GTAT seeks $3.7m in bonuses for key execs
Hearing Wednesday on incentive plan for 37 insiders and others
GT Advanced Technologies wants to award 37 insiders and other key executives a total of about $3.7 million should they meet certain financial goals, but it doesn’t want to disclose who those people are, the company says in a Dec. 29 bankruptcy court filing.
The company says the secret bonuses would boost morale and create incentives for the 120 remaining employees at the company’s Merrimack headquarters, which has already lost 48 employees since the company filed for Chapter 11 bankruptcy in early October. That doesn’t include the approximately 800 workers in Arizona who were involved in GTAT’s failed attempt to produce sapphire for Apple mobile devices.
The company has burned through some $100 million in the two months following the bankruptcy filing, though November’s $30 million loss was a considerable improvement compared to the $73 million it lost during the first 25 days in Chapter 11.
That was before the bankruptcy court approved a settlement with Apple that allows the $439 million debt GTAT owes the tech giant to be repaid through the sale of the sapphire furnaces GTAT built t the Arizona plant.
According to GTAT’s filing, nine of the insiders would receive a total of $2.275 million if they meet five targets (and an undisclosed amount if they go above it), the most important of which is the value of the furnaces shipped ($180 million). Other targets would include cash operating expenses, research and development costs, cash from selling off non-furnace assets in Arizona and advancements in the new technologies.
Meeting the goals would be “extremely challenging,” GTAT attorneys argued, “due to many factors, including limiting existing revenues and the need to transition the business to the ‘new GTAT.’”
GTAT argues in its Dec. 29 filing that it needed to keep the names of the insiders secret because “making this information public would give GTAT’s competitors an unfair advantage because they could use it to target specific employees with offers of employment having greater compensation.”
Also public disclosure of the names “may cause harm or distress to” the employees, “lowering employee morale and disrupting the functioning of GTAT’s business.”
But two days later, GTAT itself released the names of six insiders in its monthly operating report, as it is required to do by bankruptcy court rules.
The insiders were paid salaries and expenses totaling $218,000 in November, with CEO Thomas Gutierrez earning $55,769 for the month, followed by chief operating officer Daniel Squiller, with $47,215.
To put the dollar amounts in perspective, the company has paid bankruptcy professionals some $3.7 million as of Nov. 29.
The other 28 non-insiders would be paid retention bonuses ranging from $11,000 to $125,000 not to exceed a total of $1.4 million, if GTAT achieves the same goals. (In addition, the CEO would have another $300,000 he could awarded to some of these employees at his discretion.
This money would be in addition to $1.95 million to be paid to 173 other employees in the first quarter of 2016 as part of the company’s existing management incentive plan.
GTAT attorneys say they expect objections to the filing, and although none has been filed yet, there has been a firestorm of criticism on various online bulletin boards by investors, who have seen their share value drop from more than $10 to about 35 cents since the bankruptcy filing and subsequent delisting from the Nasdaq.
“So some execs deserve a ‘bonus’ for the possibility of ‘turning the company around’?” wrote one investor on a Seeking Alpha bulletin board. “If they are so confident in their abilities, then give them shares.”
“Typical corporate greed,” wrote another. “The stockholders get screwed and they get paid for it.”
But others noted that this essentially replaces an equity bonus plan, which, given the current value of the stock, is not much of an incentive anymore.
“A strategic cash bonus based on performance is an excellent plan,” said another investor.
As of Dec. 19, the company had $96.7 million in cash equivalents. That’s actually up slightly from $94.9 million at the end of November, indicating that operating losses may have been abated in the first two weeks of the month. But the company owes more than $500 million.
A hearing on keeping the names of the incentive payment recipients secret is scheduled for Wednesday in Manchester. A creditors meeting is scheduled for tomorrow. Hearings on the actual payout motion is set for Jan. 23 in Springfield, Mass.