harlan | 25,004 | * | | Christopher H. Lake | 37,289 | * | | Sonja K. McClelland | 9,170 | * | | Vincent K. Petrella | 10,200 | * | | Kenneth R. Reynolds | 28,750 | * | | Charmaine R. Riggins | 3,750 | * | | Named Executive Officers: | | | | Jeffrey S. Gorman | 2,750,842(2) | 10.5% | | Scott A. King | 39,969(3) | * | | James C. Kerr | 24,621(4) | * | | Brigette A. Burnell | 20,459(5) | * | | All Directors and Executive Officers as a group (11 persons): | 2,959,554(6)(7) | 11.3% | | Other Principal Beneficial Owners: | | | | Gayle G. Green(8)(13) PO Box 222 Wooster, OH 44691 | 2,500,510 | 9.6% | | The Vanguard Group(9)(13) 100 Vanguard Blvd. Malvern, PA 19355 | 2,292,231 | 8.8% | | Blackrock, Inc.(10)(13) 55 East 52nd Street New York, NY 10055 | 1,709,735 | 6.5% | | GAMCO Investors, Inc.(11)(13) One Corporate Center Rye, NY 10580 | 1,597,625 | 6.1% | | Dimensional Fund Advisors LP(12)(13) Building One 6300 Bee Cave Road Austin, TX 78746 | 1,321,685 | 5.0% |
Calculated CEO Pay Ratio —
| * Represents less than 1% of the outstanding shares. |
Calculated CEO Pay Ratio —
| 28 | THE GORMAN-RUPP COMPANY | | | 2024 Proxy Statement |
Calculated CEO Pay Ratio —
| (1) Reported in accordance with the beneficial ownership rules of the SEC under which a person is deemed to be the beneficial owner of a security if he or she has or shares voting power or investment power in respect of such security. Accordingly, the amounts shown in the table do not purport to represent beneficial ownership for any purpose other than compliance with the SEC reporting requirements. Voting power or investment power with respect to shares reflected in the table is not shared with others except as otherwise indicated. |
Calculated CEO Pay Ratio —
| (2) Includes 297,076 shares beneficially owned by Mr. Gorman’s wife and 743,643 shares beneficially owned by his children and grandchildren. Mr. Gorman considers that he shares the voting and investment power with respect to all of the foregoing shares, for purposes of reporting his beneficial ownership of common shares, but disclaims beneficial ownership of all of the shares referred to in this note (2), except to the extent of his pecuniary interest therein. |
Calculated CEO Pay Ratio —
| (3) Includes 5,400 common shares issuable upon vesting of restricted stock units within 60 days of February 1, 2024. |
Calculated CEO Pay Ratio —
| (4) Includes 1,134 common shares issuable upon vesting of restricted stock units within 60 days of February 1, 2024. |
Calculated CEO Pay Ratio —
| (5) Includes 1,761 common shares issuable upon vesting of restricted stock units within 60 days of February 1, 2024. |
Calculated CEO Pay Ratio —
| (6) Includes 8,295 common shares issuable upon vesting of restricted stock units within 60 days of February 1, 2024. |
Calculated CEO Pay Ratio —
| (7) Includes 1,040,719 shares as to which voting and investment power are shared. |
Calculated CEO Pay Ratio —
| (8) Includes 5,922 shares beneficially owned by Ms. Green’s husband and 522,719 shares beneficially owned by her children. Ms. Green considers that she shares the voting and investment power with respect to all of the foregoing shares, for purposes of reporting her beneficial ownership of common shares, but disclaims beneficial ownership of all of the shares referred to in this note (8), except to the extent of her pecuniary interest therein. Ms. Green is the sister of Mr. Jeffrey S. Gorman. |
Calculated CEO Pay Ratio —
| (9) Based on a Schedule 13G/A filed with the SEC on February 13, 2023. The filing indicates that, as of December 31, 2023, The Vanguard Group had beneficial ownership of 2,292,231 shares, including shared voting power over 20,174 shares, sole dispositive power over 2,251,924 shares and shared dispositive power over 40,307 shares. |
Calculated CEO Pay Ratio —
| (10) Based on a Schedule 13G/A filed with the SEC on January 29, 2024. The filing indicates that, as of December 31, 2023, Blackrock, Inc. had beneficial ownership of 1,709,735 shares, including sole voting power over 1,661,721 shares and sole dispositive power over 1,709,735 shares. |
Calculated CEO Pay Ratio —
| (11) GAMCO Investors, Inc. is a diversified asset manager and financial services company. Based on a Schedule 13D/A filed with the SEC on September 19, 2012. The filing indicates that Gabelli Funds, LLC had beneficial ownership of 873,531 shares, including sole voting power over 873,531 shares and sole dispositive power over 873,531 shares, GAMCO Asset Management Inc. had beneficial ownership of 668,390 shares, including sole voting power over 662,140 shares and sole dispositive power over 668,390 shares, and Teton Advisors, Inc. had beneficial ownership of 55,704 shares, including sole voting power over 55,704 shares and sole dispositive power over 55,704 shares. The shares reported above have been adjusted to reflect the 5-for-4 stock split effective December 10, 2013. |
Calculated CEO Pay Ratio —
| (12) Based on a Schedule 13G/A filed with the SEC on February 9, 2023. The filing indicates that, as of December 31, 2023, Dimensional Fund Advisors LP had beneficial ownership of 1,321,685 shares, including sole voting power over 1,290,854 shares and sole dispositive power over 1,321,685 shares. |
Calculated CEO Pay Ratio —
| (13) Applicable percentage ownership is based upon 26,193,998 of the Company’s outstanding Common Shares as of December 31, 2023. |