GORMAN RUPP CO Stock Compensation Disclosure
Note 13 – Stock Based Compensation
On April 25, 2024, the shareholders of the Company approved the 2024 Omnibus Incentive Plan ("2024 Plan"), which replaced the 2015 Omnibus Incentive Plan (“2015 Plan”) and 2016 Non-Employee Directors’ Compensation Plan (the “Directors’ Plan”). The 2024 Incentive Plan reserves for issuance under equity awards 800,000 common shares together with the 424,771 shares and the 14,500 shares that were then-remaining available under the 2015 Plan and the Directors’ Plan, respectively, at the time the 2024 Plan was approved. Under the 2024 Plan, the Company is authorized to grant restricted stock, restricted stock units, performance-based awards, stock options, stock appreciation rights, and other share based awards. At December 31, 2024, there were 1,222,717 common shares available for future grant under the 2024 Plan.
Restricted Stock Units ("RSUs") and Performance Share Units ("PSUs")
The Company has awarded Restricted Stock Units (“RSU’s) and Performance Stock Units (“PSU’s”) under the Plans. The following table summarizes RSU and PSU activity for the year ended December 31, 2024 under all Plans:
|
Number of Units |
Weighted Average Fair Value |
|||||||
|
Balance at beginning of the year |
233,420 | $ | 31.57 | |||||
|
Units granted |
151,991 | 35.92 | ||||||
|
Units vested |
(40,890 | ) | 32.56 | |||||
|
Units forfeited |
(20,110 | ) | 32.02 | |||||
|
Balance at the end of year |
324,411 | $ | 33.45 | |||||
RSUs are valued at the closing market price of the Company’s common shares on the grant date. The majority of RSUs vest in annual installments over a period of three years. The Company issues common shares from treasury upon the vesting of RSUs. The remaining weighted average vesting period of all non-vested RSUs is 0.8 years as of December 31, 2024.
PSUs are valued at the closing market price of the Company’s common shares on the grant date. PSUs vest after three years in amounts determined based on the Company’s achievement of appropriate performance metrics over a two-year performance period. The Company issues common stock from treasury upon the vesting of PSUs. The remaining weighted average vesting period of all non-vested PSUs is 1.1 years as of December 31, 2024.
Stock-Based Compensation Expense
Expense is recognized for all awards of stock-based compensation by allocating the aggregate grant date fair value over the vesting period. No expense is recognized for any RSUs or PSUs ultimately forfeited because recipients fail to meet vesting requirements. The Company recognized stock based compensation expense of $4.0 million, $3.3 million, and $3.0 million for the year ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, total unrecognized stock-based compensation expense related to non-vested RSUs and PSUs was $5.0 million, which is expected to be recognized over a weighted average period of approximately 1.4 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.