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In a recent SEC filing, Key Tronic Corporation, a manufacturer of printed circuit boards, outlined new compensation structures and performance goals for its executives for the fiscal year 2025. The company, headquartered in Spokane, Washington, disclosed these changes in a Form 8-K filed today, based on decisions made by its Board of Directors on Monday, September 3, 2024.
The Board, following recommendations from the Compensation and Administration Committee, has set minimum profit goals as a prerequisite for any incentive payments under the company's incentive compensation plan (ICP). For fiscal year 2025, Key Tronic will use three performance levels—entry, expected value, and overachievement—to determine potential payouts as a percentage of the participant's base salary.
Key Tronic's President & CEO Brett R. Larsen, Executive Vice President of Administration, CFO and Treasurer Anthony G. Voorhees, and Executive Vice President of Customer Relations and Integration Philip S. Hochberg are participants in the ICP. For Larsen, payments could range from 10% to 150% of his base salary, depending on the performance level achieved. Voorhees and Hochberg have potential payments ranging from 7% to 105%.
Additionally, the Board approved a salary increase for Mr. Hochberg effective September 3, 2024, raising his bi-weekly salary from $15,162 to $16,678.
Long-term incentives were also addressed, with the Board establishing performance measures for a three-year period from fiscal years 2025 to 2027. These measures focus on sales growth and return on invested capital. Target awards for this period were set for the company's officers and non-employee directors, with cash payments contingent on exceeding minimum performance targets.
Larsen, Voorhees, and Hochberg could receive $400,000, $190,000, and $190,000 respectively if target measures are met, with non-employee directors potentially receiving $35,000.
Furthermore, the company granted restricted stock unit (RSU) awards to its executives under the 2010 Incentive Plan. Larsen received 55,431 RSUs, while Voorhees and Hochberg each received 27,716 RSUs, all subject to various vesting conditions tied to the company's annual EBITDA performance. Non-employee directors were awarded 8,869 RSUs each, with a one-year vesting period.
In other recent news, Keytronic Corporation reported a decrease in total revenue to $126.7 million in its fourth-quarter fiscal year 2024 results, a significant drop from $162.6 million in the same quarter of the previous year. This decline was largely due to a cybersecurity incident that resulted in $15 million of unfulfilled revenue.
Despite this setback, the company improved its gross margin to 9% and operating margin to 2.2%. The company also reported a break-even net income for the quarter and a net loss of $800,000 for the full year.
Looking ahead, Keytronic expects to fulfill most of the delayed orders in fiscal year 2025 and projects revenue in the range of $140 million to $150 million for Q1 of FY2025. With a focus on growth opportunities in onshoring and near-shoring, as well as efficiency improvements, the company is poised to maintain a strong gross margin in the upcoming fiscal year.
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