Business Context and Reporting Period
This Form 8-K Current Report was filed by TTM Technologies, Inc. on March 25, 2010. The filing details the Compensation Committee's approval of 2010 base salaries, cash bonus programs, and long-term equity incentive awards for Named Executive Officers (NEOs). The report also references a pending acquisition of Meadville Holdings Limited, which influences the financial targets set for the year.
Key Financial Metrics and Compensation Structure
The filing does not report consolidated revenue, profit, cash flow, or debt metrics for the company. Instead, it outlines the following compensation metrics for 2010:
- Base Salaries: Effective March 22, 2010, base salaries were set for four NEOs, ranging from $310,000 to $605,000.
- Cash Bonuses: 2010 cash bonuses are based solely on company-wide operating income. Payouts range from 0% (if operating income is below 60% of target) to 230% of base salary for the CEO and 140% for other NEOs at maximum performance.
- Equity Awards: A new Performance-Based Restricted Unit (PRU) program was introduced alongside time-vesting Restricted Stock Units (RSUs). PRUs are valued at $10.55 per share (six-month trailing average) for grant calculations.
- Performance Metrics: PRU awards are tied to Revenue and EBITDA targets (equally weighted) and a Total Stockholder Return (TSR) modifier relative to the S&P SmallCap 600 index.
Material Changes and Program Details
The primary material change is the introduction of the PRU Program, adding a performance-based element to the long-term incentive structure. Key features include:
- Three-Year Performance Period: PRU awards are evaluated over rolling three-year periods. The number of shares released can range from zero to 2.4 times the target number.
- TSR Modifier: Payouts are adjusted based on TSR relative to the S&P SmallCap 600. If TSR is in the bottom quartile, the modifier is zero (no payout). If TSR is at or above the 80th percentile, the modifier is 150%.
- Meadville Acquisition Impact: 2010 financial goals include projected performance from the pending Meadville acquisition. These targets will be pro-rated if the deal closes after April 1, 2010, and eliminated if it does not close by July 1, 2010.
- EBITDA Definition: EBITDA calculations for the PRU program exclude specific items such as PRU compensation expense, goodwill impairment, asset write-downs, and plant closure costs.
Guidance, Outlook, and Risks
Management Commentary: The Compensation Committee explicitly states that the performance targets established for the PRU Program are for compensation purposes only and should not be interpreted as management's expectations or guidance for future financial performance.
Risks and Contingencies:
- Acquisition Risk: The 2010 bonus and PRU targets depend on the successful and timely closing of the Meadville acquisition. Failure to close by July 1, 2010, eliminates the Meadville portion of the targets.
- Market Risk: Even if financial targets (Revenue/EBITDA) are fully met, executives may receive no payout if the company's TSR falls below the median of the S&P SmallCap 600.
- Stock Price Volatility: Award values fluctuate with stock price changes over the three-year period.
Investor Verification Checklist
- Verify the status and closing date of the Meadville Holdings Limited acquisition to determine if 2010 performance targets will be adjusted or eliminated.
- Review the specific 2010 Revenue and EBITDA targets set by the Board, as these are not explicitly listed in this filing but are referenced as the basis for bonuses.
- Monitor the company's TSR relative to the S&P SmallCap 600 index, as this modifier can reduce potential equity payouts to zero regardless of operational performance.
- Confirm the actual operating income achieved in 2010 to calculate the final cash bonus payouts for executive officers.