Filed by the Registrant ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 ☐ Preliminary Proxy Statement

 ☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒ Definitive Proxy Statement

 ☐ Definitive Additional Materials

 ☐ Soliciting Material under §240.14a-12

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Fellow Stockholders:

We navigated through many challenges in 2020 and I am proud of the courage, compassion and commitment demonstrated by our global team members throughout the year. Despite the many personal and operational difficulties caused by the COVID-19 pandemic, our people focused their efforts on creating an outstanding experience for our customers, improving our culture of belonging and driving profitable growth in our key technologies and services:

 

As we close 2020 and look to the future, we are thinking and acting more aggressively to create an inflection point in operating results as we continue to build a high-performing process solutions business serving essential markets. Together our actions have created a strong culture, a more sustainable earnings stream due to a higher quality of revenue, and a foundation to accelerate growth and operating performance.

You are cordially invited to attend the SPX FLOW, Inc. (“SPX FLOW”) Annual Meeting of Stockholders on May 12, 2021 at 8:00 a.m. (Eastern Time), at the offices of SPX FLOW, 13320 Ballantyne Corporate Place, Charlotte, North Carolina 28277. All SPX FLOW stockholders of record at the close of business on March 15, 2021 are welcome to attend the Annual Meeting, but it is important that your shares are represented at the Annual Meeting even if you do not plan to attend. To ensure you will be represented, as soon as possible please vote by telephone, mail, or online.

Given the ongoing pandemic, we will continue to take precautionary measures to ensure the health and well-being of our employees, visitors and communities and ask that you also make a safe, comfortable choice regarding whether to attend our in-person meeting. On behalf of the Board of Directors and our leadership team, I would like to express our appreciation for your continued interest in SPX FLOW.

Sincerely,

Marcus G. Michael

 

You can vote at the Annual Meeting in person or by proxy if you were a stockholder of record at the close of business on March 15, 2021. You may revoke your proxy at any time prior to its exercise at the Annual Meeting.

This year, we are again electronically disseminating Annual Meeting materials to some of our stockholders, as permitted under the “Notice and Access” rules approved by the Securities and Exchange Commission. Stockholders for whom Notice and Access applies will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access Annual Meeting materials via the internet. The Notice also provides instructions on how to obtain paper copies if preferred.

By Order of the Board of Directors,

Peter J. Ryan

Charlotte, North Carolina

Please enjoy this overview of our 2020 performance, corporate governance highlights, sustainability efforts and executive compensation practices. We encourage you to read the entire Proxy Statement before casting your vote.

Even if you plan to attend the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) in person, we encourage you to vote in advance of the meeting via one of the following voting methods:

 

 

Proxy Summary

We are committed to corporate governance and continue to monitor and implement best practices to enhance our governance model. The practices set forth below provide a framework for effective governance to promote the long-term interest of our stockholders, while strengthening the Board’s and management’s accountability.

 

Across SPX FLOW, we are making meaningful improvements to make our world safer, healthier and more sustainable. When it comes to sustainability, the company is focused in several different areas:

Over the coming months, SPX FLOW will publish Solutions That Matter - our first ever environmental, social and governance report. The report will focus on five areas:

 

For more information regarding our ongoing commitment to sustainability, please read our Supplier Code of Conduct, Global Human Rights Policy and Environmental, Health & Safety Policy and Guiding Practices on our website (www.spxflow.com).

Below is a summary of executive compensation practices we have adopted and those we avoid in order to align our programs with stockholders’ long-term interests and recognized best practices:

 

Ten directors currently serve on our Board of Directors. At the annual meeting in 2018, the stockholders approved an amendment to the SPX FLOW certificate of incorporation to phase out the classification of the Board of Directors and the Company implemented that amendment beginning in 2019. Beginning in the 2021 annual meeting, all directors will be up for election and eligible to serve one-year terms.

At the Annual Meeting, you will be asked to elect nine directors to be elected to serve for a term expiring at the 2022 annual meeting. Mr. Fullwood will retire from the Board of Directors effective at the commencement of the Annual Meeting.

Upon the recommendation of the Nominating and Governance Committee, the Board of Directors has nominated Majdi B. Abulaban, Anne K. Altman, Patrick D. Campbell, Robert F. Hull, Jr., Marcus G. Michael, Jonathan M. Pratt, Sonya M. Roberts, Suzanne B. Rowland. and David V. Singer for election to serve for a term expiring at the 2022 annual meeting of stockholders, until a qualified successor director has been elected, or until he or she resigns, retires or is removed by the stockholders for cause. Each of these nominees is a current SPX FLOW director and Mr. Hull is the independent Chairman of the Board of Directors.

Each nominee has agreed to tender, promptly following his or her election, an irrevocable resignation effective upon his or her failure to receive the required vote for re-election at the next meeting at which he or she would face re-election and the acceptance of such resignation by the Board of Directors, in accordance with our Corporate Governance Guidelines. Your shares will be voted as you specify on the enclosed proxy card. If you do not specify how you want your shares voted, we will vote them FOR the election of each of Messrs. Abulaban, Campbell, Hull, Michael, Pratt and Singer and Ms. Altman, Ms. Roberts and Ms. Rowland. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, your shares will be voted FOR that other person. The Board of Directors does not anticipate that any of the nominees will be unable to serve.

Our director nominees support the Company with an effective mix of experience, diversity and skills. See pages 5-7 for more information about each of our director nominees.

 

Proposal No. 1 — Election of Directors

 

Proposal No. 1 — Election of Directors

Proposal No. 1 — Election of Directors

As part of its ongoing commitment to strong corporate governance, the Board of Directors has codified its corporate governance practices into a set of Corporate Governance Guidelines. These guidelines assist the Board of Directors in the exercise of its responsibilities and may be amended by the Board of Directors from time to time. Our Corporate Governance Guidelines comply with the applicable requirements of the listing standards of the New York Stock Exchange (“NYSE”) and are available on our website (www.spxflow.com).

We have adopted a Code of Business Conduct that applies to all our directors, officers and employees, including our CEO and senior financial and accounting officers. Our Code of Business Conduct requires each director, officer and employee to avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the best interest of our company and our stockholders. In addition, our Code of Business Conduct acknowledges special ethical obligations for financial reporting. The Code of Business Conduct meets the requirements of a code of business conduct and ethics under the listing standards of the NYSE and the requirement of a “Code of Ethics” as defined in the rules of the Securities and Exchange Commission (the “SEC”). We maintain a current copy of our Code of Business Conduct, and will promptly post any amendments to or waivers of our Code of Business Conduct regarding our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website (www.spxflow.com).

Our Corporate Governance Guidelines require that a substantial majority of the Board of Directors meet the independence requirements of the listing standards of the NYSE. Our Board of Directors reviews annually whether each of our directors is independent. The Board of Directors has adopted categorical Independence Standards to help guide it in this process. Our Independence Standards are available on our website (www.spxflow.com). Members of the Audit Committee, Compensation Committee and Nominating and Governance Committee must meet all applicable independence tests of the NYSE and SEC. Based on its most recent annual review, the Board of Directors has concluded that Mr. Abulaban, Ms. Altman, Mr. Campbell, Mr. Fullwood, Mr. Hull, Mr. Pratt, Ms. Roberts, Ms. Rowland and Mr. Singer are independent as defined in our Independence Standards and the listing standards of the NYSE. The Board of Directors has concluded that Mr. Michael, our President and Chief Executive Officer, is not independent as defined in our Independence Standards and the listing standards of the NYSE.

The non-employee members of the Board of Directors meet in executive session without management at least at every regularly scheduled Board meeting. In addition, the non-employee members of the Board of Directors meet in executive session with the CEO and such other management as the Board of Directors deems appropriate on a regular basis. Meetings of independent directors are chaired by the Chairman of the Board, Mr. Hull.

It is the policy of the Board of Directors that no officer or director shall solicit contributions for charities from other officers or directors or directly from SPX FLOW if the director or officer soliciting the contributions personally controls the charity. In addition, no officer or director shall solicit contributions from other officers or directors for charities controlled by SPX FLOW.

From time to time, SPX FLOW may make contributions to charitable organizations for which a member of our Board of Directors or one of our executive officers serves as a director or officer. No contributions in 2020 exceeded the greater of (a) $1 million or (b) 2% of the charitable organization’s consolidated gross revenues.

The full Board exercises risk oversight at SPX FLOW. Committees take the lead in discrete areas of risk oversight when appropriate. For example, the Audit Committee is primarily responsible for risk oversight relating to financial statements, the Compensation Committee is primarily responsible for risk oversight relating to executive compensation, and the Nominating and Governance Committee is primarily responsible for risk oversight relating to corporate governance. Committees report to the Board on risk management matters.

Management presents to the full Board its view of the top risks facing SPX FLOW in a dedicated “enterprise risk management” presentation at least once a year. In addition, risk is explicitly addressed in a wide range of Board discussions, including those relating to end market or business unit activities, cybersecurity, specific corporate functions (such as treasury, intellectual

Corporate Governance

property, tax, etc.), and consideration of extraordinary transactions. As part of these discussions, our directors ask questions, offer insights, and challenge management to continually improve the Company’s risk assessment and management. The Board has full access to management, as well as the ability to engage advisors, in order to assist in its risk oversight role.

We have conducted an in-depth review of the risks associated with our incentive-based agreements and practices and determined that the risks were appropriate.

See “Executive Compensation—Risk Analysis” for further discussion.

Interested parties may communicate with any of our non-employee directors by writing to the director, in care of our Corporate Secretary, at the address shown on the cover of this Proxy Statement. In accordance with the policy adopted by our non-employee directors, our Corporate Secretary will promptly relay to the addressee all communications that he determines require prompt attention by a non-employee director and will regularly provide the non-employee directors with a summary of all substantive communications.

The Nominating and Governance Committee selects individuals as director nominees based on their business and professional accomplishments, integrity, demonstrated ability to make independent analytical inquiries, ability to understand our business, absence of conflicts of interest, and willingness to devote the necessary time to Board duties. Neither the Board nor the Nominating and Governance Committee has set minimum requirements with respect to age, education or years of business experience or set specific required skill sets for directors, but each does require that each director has a proven record of success and leadership. The Nominating and Governance Committee seeks to structure the Board of Directors such that it consists of a diverse group of individuals, each with a unique combination of skills, experience, and background. The Nominating and Governance Committee has no set diversity policy or targets, but places what it believes to be appropriate emphasis on certain skills, experience, or background that it determines add or would add value to our Board. Knowledge of our industry and strategic perspective, as well as accounting expertise, experience on other Boards and executive leadership, are examples of attributes that our Board and the Nominating and Governance Committee consider to be key. The Nominating and Governance Committee also considers effective interaction among Board members and between the Board of Directors and management to be crucial factors in considering individuals for nomination. Both Mr. Pratt and Ms. Roberts were first identified to the Nominating and Governance Committee by a third-party director search firm engaged by the Nominating and Governance Committee.

The Nominating and Governance Committee is responsible for proposing director nominees and will consider director nominee recommendations offered by stockholders in accordance with our By-Laws. At such times as the Board of Directors and the Nominating and Governance Committee determine there is a need to add or replace a director, the Nominating and Governance Committee identifies director candidates through references by its members, other directors, management, or outside search firms.

In considering individuals for nomination, the Nominating and Governance Committee consults with our Chairman and our President and CEO. A director’s qualifications in meeting the criteria discussed above under “Board Qualifications and Diversity” are considered at least each time the director is re-nominated for Board membership. The Committee applies the same process and standards to the evaluation of each potential director nominee, regardless of whether he or she is recommended by one or more stockholders or is identified by some other method.

Once the Nominating and Governance Committee identifies a director candidate, directors and members of management interview the candidate. Following that process, the Committee and the Board of Directors determine whether to nominate the candidate for election at an annual meeting of stockholders or, if applicable, to appoint the candidate as a director to fill a vacancy on the Board of Directors. Any such nomination or appointment is subject to acceptance by the candidate.

In uncontested elections, we elect directors by majority vote. Under this majority vote standard, each director must be elected by a majority of the votes cast with respect to that director, meaning that the number of shares voted “for” a director exceeds the number of shares voted “against” that director. In a contested election, directors are elected by a plurality of the votes represented in person or by proxy at the meeting. An election is contested if the number of nominees exceeds the number of directors to be elected. Whether or not an election is contested is determined ten days in advance of the date we file our definitive Proxy Statement with the SEC. This year’s election is uncontested. Accordingly, the majority vote standard will apply.

Corporate Governance

If a nominee already serving as a director is not elected at an annual meeting, Delaware law provides that the director will continue to serve on the Board as a “holdover director” until his or her successor is elected. Our Nominating and Governance Committee, however, has established procedures requiring directors to tender to the Board advance resignations. As set forth in our Corporate Governance Guidelines, the Board will nominate for election or re-election as a director only candidates who agree to tender, promptly following each annual meeting of stockholders at which they are elected or re-elected as a director, irrevocable resignations that will be effective only if (1) the director fails to receive a sufficient number of votes for re-election at the next annual meeting of stockholders at which he or she faces re-election and (2) the Board accepts the resignation. In addition, the Board will fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with this provision.

In the event a resignation is triggered as a result of a director not receiving a majority vote, the Nominating and Governance Committee will consider the resignation and make a recommendation to the Board on whether to accept or reject it, or whether other action should be taken. The Board will consider the Committee’s recommendation and publicly disclose its decision and the rationale behind it in a Current Report on Form 8-K filed with the SEC within 90 days from the date of the certification of the election results.

It is our policy to invite all members of our Board of Directors to attend our Annual Meeting. Due to the COVID-19 pandemic, only Messrs. Hull and Michael attended our 2020 annual meeting of stockholders.

The Compensation Committee has retained Pearl Meyer as its sole independent compensation advisor. Pearl Meyer does not provide any services to our company other than advice to and services for the Compensation Committee relating to compensation of all executives and the Nominating and Governance Committee relating to compensation of our non-employee directors. The independent compensation advisor may provide other consulting services to SPX FLOW, with approval from the Compensation Committee or the Nominating and Governance Committee. The Compensation Committee reviews services provided by its independent compensation advisor on at least an annual basis.

The independent compensation advisor:

The Compensation Committee has directed the independent compensation advisor to collaborate with management, including our human resources function, to obtain data, clarify information, and review preliminary recommendations prior to the time they are shared with the relevant Committee.

The Compensation Committee has considered the independence of Pearl Meyer in light of SEC rules and NYSE listing standards. The Compensation Committee requested and received a letter from Pearl Meyer addressing Pearl Meyer and the senior advisor involved in the engagement’s independence, including the following factors: (1) other services provided to us; (2) fees paid by us as a percentage of Pearl Meyer’s total revenue; (3) policies or procedures maintained by Pearl Meyer that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisor and a member of the Compensation Committee; (5) any company stock owned by the senior advisor; and (6) any business or personal relationships between our

Corporate Governance

executive officers and the senior advisor. The Compensation Committee discussed these considerations and concluded that the work performed by Pearl Meyer and Pearl Meyer’s senior advisor involved in the engagement did not raise any conflict of interest, and that Pearl Meyer provides objective and competent advice. The following protocols are designed to help ensure objectivity:

Pursuant to its charter and a written related-party policy, the Audit Committee is charged with reviewing and approving any related-party transactions. A related-party transaction is a transaction involving SPX FLOW and any of the following persons: a director, director nominee or executive officer of SPX FLOW or an immediate family member or person sharing the household of any of these persons; a holder of more than 5% of SPX FLOW common stock; and certain other parties with relationships with SPX FLOW. When considering a transaction, the Audit Committee is required to review all relevant factors, including whether the transaction is in the best interest of our company, our company’s rationale for entering into the transaction, alternatives to the transaction, whether the transaction is on terms at least as fair to our company as would be the case were the transaction entered into with an unrelated third party, potential for an actual or apparent conflict of interest, and the extent of the related party’s interest in the transaction. Our legal staff is primarily responsible for the development and implementation of procedures and controls to obtain information for our directors and executive officers relating to related party transactions and then determining, based on the facts and circumstances, whether we or a related party has a direct or indirect material interest in the transaction. In the course of the Board of Directors’ determination regarding the independence of each of the non-employee directors, the Nominating and Governance Committee and Audit Committee considered any relevant transactions, relationships or arrangements. In 2020, SPX FLOW and its subsidiaries had total sales to Cargill, Incorporated and its subsidiaries in an aggregate amount of approximately $3.5 million. The Audit Committee has determined that such transactions were at least as fair to SPX FLOW as would be the case were the transactions entered into with an unrelated third party. In addition, such sales occurred prior to Ms. Roberts joining the Board of Directors. We anticipate continuing to engage in sales to Cargill on an arm’s length basis.

Our Board has no fixed policy or position on whether the roles of Chairman and Chief Executive Officer should be separate or combined, but rather makes leadership structure decisions in consideration of then-current circumstances. Currently, Marcus G. Michael is our President and CEO, and Robert F. Hull, Jr. is the Chairman of our Board.

We believe the leadership structure outlined above is best for our company and our stockholders at this time. We believe there is good communication between management and non-employee directors, and that our outside directors are able to carry out their oversight responsibilities effectively.

The Board of Directors met fifteen (15) times during 2020. The Board of Directors currently has a standing Audit Committee, Compensation Committee and Nominating and Governance Committee. Each current director attended at least 75% of the meetings of the Board of Directors and of the committees on which he or she served in 2020 during the period of his or her service. Each committee has adopted a charter that specifies the composition and responsibilities of the committee. Each committee charter is posted on our website (www.spxflow.com).

The Board operates with a “committees of the whole” structure with each independent director serving on each of these committees. Accordingly, each of Ms. Altman, Ms. Roberts and Ms. Rowland and Messrs. Abulaban, Campbell, Fullwood, Hull, Pratt and Singer served on each of these committees. The table below lists the current chair and 2020 meeting information for each of the Board’s committees.

Corporate Governance

Corporate Governance

Directors who are SPX FLOW employees receive no compensation for their service as directors.

We compensate our non-employee directors using a combination of cash and equity granted under the SPX FLOW Stock Compensation Plan (the “Stock Compensation Plan”). The Nominating and Governance Committee reviews non-employee director compensation from time to time. The Committee compares director compensation to our peer companies when reviewing compensation type and structure.

In 2020, we awarded shares of restricted stock to our non-employee directors as of the date of our 2020 annual meeting of stockholders, which shares will vest the day prior to the 2021 Annual Meeting, subject to the director’s continued service on our Board as of the vesting date. Time-vested restricted stock awards are designed to help ensure engaged directors with interests closely aligned with those of our long-term stockholders.

Any cash dividends paid with respect to shares of unvested restricted stock are deposited in the director’s name in an escrow or similar account maintained by SPX FLOW for that purpose. These dividends are subject to the same time restrictions as the shares of restricted stock to which they relate and are payable only upon vesting of the underlying stock.

For 2020, our directors were compensated as set forth below:

The SPX FLOW Foundation (the “Foundation”) makes matching donations for qualified charitable contributions for any director up to a total of $20,000 per annum.

Non-employee director stock ownership guidelines are three times the annual cash retainer. Our guidelines require each director to attain the desired level of ownership within five years of the date of appointment as a director of our company. Shares held in family trusts and shares held in retirement plan accounts are deemed to be owned shares for purposes of these guidelines. Unexercised stock options and unvested performance-based equity awards are excluded.

Once a director attains the desired level of share ownership, he or she shall continue to be considered in compliance with these guidelines if the cause of the non-compliance was a decrease in the price of the Company stock, so long as the director retains at least 50% of the net shares acquired pursuant to vested restricted stock grants until the director’s holdings of Company stock equals or exceeds the ownership guideline. Each director was in compliance with these requirements as of February 24, 2021.

Director Compensation

The following table summarizes the compensation of our directors in 2020. Mr. Michael, our President and CEO, received no compensation in connection with his service as a director and, accordingly, is omitted from this table.

Executive Compensation

The following pages of this Proxy Statement describe SPX FLOW’s executive compensation program and the compensation decisions made by the Compensation Committee for NEOs listed below.

Our compensation programs are metric-driven and designed to align the interests of our NEOs with the interests of our long-term stockholders. Our Compensation Committee rewards performance that meets or exceeds our goals, builds stockholder value and compares favorably to the Company’s peers. In line with our pay-for-performance philosophy, the total compensation received by our NEOs will vary based on corporate performance measured against annual and long-term targets. Our annual incentive plan focused on Revenue, Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) as a Percentage of Revenue (“Adjusted EBITDA Percentage”), Adjusted Working Capital as a Percentage of Revenue (“Adjusted Working Capital Percentage”) and Strategic Objectives, while our long-term incentive plan measures two criteria over a three-year period; (i) three-year average Return On Invested Capital on a pre-tax, adjusted basis (“ROIC”) and (ii) relative Total Shareholder Return measured against the S&P MidCap 400 Capital Goods Industry Group (“rTSR”). The total compensation of our NEOs is therefore comprised of base salary, annual incentive compensation, long-term incentive compensation and reasonable perquisites.

In 2020, our emphasis on higher quality of revenue and focus on productivity and cost containment was evident in our gross margin expansion of nearly 20 points despite revenues being down 10%. We also generated strong adjusted free cash flow, supported by working capital improvement. These factors resulted in higher levels of payout on the annual incentive program than experienced in 2019. While we made meaningful progress in 2020, the impact of COVID-19 during 2020 contributed to us not satisfying the three-year average ROIC targets under the 2018 ROIC long-term incentive awards, resulting in the forfeiture of those awards. Please see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our 2020 Annual Report to Stockholders that accompanies this proxy statement for a more detailed description of our fiscal year 2020 results.

The Company’s performance in 2020 was the key factor in the compensation decisions and outcomes that are reflected in this report.

CEO Compensation – Mr. Michael’s annual base salary for 2020 was $950,000, his target annual bonus opportunity was set at 100% of his annual base salary, and the value of equity awarded was $3,336,836. Mr. Michael does not participate in any SPX FLOW pension plan. We describe his perquisites below, and believe they are typical in both type and amount for our peer companies.

Executive Compensation

The following chart shows Mr. Michael’s Total Direct Compensation (“TDC”) for 2020, as compared to the compensation for chief executive officers of our peer companies. In this chart we are comparing peer company TDC at target, including base salary, target bonus and annual equity award - the same data the Compensation Committee examined in preparation for making decisions regarding Mr. Michael’s 2020 compensation awards. In 2020, the Enterprise Incentive Plan paid out at 95.0% and therefore Mr. Michael’s 2020 Actual TDC is slightly lower than his 2020 Target TDC.

 

Annual Bonus Awards – The Company sets a target annual cash bonus award for the majority of employees, including our NEOs, based upon overall Company performance against key internal metrics. For 2020, our NEOs were eligible for a bonus which was capped at 95.0% of their individual target amounts based on Company achievement of goals for Revenue, Adjusted EBITDA Percentage, Adjusted Working Capital Percentage and Strategic Objectives. The Company failed to meet the threshold level criteria for the Revenue metric and performed at Target on the Strategic Objectives and at Maximum on the Adjusted EBITDA Percentage and Adjusted Working Capital Percentage metrics, resulting in a bonus payout at 95.0% of target.

Long-term Incentive Plan – Our long-term incentive plans are designed to align the incentives of NEOs with those of our long-term stockholders. For 2020, NEOs, including Mr. Michael, received equal amounts of performance-based equity that cliff-vests after three years and time-based awards that vest ratably over three years.

Key attributes of the performance-based portion of the Stock Compensation Awards made in 2020:

Pension – Our NEOs do not participate in a pension plan.

We follow these guiding principles when designing and setting compensation for our NEOs:

We tailor compensation to the business and competitive environment because our success depends on our ability to attract and retain experienced and proven leaders and to motivate them to deliver superior results.

The proportion of incentive-based pay increases along with responsibility and authority. For our senior-level management, and in particular for our NEOs, a majority of total direct compensation at target, defined as salary, bonus, and equity awards, is variable.

 

NEO performance is judged primarily by reference to performance of the Company as a whole. Additional, subjective, assessments are made, including direct assessments of performance, formal talent assessment reviews, and assessments of adherence to our values. The Compensation Committee also reviews total compensation at least annually and termination values periodically. The Compensation Committee establishes and approves all elements of compensation for our CEO based on input from and discussions with management and the Committee’s independent compensation advisor, as well as its own assessments.

The Compensation Committee has retained Pearl Meyer as its independent compensation advisor. The independent compensation advisor consults on all aspects of executive officer and director compensation. See “Corporate Governance —Compensation Advisor.”

The most significant aspects of management’s role in the compensation-setting process are as follows:

The Compensation Committee and its outside compensation advisor have set a group of peer companies for our company for the purpose of compensation comparisons. Our peer group includes companies with a revenue range of 0.5 - 2.5 times the Company’s annual revenue, similar industries and business mix and which are key competitors for senior talent. Other factors include international exposure, number of employees, total shareholder return profile over various periods, and the GICs industry sub-group. For 2020, our peer companies, in descending order based on 2019 revenue, included Flowserve Corporation, Colfax Corporation, Crane Co., Regal Beloit Corporation, Woodward, Inc., ITT Inc., Valmont Industries, Inc., IDEX Corporation, Curtiss-Wright Corporation, Rexnord Corporation, Graco, Inc., Watts Water Technologies, Inc., SPX Corporation, Harsco Corporation, Barnes Group Inc., EnPro Industries, Inc., CIRCOR International, Inc. and Enerpac Tool Group Corp.

Please note that peer company compensation analysis is used only for comparative purposes. We do not target specific benchmark percentiles. We award compensation considering factors including market forces, Company or individual performance, longevity of contribution to the Company, existing contractual obligations, and differing levels of responsibility and value created by officers with the same or similar title.

The Compensation Committee established the executive compensation program to implement our focus on pay-for-performance, aligning the interests of our executive officers to our stockholders, supporting our business strategy and attracting key talent to the Company. Following are the key elements:

NEO performance was judged primarily by reference to performance of the Company as a whole. Additional, subjective assessments were made by the Compensation Committee in respect of adherence to Company values, competence, potential and alignment with Company goals. The Compensation Committee established, reviewed and approved all elements of compensation for the CEO based on review of key financial metrics, input from and discussions with members of the management team and its independent compensation advisor, Pearl Meyer.

Base salary is designed to offer competitive base income in the context of the NEO’s role and responsibilities, experience and tenure, internal equity considerations, individual performance and contribution to Company results. In 2020, Messrs. Michael, Easley and Jeffers received salary increases of 2.7%, 3% and 3%, respectively. Each salary increase was in line with the Company’s U.S. merit increase budget and became effective in the first payroll date of April 2020. The other NEOs did not receive a salary increase in 2020.

Executive Compensation

Our annual incentive plan, the EIP, measured Revenue, Adjusted EBITDA Percentage, Adjusted Working Capital Percentage and Strategic Objectives against pre-determined targets calibrated to reward employees with a portion of the incremental value created for our stockholders during the year.

Annual cash bonus awards are targeted as a percentage of annual salary. This percentage increases as the employee’s responsibilities and authority increase to help ensure that those most able to impact Company performance have the greatest percentage of their total compensation tied to Company performance.

Target bonuses for the NEOs were unchanged for 2020, with targets of 100% of salary for Mr. Michael, President and CEO, and 70% for each of Messrs. Easley, Gibson, Jeffers and Eamigh.

As described herein, the COVID-19 pandemic had a substantial impact on the Company in 2020. At various points throughout the year, manufacturing facilities around the world were forced to close, supply chain partners were unable to produce and deliver, and our customers’ food and beverage and industrial facilities were closed or faced severe restrictions on entry for installation and service. Our professional staff faced obstacles as well, with almost all offices closed and engineering, innovation, and customer service and functional teams creating new ways to engage, collaborate and share information to meet customer needs and satisfy changing regulatory demands. The impact to capital investment in important markets significantly curtailed commercial activity and reduced orders by 7% overall compared to 2019, with sharper reductions in certain product lines.

In the face of these unprecedented challenges, management took swift action to support the global team, investing approximately $2.5 million dollars in enhanced health and safety equipment and procedures, and continuing to pay our hourly workers whose facilities closed due to the pandemic or who contracted or were exposed to COVID-19 and were unable to work. The Company’s operations team scrambled to secure alternate supplies of raw materials and finished goods to help support our production teams, and the engineering and installation teams devised new ways to remote commission products and systems to meet customer needs. Throughout the organization, our teams took steps to preserve cash, reduce unnecessary cost, and secure the financial health of the Company. We completed the sale of our Power & Energy business and used a portion of the proceeds to pay down $300 million of senior notes, reducing ongoing interest expense and freeing up additional dollars to reinvest in the business.

In response, and to support these efforts, the Compensation Committee carefully reviewed the EIP and determined that certain of the original targets were unattainable, and not aligned to the critical actions the Company should take to drive value for stockholders. Following thorough review and with support of the independent compensation advisor, the Compensation Committee adopted for the NEOs the updated metrics and targets that the management team had been using to measure and track the performance of the broader organization throughout the second half of 2020. This action brought the majority of the enterprise onto one bonus plan, focused on achievable but challenging targets that would continue to incentivize the team while building the long-term strategy. The updated EIP measured Revenue, Adjusted EBITDA Percentage, Working Capital Percentage and Strategic Objectives. The Compensation Committee did not modify the Revenue and Strategic Objectives.

The Revenue metric is intended to focus the organization on the importance of execution and converting orders into revenue with quicker cycle time and measures all revenue of the Company related to the sale of goods and provision of services to its customers, subject to adjustments for foreign currency fluctuations and other matters. The Compensation Committee did not modify the Revenue metric.

Adjusted EBITDA Percentage is intended to reward earnings and is defined as earnings before interest, taxes, depreciation and amortization, plus restructuring or special charges, goodwill and/or asset impairments, and any unusual items as determined by the Compensation Committee, then expressed as a percentage of the Company’s annual Revenue. The Compensation Committee modified this earnings metric from Adjusted EBITDA dollars to Adjusted EBITDA Percentage to incentivize the management team to maximize margin performance despite the volatility caused by the COVID-19 pandemic in the Company’s end markets and production environments. Driving margin performance is consistent with the Company’s long-term strategic objectives and a key value proposition for the Company’s stockholders, and therefore, the Compensation Committee viewed this as an appropriate modification to the Plan.

Adjusted Working Capital Percentage is intended to reward working capital management and drive free cash flow generation and is defined as the change in current assets minus current liabilities, calculated in accordance with accounting principles generally accepted in the United States (“US GAAP”), adjusted for any unusual items as determined by the Compensation Committee, and

Executive Compensation

then expressed as a percentage of the Company’s annualized Revenue in the fourth quarter of 2020. The COVID-19 pandemic caused the Company to closely examine its sources and uses of cash and to develop scenarios to preserve cash and strengthen its balance sheet position. Improving the usage of working capital within the business is a key driver to free cash flow and to create operational efficiencies.

Expressed as a Percentage of Revenue, this metric aligns the teams to the objective of capital efficiency, while also avoiding the adverse incentive to reduce critical working capital below the levels needed to optimally serve customers. In the first half of the year volumes were very low due to the abrupt impact of the pandemic, and management expected to see modest improvement through the second half of the year and into 2021. The Compensation Committee carefully modified the Adjusted Working Capital Percentage calculation to utilize the Company’s annualized Revenue in the fourth quarter of 2020 rather than full-year Revenue in order to account for the higher expected levels of Revenue in the latter portion of the year and incentivize management to balance cash flow improvements with reasonable preparation for increasing customer demand. For these reasons, the Compensation Committee believed this was a reasonable modification to the Plan.

The 2020 EIP also included two Strategic Objectives, collectively worth up to 25% of the target amount of the Plan, that were not modified during the course of the year. The Strategic Objectives were developed to focus the management team on critical elements of the Company’s long-term strategy that may not produce financial results in the early years. The first objective was the execution of the sale of the Power & Energy business. This transaction was an important strategic step for the Company to focus its resources on its food and beverage and industrial product lines, reduce volatility, and free up cash to reduce debt and invest organically. The Company completed this sale in March 2020. The second objective was to deploy key elements of the strategic plan, including the product line growth plan, simplification plan built on 80/20 principles, and development of the pipeline of inorganic opportunities. The Compensation Committee believes the Company made significant progress on the strategic plan and made decisions to reallocate and focus resources on the priorities that will create value beyond the 2020 plan year.

The Compensation Committee modified the plan in a manner that drove stockholder value while also being reflective of the pervasive impact of the pandemic on the business. Considering the year-over-year operational performance of the Company, continued relative challenges in the end markets and desire to strike the right balance in terms of pay for performance, the Compensation Committee also implemented a maximum payment limitation on the Plan of 95% of target for the year. Within each of the metrics, caps of 150%, 125%, 150% and 100% also applied to Revenue, Adjusted EBITDA Percentage, Adjusted Working Capital Percentage, and the Strategic Objectives, respectively. Should the natural calculation of the Plan exceed 95% of Target, the Compensation Committee would automatically reduce the payment to 95% of Target.

Based on the Company’s performance, the Compensation Committee awarded a bonus payout of 95% of target:

Long-term equity awards are designed to promote stock ownership and expose senior-level management to the risks and rewards faced by long-term stockholders. Each award includes (i) performance-based restricted stock units that are subject to the Company’s rTSR versus the Comparator Group and ROIC, and (ii) time-based restricted stock units that vest evenly over three years subject to continued employment.

Because time-based restricted stock unit awards vest ratably over three years based on continued employment for officers who are not retirement eligible, they have significant employee retention value and continue to tie the interests of NEOs to those of stockholders even after they are awarded. Grants of performance-based and time-based restricted stock unit awards are the most significant component of our NEOs’ direct compensation opportunity.

Performance-based restricted stock unit awards feature cliff-vesting after a three-year performance period in which two criteria are measured: (i) for one-half of the award (the “rTSR Award”), the Company’s rTSR is measured against the Comparator Group

Executive Compensation

and between 0% and up to 200% of that portion of the award may vest based on the Company’s percentile ranking versus the Comparator Group between the 35^th and 75^th percentile, and (ii) for the other half of the award (the “ROIC Award”), the Company’s three-year average ROIC is measured on an adjusted, pre-tax basis, and compared against predetermined targets whereby between 0% and up to 200% of that portion of the award may vest based upon the Company’s performance.

The table below shows the long-term incentive awards granted in 2020 for each of our NEOs:

The 2018 rTSR Award vested at 90.2% at the beginning of 2021 as a result of the Company’s rTSR ranking in the 47^th percentile against the S&P MidCap 400 Capital Goods Industry Group. The 2018 ROIC Award vested at 0% at the beginning of 2021 as a result of the Company’s ROIC of 7.39% compared against predetermined targets. These predetermined targets were as follows: 8.25% ROIC for Threshold, 8.75% ROIC for Target and 9.25% ROIC for Maximum.

A full review of executive compensation, including equity awards, is conducted at least annually. Equity awards were reviewed, approved and granted within the first quarter of the award year. Dividends and dividend equivalents with respect to any shares of unvested restricted stock or restricted stock units are deposited in the NEO’s name in an escrow or similar account maintained by SPX FLOW for that purpose. The NEO receives these dividends or dividend equivalents only if and when the related shares of equity or restricted stock units vest. Dividends and dividend equivalents are forfeited if the equity or restricted stock unit on which those dividends or dividend equivalents were paid is forfeited. The Company did not pay a dividend in 2020. In the event of retirement, unvested time-based restricted stock and restricted stock unit awards will vest immediately and unvested performance-based restricted stock and restricted stock unit awards will remain subject to the original performance requirements and vesting schedule (to the extent provided under such agreement).

We provide perquisites to attract and retain executives in a competitive marketplace, and believe these benefits are generally consistent with market practices of our peer group and other comparable public industrial manufacturing companies. See the Summary Compensation Table and accompanying footnotes on pages 27 and 28 for a full listing of benefits and perquisites. We do not provide tax gross-up payments for perquisites.

The CEO may utilize the Company-leased aircraft for personal travel for himself and his family. Other NEOs may be permitted personal use of the Company-leased aircraft for themselves and their families if approved by our CEO. This benefit enhances security for our officers and allows them to devote more time to SPX FLOW business. We report the value of any personal use of the Company-leased aircraft by NEOs as ordinary taxable income and as compensation in the Summary Compensation Table.

NEOs and other senior-level management are eligible to participate in the SPX FLOW Retirement Savings Plan (the “401(k) Plan”) and the SPX FLOW Supplemental Retirement Savings Plan (the “SRSP”), a non-qualified deferred compensation plan that permits voluntary deferrals of base salary and annual bonuses in excess of those permitted under the 401(k) Plan. See the Nonqualified Deferred Compensation in 2020 table and accompanying narrative and footnotes on pages 31 and 32 for more information regarding these plans.

Executive Compensation

We design termination and change-in-control contractual provisions to be competitive at the time we enter into an agreement. These arrangements are designed to protect stockholder interests by stabilizing management during periods of uncertainty. Generally, executives are more willing to accept risks and costs if they are protected in the event their employment is terminated due to unanticipated changes, including a change in control. Additionally, executives often assign significant value to severance agreements because they provide compensation for lost professional opportunities in the event of a change in control. These arrangements also can be a powerful tool to discourage entrenchment of management, in that severance agreements can offset the risk of financial and professional loss that management may face when recommending a sale to or merger with another company.

In the case of certain terminations following a change in control, the NEOs become immediately vested in all previously granted unvested SPX FLOW equity, including shares and units subject to performance vesting at the target level of vesting. This feature is designed to be equitable in the event of dismissal without cause or resignation for good reason, and we believe it is appropriate in the event of termination following a change in control. Additionally, other benefits may be paid in the event the executive is terminated following a change in control (sometimes called a “double trigger”).

Termination and change-in-control agreements are further discussed and quantified in “Potential Payments Upon Termination or Change-in-Control” on pages 33-35.

We maintain stock ownership guidelines to emphasize the importance of substantive, long-term share ownership by senior executives to align their financial interests with those of stockholders. The guidelines are:

Shares held in family trusts and shares held in retirement plan accounts are deemed to be owned shares for purposes of these guidelines.

Executive leaders are asked to attain the desired level of share ownership within five years of the later of appointment to an executive position or the date the relevant stock ownership guidelines were increased, whether through promotion or by revision to the guidelines.

Once an executive leader attains the desired level of share ownership, he or she shall continue to be considered in compliance with these guidelines if the cause of the non-compliance was a decrease in the price of the Company stock, so long as the executive leader retains at least 50% of the net shares acquired upon exercise of stock options and at least 50% of the net shares acquired pursuant to vested restricted stock grants and vested restricted stock unit grants until the executive leader’s holdings of Company stock equals or exceeds the applicable target value. For these purposes, “net shares” means the shares remaining after disposition of shares necessary to pay the related tax liability and, if applicable, the stock option exercise price. In addition to existing Company trading policy requirements, executive leaders shall obtain the approval of the Company General Counsel prior to selling Company stock where their stock ownership is below the Target Value or where the sale would reduce their ownership below the target value. This rule does not apply to dispositions of shares for tax withholding purposes.

The Nominating & Governance Committee periodically reviews these guidelines and recommends revisions to the guidelines to the Board as it deems appropriate. Each NEO was in compliance with these requirements as of February 24, 2021.

If the Board of Directors were to determine that an NEO had engaged in fraudulent or intentional misconduct, it would take action to remedy the misconduct and impose appropriate discipline. Discipline would vary based on the facts and circumstances but may include termination of employment or other appropriate actions.

We retroactively adjust compensation in the event of a restatement of financial or other performance results to the extent required by the Sarbanes-Oxley Act of 2002. The EIP provides for repayment or forfeiture of awards under specified circumstances if the Company, as a result of misconduct, is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws. Any awards earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever first occurred) of the financial document that failed to materially comply with a financial reporting requirement must be paid back to the Company. To the extent that the affected award was

Executive Compensation

deferred under a nonqualified deferred compensation plan maintained by the Company rather than paid to the executive officer, the deferred amount (and any earnings from it) must be forfeited. Our equity award agreements provide that awards are subject to any compensation recovery policy adopted by us, as amended from time to time.

The discussion of performance targets in this Compensation Discussion and Analysis section is exclusively in the context of executive compensation, and you should not use these targets for any other purpose or regard them as an indication of management’s expectations of future results.

References to “bonuses” are to performance-based payments as reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.

Executive Compensation

The Compensation Committee of the SPX FLOW Board of Directors comprises nine directors. Each of the Compensation Committee members is independent, as defined under SEC rules and the listing standards of the NYSE. The Compensation Committee reviews SPX FLOW’s “Compensation Discussion and Analysis” on behalf of the Board of Directors.

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” with management, and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and SPX FLOW’s Annual Report on Form 10-K for the year ended December 31, 2020.

Compensation Committee

Emerson U. Fullwood, Chairman

Majdi B. Abulaban

Anne K. Altman

Patrick D. Campbell

Robert F. Hull, Jr.

Jonathan M. Pratt

Sonya M. Roberts

Suzanne B. Rowland

David V. Singer

Executive Compensation

This table summarizes the compensation for the named executive officers in 2020. The “named executive officers” are our Chief Executive Officer, our Chief Financial Officer, our next three most highly compensated officers who were serving as officers as of December 31, 2020.

The above benefits are provided pursuant to the terms of an employment agreement with Mr. Michael. The term of the employment agreement for Mr. Michael extended through December 31, 2020 with extensions from year to year unless proper advance notice is provided in accordance with the terms of the agreement.

Under Mr. Michael’s agreement, any annual base salary rate reductions require his consent and it provides for participation in any annual performance bonus plans, long-term incentive plans, and equity based compensation plans that we establish or maintain for our officers as well as continuation of all other senior executive benefit plans offered by us, subject to our right to modify, suspend or discontinue the plans. Business expense reimbursement, perquisites and vacation entitlements also are provided pursuant to the agreement.

See “Compensation Discussion and Analysis” for further discussion and explanation of each element of compensation.

Executive Compensation

The following table provides information regarding equity and non-equity awards granted to the named executive officers in 2020.

The following table details the outstanding equity awards held by each of the named executive officers at December 31, 2020.