May 25, 1995 in Nation/World

Key Tronic Ceo Hiller Cashes Stock Options Institutional Investors Snap Up Shares In Heavy Trading

Michael Murphey Staff writer
 

Stock of Key Tronic Corp., the resurg ent Spokane-based keyboard maker, had another huge trading day Tuesday with a volume of almost 1.5 million shares.

The activity was prompted by the sale of 650,000 shares of stock at $13.50 per share by company chief executive officer Stanley Hiller and company founder Lewis G. Zirkle.

Genesis Merchant Group Securities, a San Francisco-based brokerage firm, purchased the stock and resold it to a variety of institutional money manager investors.

“Money managers buy stocks because they think there is opportunity for price appreciation in the stocks,” said Greg Tuerk, Genesis’s head trader for the NASDAQ over-the-counter exchange. “Our buyers thought the stock was underpriced and that it would go up.”

Earlier this year, Thomas Friedberg, an analyst with Genesis, said Key Tronic is an attractive company because it has positioned itself well to compete globally.

“They’ve shown that an American company can be a leader,” Friedberg said in March.

Key Tronic stock closed at $14.25 in Tuesday’s trading on the NASDAQ market. Wednesday, the stock closed at $13.88 1/2 with 72,200 shares traded.

The daily volume average for the stock is about 36,000 shares.

The bulk of the Tuesday transactions came from the exercise of an option by Hiller.

Hiller, whose company The Hiller Group is based in Menlow Park., Calif., has a long history or successfully restoring struggling companies to profitability. He was recruited into Key Tronic by the company’s board of directors in early 1992.

Founded by Zirkle in 1969, Key Tronic became Spokane’s premier high-tech manufacturer by building computer keyboards. The company’s stock price reached $14.63 in 1986, but by the end of 1991, the company was struggling to stay alive, and the stock price had plummeted to about $2.50.

Hiller’s company charges Key Tronic for its expenses, but rather than taking a salary for the turnaround work, Hiller takes compensation in the form of stock options.

Hiller negotiated options for two blocks of stock when he agreed to take over management of Key Tronic. One is an open-ended option that allows him to buy 2.4 million shares at $4.50. The second option originally allowed him to buy 1 million of Zirkle’s shares at $6 per share. That option had to be exercised by March 2, 1995.

Earlier this year, Hiller negotiated an extension of that option date with Zirkle. In exchange for the extension, Hiller agreed to reduce the number of shares in the option to 750,000, and increase the option price to $7 per share, according to Ronald F. Klawitter, Key Tronic’s treasurer and vice president of finance.

In Tuesday’s transaction, Klawitter said, Hiller acquired all 750,000 shares under the option from LGZ Inc. He then resold 500,000 of those shares at a profit of $6.50 a share.

“The idea was to sell an amount of shares enough to cover the cost of exercising the whole option, plus pay taxes on the transaction,” Klawitter explained.

The remaining 150,000 shares in the Tuesday transaction were sold by LGZ Inc., according to the news release.

During the past 52 weeks, Key Tronic stock has gone from a low of $6 per share to a peak of $15 per share in March when institutional buying produced a 1 millionshare volume trading day.

“We’ve got a pretty good foundation and we’re going forward,” said Klawitter. “The future looks pretty good right now, and that’s being reflected in the stock price.”

Key Tronic is the world’s largest independent manufacturer of computer keyboards and other computer input devices. Headquartered in Spokane, the company has manufacturing operations in Spokane, Mexico, Europe and Asia.


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