DEF 14A of Key Tronic Corp, Sep 29, 2023

DEF 14A of Key Tronic Corp

Filed Sep 29, 2023 · FY20230000719733-23-000034

Open on EDGAR

  1. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS Six directors are to be elected at the Annual Meeting to serve until the next Annual Meeting of Shareholders and until their respective successors have been elected and have qualified. The six nominees receiving the highest number of affirmative votes will be elected as directors. In the event any nominee is unable or unwilling to serve as a nominee or director, the proxies may be voted for the balance of those nominees named and for any substitute nominee designated by the present Board of Directors or the proxy holders to fill such vacancy, or for the balance of those nominees named without nomination of a substitute, or the size of the Board of Directors may be reduced in accordance with the Amended and Restated By-Laws of the Company. The Board of Directors has no reason to believe that any of the persons named will be unable or unwilling to serve as a nominee or as a director if elected.

  2. Board Diversity

    Board Diversity The Board believes the current nominees embody a diverse range of viewpoints, backgrounds and skills, including with respect to tenure and race/ethnicity. In accordance with Nasdaq’s new Board Diversity Rules, the following Board Diversity Matrix provides certain information regarding the composition of our Board as of July 1, 2023, Each of the categories listed in the table has the meaning as it is used in Nasdaq Rule 5605(f).

  3. Board Diversity

    | Board Diversity Matrix | | | | | | Total Number of Directors | 6 | | | | | | Female | Male | Non-Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | Directors | 0 | 6 | 0 | 0 | | Part II: Demographic Background | | | | | | African American or Black | 0 | 0 | 0 | 0 | | Alaskan Native or Native American | 0 | 0 | 0 | 0 | | Asian | 0 | 1 | 0 | 0 | | Hispanic or Latinx | 0 | 0 | 0 | 0 | | Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | | White | 0 | 3 | 0 | 0 | | Two or More Races or Ethnicities | 0 | 2 | 0 | 0 | | LGBTQ+ | 0 | | | | | Did Not Disclose Demographic Background | 1 | | | |

  4. Board Diversity

    The following information has been provided to the Company with respect to the nominees for election to the Board of Directors: James R. Bean, age 73, has been a director of the Company since October 2006. Mr. Bean served as President and CEO of Preco Electronics, LLC from November 1999 to March 2020. From May 1997 to 1999 he held various management positions in Boise with Preco Electronics, LLC, which was sold to Sensata Technologies in March 2020. Mr. Bean remained with Sensata until his retirement in November 2022. Previously he held various management positions in manufacturing operations with Sun Microsystems, Inc., Apple Computer, Inc. and National Semiconductor, Inc. Mr. Bean is a graduate of New Mexico State University with a B.S. in Industrial Engineering. The Board of Directors has concluded that based upon Mr. Bean's business and financial expertise, current and prior senior management experience and education that he should serve as a director of the Company. Craig D. Gates, age 64, has been a director of the Company since July 2009 and has been President and CEO of the Company since April 2009. Previously he was Executive Vice President of Marketing, Engineering and Sales since July 1997. He served as Vice President and General Manager of New Business Development from October 1995 to July 1997. He joined the Company as Vice President of Engineering in October 1994. From 1991 to October 1994, Mr. Gates served as Director of Operations, Electronics for the Microswitch Division of Honeywell Inc. From 1982 to 1991, Mr. Gates held various engineering and management positions within the Microswitch Division. Mr. Gates has a Bachelor of Science Degree in Mechanical Engineering and a Masters in Business Administration from the University of Illinois, Urbana. Mr. Gates also serves on the Board of Directors of CyberOptics Corporation. The Board of Directors has concluded that based upon Mr. Gates’ business expertise, current and prior senior management experience and education that he should serve as a director of the Company. Ronald F. Klawitter, age 71, has been a director of the Company since October 2009 and formerly served as Executive Vice President of Administration, CFO and Treasurer of the Company from July 1997 through July 2015. Previously he was Vice President of Finance, Secretary and Treasurer of the Company since October 1995. He was Acting Secretary from November 1994 to October 1995 and Vice President of Finance and Treasurer from 1992 to October 1995. From 1987 to 1992, Mr. Klawitter was Vice President, Finance at Baker Hughes Tubular Service, a subsidiary of Baker Hughes, Inc. He has a Bachelor of Arts degree from Wittenberg University and is a Certified Public Accountant. The Board of Directors has concluded that based upon Mr. Klawitter’s business and financial expertise, current and prior management experience and education that he should serve as a director of the Company. Dr. Subodh K. Kulkarni, age 59, has been a director of the Company since October 2018. Dr. Kulkarni has served as President and Chief Executive Officer at Rigetti Computing, Inc. since December 2022. Dr. Kulkarni is a seasoned public company CEO with thirty-plus years of experience in the semiconductor industry and a track record of success in scaling and commercializing cutting-edge technologies. Prior to joining Rigetti, Dr. Kulkarni was President, CEO, and member of the Board of CyberOptics Corporation, a developer and manufacturer of high precision sensors and inspection systems for the semiconductor and electronics industry. He held these roles from 2014 until CyberOptics was acquired by Nordson Corporation in November 2022. Prior to CyberOptics, Dr. Kulkarni was CEO of Prism Computational Sciences, a developer of software tools for scientific and commercial applications in the semiconductor industry. Earlier in his career, he held additional leadership positions, including Chief Technology Officer and Senior Vice President of OEM/Emerging business, global commercial business, R&D and manufacturing at Imation, a global scalable storage and data security company. Dr. Kulkarni began his career in research and management positions with 3M Corporation and IBM. He received his B.S. in chemical engineering from the Indian Institute of Technology, Mumbai, and later obtained a M.S. and Ph.D. in chemical engineering from MIT. Dr. Kulkarni currently serves as Chairman of the Board for Prism Computational Sciences. Yacov A. Shamash, age 73, has been a director of the Company since 1989. He is a Professor of Electrical and Computer Engineering at Stony Brook University and was the Vice President of Economic Development from 2001 - 2019 and the Dean of Engineering and Applied Sciences at the campus from 2015. Professor Shamash developed and directed the NSF Industry/University Cooperative Research Center for the Design of Analog/Digital Integrated Circuits from 1989 to 1992 and also served as Chairman of the Electrical and Computer Engineering Department at Washington State University from 1985 until 1992. Dr. Shamash also serves on the Board of Directors of Applied DNA Sciences, Inc., Softheon Inc., Advanced Convergence Group and Comtech Telecommunications Corp.. The Board of Directors has concluded that based upon Dr. Shamash’s professional and management experience, service on public companies’ boards and education that he should serve as a director of the Company. Patrick Sweeney, age 88, has been a director of the Company since July 2000. Mr. Sweeney was President and CEO of Hadco Corporation from 1991 through 1995 and formerly served as Hadco’s Vice President/Chief Financial Officer and Vice President of Operations. Prior to that Mr. Sweeney was the Vice President of International Manufacturing at Wang - USA from 1981 through 1986 and also served as Managing Director of Ireland for Digital Equipment Corporation and as Plant Manager of its Galway and Clonmel divisions. Mr. Sweeney also serves on the Board of Directors of Photo Machining Inc. The Board of Directors has concluded that based upon Mr. Sweeney’s business and financial expertise, senior management experience, service on public companies’ boards and education that he should serve as a director of the Company. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.

  5. Summary Compensation Table-Fiscal Years 2021-2023

    Summary Compensation Table-Fiscal Years 2021-2023 The following table sets forth information concerning compensation for services rendered to the Company by the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer and the Company’s next most highly compensated executive officer. Collectively, these officers are the “named executive officers.”

  6. Summary Compensation Table-Fiscal Years 2021-2023

    | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option/SAR Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | | Craig D. Gates, | 2023 | 905,367 | — | 52,250 | 543,220 | 12,200 | 1,513,037 | | President & Chief | 2022 | 799,549 | — | 68,250 | 511,711 | 11,600 | 1,391,110 | | Executive Officer | 2021 | 684,775 | — | 58,000 | 871,244 | 20,242 | 1,634,261 | | Brett R. Larsen, | 2023 | 475,952 | — | 23,513 | 199,900 | 12,200 | 711,565 | | Executive Vice President, | 2022 | 430,485 | — | 30,713 | 165,306 | 11,600 | 638,104 | | Chief Financial Officer | 2021 | 398,954 | — | 26,100 | 353,097 | 12,648 | 790,799 | | Philip S. Hochberg, | 2023 | 384,522 | — | 20,900 | 126,892 | 14,339 | 546,653 | | Executive Vice President, | 2022 | 346,006 | — | 27,300 | 110,722 | 11,600 | 495,628 | | Business Development | 2021 | 333,224 | — | 23,200 | 263,635 | 12,908 | 632,967 |

  7. Summary Compensation Table-Fiscal Years 2021-2023

    1)The amounts reported in the “Option/SAR Awards” column reflect the fair value on the grant date of the stock appreciation rights, or SARS, granted to the named executive officers during the fiscal year. These values have been determined under generally accepted accounting principles used to calculate the value of equity awards for purposes of the Company’s financial statements. For a discussion of the assumptions and methodologies used to calculate the amounts reported above, please see the discussion of equity awards contained in Note 8 - “Stock Option and Benefit Plans” to the Consolidated Financial Statements in the Company’s 2023 Annual Report. Assuming the highest level of performance is achieved for the SARS granted during the 2023 fiscal year, the maximum value of such awards at the grant date would be $127,500 for Mr. Gates, $57,535 for Mr. Larsen and $51,000 for Mr. Hochberg. 2)Amounts reflect (a) annual cash incentive compensation, which is based on performance during the relevant fiscal year, pursuant to the annual incentive program and (b) any payout of long term performance unit awards for the three year performance period that ended in the relevant fiscal year, pursuant to the long term cash incentive program. 3)Includes for fiscal year 2023 payment for retro pay in the amount of $2,139 for Mr. Hochberg. Included for fiscal year 2021 payment for retro pay in the amount of $8,842 for Mr. Gates, $1,146 for Mr. Larsen, and $1,291 for Mr. Hochberg. Also includes for Mr. Hochberg a service award in the amount of $217.17 in fiscal year 2021.

  8. Outstanding Equity Awards at Fiscal 2023 Year-End

    Outstanding Equity Awards at Fiscal 2023 Year-End The following table presents information regarding the outstanding stock appreciation rights awards held by each of the Company’s named executive officers as of July 1, 2023. No named executive officer has any other form of equity award outstanding.

  9. Outstanding Equity Awards at Fiscal 2023 Year-End

    | Option Awards | | | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#)(1) | Option Exercise/Base Price ($) | Option Expiration Date | | Craig D. Gates | 07/29/22 08/09/21 07/23/20 07/26/19 07/27/18 | 25,000 25,000 | 25,000 25,000 25,000 | 5.10 7.17 6.94 4.93 8.17 | 07/29/27 08/09/26 07/23/25 07/26/24 07/27/23 | | Brett R. Larsen | 07/29/22 08/09/21 07/23/20 07/26/19 07/27/18 | 11,250 11,250 | 11,250 11,250 11,250 | 5.10 7.17 6.94 4.93 8.17 | 07/29/27 08/09/26 07/23/25 07/26/24 07/27/23 | | Philip S. Hochberg | 07/29/22 08/09/21 07/23/20 07/26/19 07/27/18 | 10,000 10,000 | 10,000 10,000 10,000 | 5.10 7.17 6.94 4.93 8.17 | 07/29/27 08/09/26 07/23/25 07/26/24 07/27/23 |

  10. Outstanding Equity Awards at Fiscal 2023 Year-End

    (1)Stock appreciation rights vest on the third anniversary of the grant date and have a five year term. Payouts under the stock appreciation rights are dependent upon the achievement of goals for three year’s return on invested capital compared to peer group companies.

  11. Option/SAR Exercises and Stock Vested-Fiscal Year 2023

    Option/SAR Exercises and Stock Vested-Fiscal Year 2023 During fiscal year 2023, none of the named executive officers exercised any stock appreciation rights awards.

  12. Pension Benefits

    Pension Benefits None of the named executive officers is covered by a pension plan.

  13. Non-qualified Deferred Compensation

    Non-qualified Deferred Compensation None of the named executive officers is covered by a defined benefit plan or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.

  14. Potential Payments upon Termination or Change in Control

    Potential Payments upon Termination or Change in Control The following section describes the benefits that may become payable to the named executive officers in connection with a termination of their employment and/or a change in control of the Company. Quantification of Severance and Change in Control Benefits. The tables below quantify the benefits that would have been payable to each of the named executive officers if the executive’s employment had terminated under the circumstances described above and/or a change in control of the Company had occurred on July 1, 2023. The first table presents the benefits the executive would have received if such a termination had occurred outside of the context of a change in control. The second table presents the benefits the executive would have received if such a termination occurred in connection with a change in control.

  15. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION

  16. Non-Employee Director Compensation Table

    Non-Employee Director Compensation Table The following table presents information regarding the compensation paid for fiscal year 2023 to members of the Board of Directors who are not also employees of the Company (referred to herein as “non-employee directors”).

  17. Non-Employee Director Compensation Table

    | Name | Fees Earned or Paid in Cash ($) | Option/SAR Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | | James R. Bean | 79,500 | 7,838 | — | — | 87,338 | | Ronald F. Klawitter | 79,500 | 7,838 | — | — | 87,338 | | Subodh K. Kulkarni | 79,500 | 7,838 | — | — | 87,338 | | Yacov A. Shamash | 79,500 | 7,838 | — | — | 87,338 | | Patrick Sweeney | 95,400 | 7,838 | — | — | 103,238 |

  18. Non-Employee Director Compensation Table

    (1)The amounts reported in the “Option/SAR Awards” column reflect the fair value on the grant date of the stock appreciation rights granted to the Company’s non-employee directors during fiscal year 2023 as determined under generally accepted accounting principles used to calculate the value of equity awards for purposes of the Company’s financial statements. For a discussion of the assumptions and methodologies used to calculate the amounts reported above, please see the discussion of equity awards contained in Note 8 - “Stock Option and Benefit Plans” to the Consolidated Financial Statements in the Company’s 2023 Annual Report. (2)Amounts reflect any payout of long term performance unit awards for the three year performance period that ended in fiscal year 2023, pursuant to the long term cash incentive program. The table below presents the number of outstanding and unexercised options/SAR awards held by each of the Company’s non-employee directors as of July 1, 2023.

  19. Non-Employee Director Compensation Table

    | Director | Number of Shares Subject to Outstanding Options/SAR Awards as of July 1, 2023 | Number of Unvested Restricted Shares/Units as of July 1, 2023 | | James. R. Bean | 18,750 | — | | Ronald F. Klawitter | 18,750 | — | | Patrick Sweeney | 18,750 | — | | Subodh K. Kulkarni | 15,000 | — | | Yacov A. Shamash | 18,750 | — |

  20. Pay Versus Performance

    Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to our CEO as principal executive officer (or “PEO) and to our other NEOs and certain metrics of financial performance of the Company. The following table shows the total compensation for our NEOs for the past two fiscal years as set forth in the Summary Compensation Table, the “Compensation Actually Paid” (or “CAP”) to our CEO as PEO, and, on an average basis, our other NEOs, and our total shareholder return. CAP figures do not reflect the actual amount of compensation earned by or paid to our NEOs during the applicable year as significant portions of this compensation depends on the achievement of performance criteria in subsequent fiscal periods.

  21. Pay Versus Performance

    | Year(1) | Summary compensation table total for PEO(2) | Compensation actually paid to PEO(3) | Average summary compensation table total for non-PEO named executive officers(2) | Average compensation actually paid to non-PEO named executive officers(3) | Value of initial fixed $100 investment based on: Total shareholder return(4) | Net income | | 2023 | $1,513,037 | $1,542,537 | $629,109 | $641,647 | $86.56 | $5,156,736 | | 2022 | $1,391,110 | $1,346,860 | $566,866 | $548,060 | $67.33 | $3,377,205 |

  22. Pay Versus Performance

    1.Mr. Gates served as the Company’s Chief Executive Officer for the entirety of 2022 and 2023. Our non-PEO NEOs for 2022 and 2023 included Messrs. Larsen and Hochberg. 2.Amounts reported in this column represent the total compensation reported in the Summary Compensation Table for the applicable year. 3.To calculate “Compensation Actually Paid” under SEC disclosure rules, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable year. Reconciliations of the adjustments for Messrs. Gates, Larsen and Hochberg are set forth in the tables below.

  23. Pay Versus Performance

    | | PEO | | NEOs - Average | | | | 2023 | 2022 | 2023 | 2022 | | Less grant date fair value of current year SARs | $(52,250) | $(68,250) | $(22,206) | $(29,006) | | Year-end fair value of current year SARs | $63,250 | $52,250 | $26,881 | $22,206 | | Year-over-year change in fair value of unvested SARs | $22,000 | $(32,000) | $9,350 | $(13,600) | | Change in fair value at vesting (from prior fiscal year end) of SARs granted in prior years for which vesting conditions were satisfied during current year | $(3,500) | $3,750 | $(1,488) | $1,594 | | Less fair value as of prior fiscal year end of SARs granted in prior years that failed to meet vesting conditions during current year | $— | $— | $— | $— | | Dividends paid | $— | $— | $— | $— | | Total Adjustments | $29,500 | $(44,250) | $12,537 | $(18,806) |

  24. Pay Versus Performance

    + 4.Pursuant to rules of the SEC, the comparison assumes $100 was invested on July 1, 2021. Historic stock price performance is not necessarily indicative of future stock price performance.

  25. Non-Employee Director Compensation

    Non-Employee Director Compensation Equity Grants. Under the Company’s 2010 Incentive Plan, as approved by the shareholders in October 2010, as amended and restated October 23, 2014, the Company’s non-employee directors receive awards, subject to the non-employee director’s continued service to the Company through the vesting date. Long-Term Incentive Plan Awards. Under the Company’s Long-Term Incentive Plan, non-employee directors receive long term non-equity incentive compensation awards. Retainers and Meeting Fees. In addition, non-employee directors received annual retainers for attending Board and committee meetings as set forth in the following table:

  26. Non-Employee Director Compensation

    | Annual Cash Retainer | | | Board Member, other than Chairman | $81,000 | | Chairman of the Board | 97,200 |

  27. Non-Employee Director Compensation

    All non-employee directors are also reimbursed for their expenses incurred in attending Board meetings and committee meetings, as well as other Board-related travel expenses.