DEF 14A of Key Tronic Corp
Filed Oct 28, 2024 · FY20240000719733-24-000119
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS Seven 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 seven 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.
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 Board Diversity Rules, the following Board Diversity Matrix provides certain information regarding the composition of our Board as of June 29, 2024, Each of the categories listed in the table has the meaning as it is used in Nasdaq Rule 5605(f).
Board Diversity
| Board Diversity Matrix | | | | | | Total Number of Directors | 6 | | | | | | Female | Male | Non-Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | Directors | 1 | 4 | 0 | 1 | | 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 | 1 | 2 | 0 | 0 | | Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | | LGBTQ+ | 0 | | | | | Did Not Disclose Demographic Background | 2 | | | |
Board Diversity
The following information has been provided to the Company with respect to the nominees for election to the Board of Directors: Cheryl Beranek, age 61, has been a director of the Company since January 2004. Ms. Beranek is the President, Chief Executive Officer and a director of Clearfield, Inc., a publicly held company that designs, manufactures and distributes fiber optic management, protection and delivery products for communications networks. Ms. Beranek was a member of the board of directors of publicly-traded CyberOptics Corporation, a developer and manufacturer of high precision sensors and inspection systems for the semiconductor and electronics industry, from May 2020 until its acquisition in November 2022. Ms. Beranek holds a Bachelor of Science degree from Southwest Minnesota State University and a Master of Science degree from North Dakota State University. The Board of Directors has concluded that based upon Ms. Beranek’s senior management experience, service on companies’ boards and education that she should serve as a director of the Company. James R. Bean, age 74, 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 65, has been a director of the Company since July 2009 and formerly served as President and CEO of the Company from April 2009 through June 2024. 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. 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 72, has been a director of the Company since October 2009 and Chair of the Board since January 2024. Mr. Klawitter formerly served as Executive Vice President of Administration, CFO and Treasurer of the Company from July 1997 through July 2015 and Vice President of Finance, Secretary and Treasurer 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 60, 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. The Board of Directors has concluded that based upon Dr. Kulkarni’s current and prior senior management and financial experience, service on companies’ boards and education that he should serve as a director of the Company. Brett R. Larsen, age 51, has served as served as President and CEO of the Company since June 30, 2024. Previously he was Executive Vice President of Administration, Chief Financial Officer, and Treasurer since July 2015 and Vice President of Finance and Controller from February 2010 to July 2015. He was Chief Financial Officer of FLSmidth Spokane, Inc. from December 2008 to February 2010. From October 2005 through November 2008, Mr. Larsen served as Controller of Key Tronic Corporation. From May 2004 to October 2005, Mr. Larsen served as Manager of Financial Reporting of Key Tronic Corporation. From 2002 to May 2004, Mr. Larsen was an audit manager for the public accounting firm BDO USA, LLP. He also held various auditing and supervisory positions with Grant Thornton LLP from 1997 to 2002. Mr. Larsen has a Bachelor of Science degree in Accounting and a Masters degree in Accounting from Brigham Young University and is a Certified Public Accountant. The Board of Directors has concluded that based upon Mr. Larsen’s business expertise, current and prior senior management experience and education that he should serve as a director of the Company. Yacov A. Shamash, age 74, 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. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
Summary Compensation Table-Fiscal Years 2022-2024
Summary Compensation Table-Fiscal Years 2022-2024 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 for fiscal years 2022 through 2024, to the extent such persons served in such capacities during such period. Collectively, these officers are the “named executive officers.”
Summary Compensation Table-Fiscal Years 2022-2024
| 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, | 2024 | 879,070 | — | — | — | 13,200 | 892,270 | | President & Chief | 2023 | 905,367 | — | 52,250 | 543,220 | 12,200 | 1,513,037 | | Executive Officer | 2022 | 799,549 | — | 68,250 | 511,711 | 11,600 | 1,391,110 | | Brett R. Larsen, | 2024 | 593,917 | — | — | — | 18,969 | 612,886 | | Executive Vice President, | 2023 | 475,952 | — | 23,513 | 199,900 | 12,200 | 711,565 | | Chief Financial Officer | 2022 | 430,485 | — | 30,713 | 165,306 | 11,600 | 638,104 | | Philip S. Hochberg, | 2024 | 389,870 | — | — | — | 16,088 | 405,958 | | Executive Vice President of | 2023 | 384,522 | — | 20,900 | 126,892 | 14,339 | 546,653 | | Customer Relations and Integration | 2022 | 346,006 | — | 27,300 | 110,722 | 11,600 | 495,628 |
Summary Compensation Table-Fiscal Years 2022-2024
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 2024 Annual Report. 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 2024 payment for retro pay in the amount of $2,888 for Mr. Hochberg and $5,769 for Mr. Larsen. Includes for fiscal year 2023 payment for retro pay in the amount of $2,139 for Mr. Hochberg.
Grants of Plan-Based Awards-Fiscal Year 2024
Grants of Plan-Based Awards-Fiscal Year 2024 The following table sets forth information concerning individual grants of non-equity incentive plan awards made during fiscal year 2024 to each of the named executive officers. As noted above, the Compensation Committee did not grant any equity incentive plan awards in fiscal year 2024.
Grants of Plan-Based Awards-Fiscal Year 2024
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | | Craig D. Gates | 08/10/23(1) 08/10/23(2) | 87,907 200,000 | 879,070 400,000 | 1,318,605 600,000 | | Brett R. Larsen | 08/10/23(1) 08/10/23(2) | 32,286 125,000 | 322,858 250,000 | 484,286 375,000 | | Philip S. Hochberg | 08/10/23(1) 08/10/23(2) | 20,649 75,000 | 206,487 150,000 | 309,730 225,000 |
Grants of Plan-Based Awards-Fiscal Year 2024
(1)Represents threshold, target and maximum payouts under the annual Incentive Compensation Plan for fiscal year 2024. For actual payouts, if any, earned for fiscal year 2024 see the Summary Compensation Table. (2)Represents threshold, target and maximum payouts under the Long-Term Incentive Plan for the 2024-2026 performance cycle. Payouts under the Long-Term Incentive Plan for the 2024-2026 performance cycle are dependent upon the achievement of goals for three years sales growth compared to peer group companies and return on invested capital.
Outstanding Equity Awards at Fiscal 2024 Year-End
Outstanding Equity Awards at Fiscal 2024 Year-End The following table presents information regarding the outstanding stock appreciation rights (SARs) awards held by each of the Company’s named executive officers as of June 29, 2024. No named executive officer has any other form of equity award outstanding, except for the RSUs granted on September 3, 2024 and disclosed in our Current Report on Form 8-K, filed with the SEC on September 9, 2024.
Outstanding Equity Awards at Fiscal 2024 Year-End
| Option/SAR Awards | | | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (SARs) (#) Exercisable(1) | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (SARs) (#)(1) | Option (SAR) Exercise/Base Price ($) | Option (SAR) Expiration Date | | Craig D. Gates | 07/29/22 08/09/21 07/26/19(2) | 25,000 | 25,000 25,000 | 5.10 7.17 4.93 | 07/29/27 08/09/26 07/26/24 | | Brett R. Larsen | 07/29/22 08/09/21 07/26/19(2) | 11,250 | 11,250 11,250 | 5.10 7.17 4.93 | 07/29/27 08/09/26 07/26/24 | | Philip S. Hochberg | 07/29/22 08/09/21 07/26/19(2) | 10,000 | 10,000 10,000 | 5.10 7.17 4.93 | 07/29/27 08/09/26 07/26/24 |
Outstanding Equity Awards at Fiscal 2024 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. (2)The awards granted on August 9, 2021 did not vest and were no longer outstanding as of August 9, 2024.
Option/SAR Exercises and Stock Vested-Fiscal Year 2024
Option/SAR Exercises and Stock Vested-Fiscal Year 2024 During fiscal year 2024, none of the named executive officers exercised any stock appreciation rights awards.
Pension Benefits
Pension Benefits None of the named executive officers are covered by a pension plan.
Non-qualified Deferred Compensation
Non-qualified Deferred Compensation None of the named executive officers are covered by a defined benefit plan or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
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 June 29, 2024. As previously disclosed, Mr. Gates retired as the Company’s President and Chief Executive Officer, on June 29, 2024. 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.
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.
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 (loss) | | 2024(1) | $892,270 | $778,520 | $509,422 | $461,078 | $61.83 | $(2,787,296) | | 2023(1) | $1,513,037 | $1,542,537 | $629,109 | $641,647 | $86.56 | $5,156,736 | | 2022(1) | $1,391,110 | $1,346,860 | $566,866 | $548,060 | $67.33 | $3,377,205 |
Pay Versus Performance
1.Mr. Gates served as the Company’s Chief Executive Officer for the entirety of 2022, 2023 and 2024. Our non-PEO NEOs for 2022, 2023 and 2024 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.
Pay Versus Performance
| | PEO | NEOs - Average | | | 2024 | 2024 | | Less grant date fair value of current year SARs | — | — | | Year-end fair value of current year SARs | — | — | | Year-over-year change in fair value of unvested SARs | $(50,500) | $(21,463) | | 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 | — | — | | Less fair value as of prior fiscal year end of SARs granted in prior years that failed to meet vesting conditions during current year | $(63,250) | $(26,881) | | Dividends paid | — | — | | Total Adjustments | $(113,750) | $(48,344) |
Pay Versus Performance
4.Pursuant to rules of the SEC, the comparison assumes $100 was invested on July 1, 2021. Historic stock price performance is not necessarily indicative of future stock price performance.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Non-Employee Director Compensation Table
Non-Employee Director Compensation Table The following table presents information regarding the compensation paid during fiscal year 2024 to members of the Board of Directors who were not also employees of the Company (referred to herein as “non-employee directors”).
Non-Employee Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Option/SAR Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | James R. Bean | 81,000 | — | — | — | 81,000 | | Ronald F. Klawitter | 84,330 | — | — | — | 84,330 | | Subodh K. Kulkarni | 81,000 | — | — | — | 81,000 | | Yacov A. Shamash | 81,000 | — | — | — | 81,000 | | Cheryl Beranek | 20,250 | — | — | — | 20,250 | | Patrick Sweeney | 72,900 | — | — | — | 72,900 |
Non-Employee Director Compensation Table
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 June 29, 2024. As noted above, the Compensation Committee did not grant any equity incentive plan awards in fiscal year 2024.
Non-Employee Director Compensation Table
| Director | Number of Shares Subject to Outstanding Options/SAR Awards as of June 29, 2024 | | James. R. Bean | 15,000 | | Ronald F. Klawitter | 15,000 | | Cheryl Beranek | — | | Subodh K. Kulkarni | 15,000 | | Yacov A. Shamash | 15,000 |
Non-Employee Director Compensation
Non-Employee Director Compensation Retainers and Meeting Fees. Non-employee directors received annual retainers for attending Board and committee meetings as set forth in the following table:
Non-Employee Director Compensation
| Annual Cash Retainer | | | Board Member, other than Chair | $81,000 | | Chair of the Board | $97,200 |
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. Equity Grants. Under the Company’s 2024 Incentive Plan, subject to approval by the shareholders at the Annual Meeting, the Company’s non-employee directors may 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.