<PAGE> 0
SCI SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 28, 1994
To the Shareholders of SCI Systems, Inc.:
Notice is hereby given that the 1994 annual meeting of shareholders of SCI
Systems, Inc., a Delaware corporation, will be held at 10:00 A.M., Eastern
Daylight Savings Time, on Friday, October 28, 1994, at The Harvard Club of
Boston, 374 Commonwealth Avenue, Boston, Massachusetts 02215-2860, for the
following purposes:
(1) to elect two Class I Directors to serve for a term of three years;
(2) to approve the SCI Systems, Inc. 1994 Stock Option Incentive Plan;
(3) to act upon a proposal to ratify the selection of Ernst & Young LLP
as auditors for the fiscal year ending June 30, 1995; and
(4) to transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on September 19, 1994
as the record date for the determination of shareholders entitled to notice of
and to vote at such meeting and any adjournment or postponement thereof.
It is important that your shares be represented and voted at the meeting.
Accordingly, you are requested to please date, sign, and mail the enclosed
proxy as promptly as possible. Thank you for your cooperation.
By order of the Board of Directors,
Michael M. Sullivan
Secretary
Huntsville, Alabama
September 28, 1994
Please sign, date and promptly mail the enclosed white proxy in the postage
paid envelope provided.
<PAGE> 1
SCI SYSTEMS, INC.
c/o SCI Systems (Alabama), Inc.
P.O. Box 1000
Huntsville, Alabama 35807
PROXY STATEMENT
This Statement is furnished in connection with the solicitation by the Board
of Directors of SCI Systems, Inc. (the "Board" and the "Company") of proxies
to be voted at the annual meeting of shareholders of the Company to be held at
10:00 A.M., Eastern Daylight Savings Time, on Friday, October 28, 1994, at The
Harvard Club of Boston, 374 Commonwealth Avenue, Boston Massachusetts
02215-2860, and at any and all adjournments or postponement of such meeting
(the "Meeting"). If the enclosed form of proxy is executed, returned, and not
revoked, it will be voted in accordance with the specifications, if any, made
by the shareholders, and if specifications are not made, it will be voted for
election of the director nominees named herein, for approval of the SCI
Systems, Inc. 1994 Stock Option Incentive Plan and for ratification of the
selection of auditors, as described in this Proxy Statement. If other matters
are properly presented at the Meeting, it is the intention of the persons
designated as proxies to vote on them in accordance with their best judgment.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the Secretary of the Company either an instrument
revoking the proxy, or a duly executed proxy bearing a later date. Proxies
also may be revoked by any shareholder present at the Meeting who expresses a
desire to vote his or her shares in person. A majority of the shareholders
entitled to vote must be present in person, or represented by proxy, to
constitute a quorum and act upon the proposed business. Failure of a quorum
to be represented at the Meeting will necessitate adjournment and will
subject the Company to additional expense. When a quorum is present at any
meeting, an affirmative vote of a majority of the number of shares of stock
present or represented by proxy at the Meeting and entitled to vote shall
decide any question brought before the Meeting. However, directors shall be
elected by an affirmative vote of a plurality of the shares present in person
or represented by proxy at the Meeting and entitled to vote on the election
of directors. Abstentions will have the effect of negative votes with respect
to any matter presented at the Meeting, other than election of directors,
while broker non-votes will have no effect on any matter presented. If
authority to vote for one or more of the director nominees is withheld on a
proxy card,no vote will be cast with respect to the shares indicated on that
proxy card and the outcome of the election will not be affected.
The Notice of the Meeting, this Proxy Statement, and the form of proxy were
first mailed to shareholders on or about September 28, 1994.
VOTING SECURITIES
At the close of business on September 19, 1994, the record date for
determining shareholders entitled to notice and to vote at the Meeting, there
were outstanding 27,345,382 shares of common stock, $.10 par value ("Common
Stock") of the Company. Each share is entitled to one vote.
The following table sets forth certain information concerning each person
known to the Board to be a beneficial owner of more than five percent of the
outstanding shares of the Company's Common Stock as of December 31, 1993 (the
ownership of the Directors and executive officers of the Company being
included elsewhere herein).
Name and Address Amount Beneficially Percent of
of Beneficial Owner Owned Class (1)
- - -----------------------------------------------------------------------------
FMR Corporation 3,030,400 (1) 11.08%
82 Devonshire Street,
Boston, Massachusetts 02109-3614
The Capital Group, Inc. and Capital
Research and Management Company 2,345,640 (1) (2) 18.58%
333 South Hope Street,
Los Angeles, California 90071
(1) According to a Schedule 13G ("Schedule 13G"), filed pursuant to the
Securities Exchange Act of 1934 and dated February 11, 1994.
(2) Certain operating subsidiaries of The Capital Group, Inc. exercised
investment discretion over various institutional accounts which as of
December 31, 1993 held 2,345,640 shares of the Company's Common Stock.
Capital Research and Management Company and Capital International, Inc.,
registered investment advisers, and Capital International Limited and
Capital International, S.A., other operating subsidiaries, had invest-
ment discretion with respect to 1,694,300; 24,140; 498,300; and 128,900
shares, respectively, of the above shares.
<PAGE> 2
Ownership of Equity Securities in the Company
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock of each director, the Named Executive Officers and
the directors and executive officers of the Company as a group as of September
19, 1994.
Aggregate Number of Shares Percentage of Name
Name Beneficially Owned Outstanding Shares
- - ------------------------------------------------------------------------------
Olin B. King 1,214,483 (1) 4.4
A. Eugene Sapp, Jr. 1,226,818 (1) *
Richard A. Holloway 1,101,156 (2) *
Howard H. Callaway 1,288,500 (3) *
Jerry F. Thomas 1,238,933 (4) *
David F. Jenkins 1,226,550 (5) *
William E. Fruhan 1,223,500 (1) *
G. Robert Tod 1,223,278 (1) *
Jackie M. Ward 1,222,100 (1) *
Joseph C. Moquin 1,221,000 (1) *
Wayne Shortridge 1,221,000 (1) *
All Directors and Executive Officers
as a group (16 persons) 1,772,010 (6) 6.5
* Indicates less than 1% of issued and outstanding shares of Common Stock
of the Company.
(1) Includes 249,450 and 157,500 shares not presently owned by Messrs. King
and Sapp, respectively, but which are subject to stock options exercisable
within 60 days after September 19, 1994.
(2) Includes 78,100 shares not presently owned by Mr. Holloway but which are
subject to stock options exercisable within 60 days after
September 19,1994.
(3) Includes 3,000 shares owned by Mr. Callaway's spouse and 15,500 shares
owned of record by the Howard H. Callaway Foundation, Inc. Mr. Callaway
is an officer and Trustee of the Foundation and, as such, shares voting
and investment powers with respect to the shares owned by the Foundation.
Nothing in this paragraph should be construed as an admission by Mr.
Callaway of beneficial ownership of the shares owned by his spouse.
(4) Includes 37,425 shares not presently owned by Mr. Thomas but which are
subject to stock options exercisable within 60 days after September 19,
1994.
(5) Shares indicated are shares subject to stock options exercisable within 60
days after September 19, 1994.
(6) Includes 612,225 shares not presently owned but which are subject to stock
options exercisable within 60 days after September 19, 1994.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Board of Directors
In accordance with the Company's Amended and Restated Certificate of
Incorporation, the Board is divided into three classes, with each class
consisting, as nearly as possible, of one third of the total number of
directors fixed by the Board.
The Company's Bylaws provide that the number of directors shall be not less
than three(3) and not more than eleven (11), and that the exact size of the
Board may be fixed from time to time by the Board. The Board has fixed the
number of directors at eight, with two directors in Class I, three in Class
II, and three in Class III. Board members serve three-year terms. The terms
are staggered to provide for election of one class each year. Class I
directors are to be elected at the Meeting. The Board has nominated Olin B.
King and Howard H. Callaway for re-election as Class I directors. It is
intended that the proxies will be voted for the re-election of the two
nominees to serve as directors of the Company for a term of three years and
until their respective successors are elected and qualified. The proxies
cannot be voted for a greater number of persons than the number of nominees
named herein. In the event any of the nominees refuses or is unable to serve
as a director (which is not now anticipated), the person(s) acting as proxies
reserve full discretion to vote for such other persons as may be nominated.
Information About Director Nominees and Continuing Directors
Based upon information supplied by them, the table below sets forth for each
director nominee and continuing director their name, age, positions with the
Company, principal occupation and business experience for the last five years,
and prior service as a director of the Company.
Positions with the Company Director
Name and Age and Principal Occupation Since
- - ------------------------------------------------------------------------------
Class I Director Nominees
Term expiring in 1997)
- - -------------------------
Olin B. King (1) Chairman of the Board and Chief
(60) Executive Officer of SCI Systems, Inc. 1961
Howard H. Callaway (2) (4) President, Crested Butte Mountain 1976
(67) Resort, Inc., Crested Butte, Colorado,
a resort complex, since 1979; CEO and
President, Callaway Garden Resort, Inc.,
a resort complex, since January 1994.
Class II Directors
(Term expiring in 1995)
- - -------------------------
Jackie M. Ward (3) (4) Chief Executive Officer, Computer 1992
(56) Generation Incorporated, Atlanta, Ga.,1992
a provider of turn-key telecommunications
systems products and data processing
services to U.S. and International markets,
1968 to present.
Wayne Shortridge (2) (3) (5) Partner, Paul, Hastings, Janofsky & Walker, 1992
(56) January 1994 to present; Partner, Powell,
Goldstein, Frazer & Murphy, Atlanta, Ga.,
1968 to January 1994.
<PAGE> 3
William E. Fruhan (2) (3) The Thomas D. Casserly, Jr. Professor of 1992
(51) Business Administration, Harvard University,
Graduate School of Business, Cambridge,
Mass., 1979 to present.
Class III Director Nominees
(Term expiring in 1996)
- - -------------------------
G. Robert Tod (2) (4) President and Chief Operating Officer, 1981
(55) CML Group, Inc., Acton, Massachusetts, a
specialty marketing company, since 1969.
A. Eugene Sapp, Jr. (1) (3) President and Chief Operating Officer of 1981
(58) SCI Systems, Inc.
Joseph C. Moquin (1) (4) Retired; Chief Executive Officer, 1992
(70) Teledyne Brown Engineering, 1985 to 1990;
Interim President, University of Alabama in
Huntsville, September 1990 to July 1991.
- - -------------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Investment Committee
(4) Member of the Compensation Committee
(5) Until January 1994 Mr. Shortridge was a member of the law firm of
Powell, Goldstein, Frazer & Murphy of Atlanta, Georgia, which acts
as general counsel for the Company. As such, he shared in the
legal fees paid by the Company for the firm's services.
Certain of the continuing directors and director nominees also serve as
directors of other publicly held companies as follows: Mr. Callaway, CML
Group, Inc.; Mr. King, Regions Financial Corporation; Mr. Sapp, Irvine Sen-
sors Corp. and VBand Corporation; Mr. Tod, EG&G, Inc. and CML Group, Inc.; Mr.
Fruhan, Prudential Institutional Fund; and Ms. Ward, Information America,
Inc., Blue Cross Blue Shield of Virginia, and NationsBank Corporation.
Meetings and Committees
The Board has standing Executive, Investment, Compensation, and Audit
Committees. The Board does not have a standing Nominating Committee, as the
Executive Committee acts as such.
During the 1994 fiscal year the Board met four times; the Executive Committee
met seven times; the Investment Committee met four times; and the Compensation
and Audit Committees each met two times.
Consisting entirely of outside directors, the Audit Committee is responsible
for reviewing the Company's financial statements, evaluating the Company's
internal financial controls and procedures, and coordinating and approving the
activities of the Company's auditors.
Consisting entirely of outside directors, the Compensation Committee is
responsible for setting compensation guidelines for executives of the Company,
establishing their salaries, reviewing and approving incentive compensation
plans and bonus awards, and reporting all of the foregoing to the outside
members of the Board for approval.
The Executive Committee functions with substantially all of the powers and
duties of the Board; however, this Committee does not have authority to
approve mergers, amend the Certificate of Incorporation or Bylaws, or dispose
of substantially all of the Company's assets. The Executive Committee also
functions as the nominating committee of the Company, and will consider
proposed directorship nominations if recommended by shareholders in writing
to the Secretary of the Company.
The Investment Committee is responsible for reviewing and directing the
investment funds of the Company and of each employee benefit trust established
by the Company.
For fiscal 1994 the six outside directors were paid an annual fee of $10,000
plus $750 per Board meeting attended and $375 per committee meeting attended,
except that, in addition to the annual fee and Board Meeting fee, Mr. Moquin
is paid $150 per hour for Executive Committee meetings and for other work done
for the Company as requested. In 1994 Mr. Moquin was paid $1,350 for
attendance at Executive Committee meetings and $600 for government contracting
consulting services rendered to the Company's Government Division.
The Board of Directors recommends a vote "FOR" the re-election of the
director nominees named above.
<PAGE> 4
PROPOSAL 2-APPROVAL OF SCI SYSTEMS, INC.
1994 STOCK OPTION INCENTIVE PLAN
The Board of Directors has approved and seeks shareholder approval of the
SCI Systems, Inc. 1994 Stock Option Incentive Plan (the "1994 Plan"). The
purpose of the 1994 Plan is to give the Company increased flexibility to
provide equity-based incentive compensation linked to long-term shareholder
value to its key employees, officers and nonemployee directors.
The 1994 Plan would replace the SCI Systems, Inc., Non-Qualified Stock Option
Plan and the SCI Systems, Inc. Incentive Stock Option Plan (collectively, the
"Prior Option Plans"), both of which were approved by the Company's
shareholders in 1988. The Board of Directors has reserved 1,300,000 shares of
common stock, $.10 par value, of the Company ("Common Stock") for issuance
pursuant to awards that may be made under the 1994 Plan, of which
approximately 300,000 shares of Common Stock were previously reserved for
issuance under the Prior Option Plans. Of the 1,300,000 reserved shares,
1,200,000 shares may be granted to key employees and officers, and 100,000 may
be granted to nonemployee directors.
Awards to Key Employees and Officers. The 1994 Plan permits awards of
nonqualified stock options and incentive stock options within the meaning of
Internal Revenue Code Section 422 (collectively, "Options") to key employees
and officers. All officers and key employees of the Company and its
subsidiaries and affiliates are eligible to participate in the 1994 Plan. It
is currently estimated that approximately twenty-nine individuals are eligible
to participate. Awards to employees and officers under the 1994 Plan will be
determined by a committee of the Board (the "Committee"), the members of which
are selected by the Board. Only persons who satisfy the criteria of
"disinterested person" set forth in Rule 16b-3(c) of the Securities and
Exchange Act of 1934 may be members of the Committee. Accordingly, employee
Directors may not serve on the Committee. The Board of Directors has
authorized the appointment of nonemployee Directors Howard H. Callaway, Joseph
C. Moquin, G. Robert Tod and Jackie M. Ward, as the Committee.
The Committee will determine the persons to whom, and the times when, options
will be granted. The Committee will also determine the types of option to be
granted, the number of shares of Common Stock to which an option will be
subject, the exercise price, the terms and conditions of exercise, and all
other related terms and conditions of the option, subject to the limitations
described below and as set forth in the 1994 Plan. The terms and conditions of
each option shall be set forth in a written agreement with a participant. The
Committee shall also be authorized to accelerate the vesting, exercisability
and settlement of awards. Notwithstanding the above, the maximum number of
shares of common stock with respect to which an option may be granted during
any one year period to any key employee or officer shall not exceed 100,000.
The per share exercise price of any incentive stock option may not be less
than the fair market value at the time of grant, and with respect to an
incentive stock option granted to a person owning greater than 10% of the
Company's Common Stock, the exercise price may not be less than 110% of fair
market value at the time of grant. The per share exercise price of a
nonqualified stock option may be less than the fair market value at the time
of grant. No option may be granted on or after the tenth anniversary of the
date the 1994 Plan was approved by the Board.
An optionee may pay the exercise price of an option in any form or manner
authorized by the Committee, including, but not limited to, (i) cash, (ii)
shares of Common Stock previously owned by the optionee, (iii) a "cashless
exercise" through a broker, or (iv) by having a number of shares of Common
Stock withheld, the fair market value of which is sufficient to satisfy the
exercise price. The Committee may also authorize Company financing to assist a
key employee or officer in paying for the shares of Common Stock upon exercise
of an option. The interest rate on any such financing must not be less than
the "applicable federal rate" as defined in the Internal Revenue Code of 1986,
as amended.
Awards to Nonemployee Directors. All nonemployee directors of the Company
and its affiliates are eligible to participate in the 1994 Plan. Six
individuals are currently eligible to participate. The 1994 Plan permits each
nonemployee director to irrevocably direct the foregoing of all or a portion
(in 25% increments) of his or her annual director fee (but not meeting or
committee fees or expense reimbursements) in exchange for nonqualified stock
options.
Each direction shall be effective with respect to all annual director fees to
be paid for the remainder of the director's term after the expiration of six
months following the annual Company's receipt of such direction. A director is
entitled to make a direction at any time prior to 30 days following his or her
election, re-election or appointment to the Board; provided, that, any
nonemployee director who is a member of the Board as of the Plan's effective
date may make a direction at any time prior to 30 days following the Plan's
effective date.
Each nonqualified stock option granted to a nonemployee director shall be
issued for that number of shares of stock with an aggregate fair market value
(determined as of the date of grant) equal to four times the amount of the
foregone director fee allocated toward the purchase of options. Each option
may be exercised to the extent it has become vested. An option shall vest
generally in quarterly periods over the director's remaining term. An optionee
who ceases to be a nonemployee director shall forfeit that portion of the
option attributable to such vesting dates on and after the date he or she
ceases to be a nonemployee director.
<PAGE> 5
Each option will be exercisable at a price equal to the common stock's fair
market value as of the date the option is granted. Once exercisable each
option remains exercisable until the tenth anniversary of the date on which it
was granted. An optionee may pay the exercise price in cash, in shares of
common stock previously owned by the optionee, or by a cashless exercise
through a broker.
General Provisions Applicable to all Awards under the 1994 Plan. Awards of
nonqualified stock options and incentive stock options under the 1994 Plan are
nontransferable except by will or the laws of descent and distribution. In the
event of or anticipation of a merger, consolidation or other reorganization of
the Company or tender offer for shares of Common Stock, the Committee may make
such adjustments with respect to such awards and take such other action as it
deems necessary or appropriate to reflect such merger, consolidation,
reorganization or tender offer, including, without limitation, the
substitution of new awards, the termination or adjustment of outstanding
awards, the acceleration of awards or the removal of restrictions on
outstanding awards. The number of shares of Common Stock reserved for issuance
under the 1994 Plan is subject to adjustment in the event of stock split,
stock dividend, recapitalization and similar events.
The Board may amend or terminate the 1994 Plan without the approval of the
Shareholders, but may condition any amendment on Shareholder approval if the
Board believes it is necessary or advisable to comply with any applicable tax
or regulatory requirement. No termination or amendment of the 1994 Plan
without the consent of the holder of an award shall adversely affect the
rights of that participant.
Federal Income Tax Consequences. The following discussion outlines generally
the federal income tax consequences of participation in the 1994 Plan.
Individual circumstances may vary these results. The federal income tax law
and regulations are frequently amended, and each participant should rely on
his or her own tax counsel for advice regarding federal income tax treatment
under the 1994 Plan.
A participant will not recognize income upon the grant of a nonqualified
stock option. At the time the participant exercises a nonqualified option or
portion thereof, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock on the date the option is ex ercised over the price paid for the Common
Stock, and the Company will then be entitled to a corresponding deduction.
A participant will not recognize income upon the grant of an incentive stock
option. A participant who exercises an incentive stock option will not be
taxed at the time he or she exercises his or her option or a portion thereof.
Instead, he or she will be taxed at the time he or she sells the Common Stock
purchased pursuant to the option. If shares of Common Stock transferred
pursuant to the exercise of an incentive stock option are disposed of within
two years from the date the option is granted, or within one year from the
date the option is exercised, the optionee generally will recognize ordinary
income equal to the lesser of (1) the gain recognized (i.e., the excess of the
amount realized on the disposition over the exercise price) or (2) the excess
of the fair market value of the shares tranferred upon exercise over the
exercise price for such shares. If the optionee is subject to Section 16(b) of
the Securities Exchange Act of 1934, special rules may apply to determine the
amount of ordinary income recognized on the disposition. The balance, if any,
of the optionee's gain over the amount treated as ordinary income on
disposition generally will be treated as long or short-term capital gain
depending upon whether the holding period applicable to long-term capital
assets is satisfied. The Company normally would be entitled to a federal
income tax deduction equal to any ordinary income tax withholding requirements.
Exercise of an incentive stock option may subject a participant
to, or increase a participant's liability for, the alternative minimum tax.
All payments pursuant to the Plan shall be subject to federal income tax
withholding.
Shareholder Approval
The Board seeks shareholder approval of the 1994 Plan for the following
reasons: (1) A well balanced stock option program is key to the Company's
philosophy of linking officers' compensation to long-term shareholder value.
In the view of senior Company management, the 1994 Plan continues that
philosophy, and enhances it with the addition of nonemployee directors as
participants; (2) Certain of the Company's officers (including all of those
officers named in the Cash Compensation Table and included in the group
identified therein) ("Section 16 Employees") are subject to Section 16 of the
Securities Exchange Act of 1934. In October 1992 the U.S. Securities and
Exchange Commission ("SEC") revised its Regulations relating to transactions
by Section 16 Employees in Company securities, including stock options and
underlying Common Stock. The SEC provided a transition period for companies to
bring their benefit plans (including stock option plans) into compliance with
the new Regulations. Accordingly, the Company must make changes to its stock
option plans in order to comply with the new Regulations and allow Section 16
Employees to participate in the 1994 Plan, and thus have their compensation
linked to long-term shareholder value; and (3) Internal Revenue Code Section
162(m) restricts the deductibility of compensation in excess of certain limits
paid to certain Company executives according to Company compensation plans,
including stock option plans, if not approved by shareholders. If the 1994
Plan is not approved by shareholders, the Prior Option Plans will continue to
be available for making awards to employees.
<PAGE> 6
In summary, the Board of Directors seeks shareholder approval of the 1994
Plan so that the Company will have greater flexibility to design and implement
incentive awards to its key employees, officers and nonemployee directors,
including its Section 16 Employees, which are equity-based and linked to
long-term shareholder value.
Your Board recommends that Shareholders vote "FOR" the SCI Systems, Inc. 1994
Stock Option Incentive Plan.
PROPOSAL 3-RATIFICATION OF SELECTION OF AUDITORS
Ernst & Young LLP has served as independent certified public
accountant for the Company since 1961 and has been selected by the Board of
Directors to audit the books and records of the Company for the fiscal year
ending June 30, 1995. If the shareholders do not ratify this selection, the
selection of another firm will be considered by the Board. The Audit Committee
of the Board is of the opinion that the retention of the services of Ernst &
Young LLP is in the best interests of the Company. A representative of the
firm is expected to be present at the Meeting to respond to appropriate
questions and to make a statement if he or she so desires.
The Board of Directors recommends a vote "FOR" ratification of
Ernst & Young LLP as Auditors for fiscal year 1995.
EXECUTIVE OFFICERS
Officers of the Company are elected by the Board annually and serve at the
pleasure of the Board. Information concerning certain of the executive
officers of the Company is contained in the following Summary Compensation
Table and other tables set forth in this Proxy Statement.
Messrs. Olin B. King and A. Eugene Sapp, Jr. are officers of SCI Systems,
Inc. and of one or more of its subsidiaries; all other executive officers are
officers of one or more Company subsidiaries.
Messrs. King and Sapp have held various positions with the Company since 1961
and 1962, respectively, and have been Chairman and CEO, and President and COO,
respectively, since prior to 1988. Mr. Richard A. Holloway, age 52, joined the
Company in April 1986 as Senior Vice President, Government Division.
Mr. Jeffrey L. Nesbitt, age 43, joined the Company in 1985 as Plant Manager
and was promoted to Vice President in 1987 and to Senior Vice President,
Commercial Division, Eastern Region, in 1991.
Mr. David F. Jenkins, age 57, joined the Company in 1990 as Vice President
and was promoted to Senior Vice President, Commercial Division, Western
Region, in 1991. Prior to 1990 Mr. Jenkins served in several managerial
positions with the Unisys Corporation.
Mr. Alexander A.C. Wilson, age 57, joined the Company as Senior Vice
President, Commercial Division, European Region, in October 1993. From 1992 to
September 1993 Mr. Wilson served as Director, Personal Computer Manufacturing
and Distribution, International Business Machines Corporation. From 1978
through 1992 Mr. Wilson held increasingly responsible management positions
with International Business Machines Corporation.
Mr. Jerry F. Thomas, age 53, has held various positions with the Company
since 1963. In 1987 he was named Vice President, Government Division; in July
1992 he was named Vice President, Commercial Division, Central Region; and in
September 1993 he was promoted to Senior Vice President, Commercial Division,
Central Region.
Mr. Peter M. Scheffler, age 43, joined the Company as Senior Vice President,
Commercial Division, Asian Region, in January 1994. From June 1993 to January
1994 Mr. Scheffler was Senior Director of Worldwide Manufacturing for Apple
Computer, Inc. From 1988 through June 1993 Mr. Scheffler held a variety of
management positions with Apple Computer, Inc.
EXECUTIVE COMPENSATION
SEC regulations require disclosure of executive compensation in prescribed
formats. The required information is comprised of a Summary Compensation
Table, additional tables which provide further details of stock options and
similar forms of compensation, a report on executive compensation from the
Compensation Committee of the Board of Directors, and a five year stock
performance graph.
Compensation Summary
The following table summarizes for the last three completed fiscal years the
compensation of the Chief Executive Officer and the four most highly
compensated executive officers ("Named Executive Officers") of the Company
whose salary and bonus exceeded $100,000 for the year ended June 30, 1994.
<PAGE> 7
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term
------------------------------ Compensation
-------------
<C> <C> <C> <C> <C> <C> <C>
Name and Total Securities All Other
Principal Annual Underlying Compensation
Position Year Salary($) Bonus($) Compensation($) Options(#) ($) (b)
- - ----------------------- ---- --------- ---------- ------------- ------------- -------------
Olin B. King 1994 399,573 211,610(a) 611,183 40,000 14,385
Chairman & CEO 1993 348,694 265,590 614,284 30,000 12,553
1992 333,600 38,245 371,845 30,009 12,010
A. Eugene Sapp, Jr., 1994 308,800 137,547(a) 446,347 28,000 11,117
President & COO 1993 275,331 172,634 447,965 20,000 9,912
1992 263,400 24,859 288,259 20,000 9,482
Richard A. Holloway, 1994 174,042 5,315(a) 179,357 19,000 3,981
Senior Vice President, 1993 166,008 7,109 173,117 8,000 2,988
Government Division, 1992 159,500 8,908 168,408 8,000 2,871
David F. Jenkins, 1994 160,004 72,770(a) 232,774 12,000 2,898
Senior Vice President, 1993 144,946 118,790 263,736 8,000 2,609
Commercial Division, 1992 132,606 39,340(a) 171,946 9,000 2,387
Western Region
Jerry F. Thomas, 1994 139,962 69,619(a) 209,581 10,000 5,039
Senior Vice President, 1993 132,769 35,495 168,264 8,000 4,780
Commercial Division 1992 112,000 -0- 112,000 5,000 3,179
Central Region
(a) The 1994 bonus is an estimate of the amount payable when final calculations are completed
and approved by the Board of Directors
(b) Amounts represent the Company's contributions to Profit Sharing Plans, which Plans are
available to all eligible U.S. employees.
</TABLE>
Stock Option Grants in Last Fiscal Year
The Company from time to time awards stock options to executive officers and
other key employees pursuant to its Incentive Stock Option and Non-Qualified
Stock Option Plans. The Company does not grant Stock Appreciation Rights
(SARs). The following table sets forth certain information regarding stock
options granted to the Named Executive Officers during fiscal year 1994 under
the Plans.
<TABLE>
<CAPTION>
Individual Grants
- - ---------------------------------------------------------------------------------- Potential Realizable
<C> <C> <C> <C> <C> <C> <C>
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted to Price Appreciation for
Options Employees in Exercise or Base Expiration Option Term
Name Granted (#) Fiscal Year Price ($/SH) Date 5% ($) 10% ($)
- - -------------------- ----------- -------------------- ---------------- ---------- ------- ---------
Olin B. King 40,000 15.09 18.25 10/29/03 459,093 1,163,432
A. Eugene Sapp, Jr. 28,000 10.57 18.25 10/29/03 321,365 814,402
Richard A. Holloway 19,000 13.40 18.25 10/29/03 105,296 261,772
David F. Jenkins 12,000 14.53 18.25 10/29/03 137,728 349,030
Jerry F. Thomas 10,000 13.77 18.25 10/29/03 114,773 290,858
The assumed annual rates of appreciation of five and ten percent would result
in the price of the Company's stock increasing by $11.47 and $29.09,
respectively, at the end of the option term.
</TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table summarizes options exercised during 1994 and presents
the value of unexercised options held by the Named Executive Officers at
fiscal year end:
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) at Fiscal Year End ($)
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- - ------------------- -------------- ----------- ----------- ------------- ----------- -------------
Olin B. King 75,000 309,375 210,700 80,750 1,522,694 315,187
A. Eugene Sapp, Jr. 52,500 292,188 132,100 54,200 957,521 203,650
Richard A. Holloway -0- -0- 66,600 21,700 491,500 97,925
David F. Jenkins -0- -0- 18,800 19,950 123,075 58,988
Jerry F. Thomas 18,750 215,254 28,800 18,825 188,450 65,581
</TABLE>
Supplemental Retirement Plan: The Company's Supplemental Retirement Plan
("SRP") is a noncontributory, defined benefit pension plan which provides
fixed benefits to members upon their retirement, death or termination of
employment after at least 5 years of service with the Company or its
subsidiaries. The SRP is sponsored by SCI Systems (Alabama), Inc.
("SCI Alabama"), a wholly-owned subsidiary of the Company.
<PAGE> 8
All employees of the Plan Sponsor and its participating affiliates are
eligible to participate in the SRP. The SRP provides for a benefit accrual
each year for up to 35 years equal to 1% of employee compensation in excess
of $10,000 and, as of January 1, 1989, 1/2% of the first $10,000. Employee
compensation covered by the SRP is the total compensation that would be
subject to Social Security taxes as actually paid to the employee during
a calendar year, but excluding supplemental compensation awards, subject to
a limitation beginning January 1, 1989. Compensation deferred by members
under the Deferred Compensation Plan is not included as part of the employee
covered compensation in the year of deferral. Based on past years'
compensation covered by the SRP, and assuming normal retirement age and a
5.5% annual increase in covered compensation from calendar year 1994 until
retirement, estimated annual benefits payable upon retirement to the U.S.
based Named Executive Officers include the following: Mr. King, $63,581;
Mr. Sapp, $58,389; Mr. Jenkins, $22,356; Mr. Holloway, $44,329; and for
Mr. Thomas, $36,429. These estimated benefits are subject to Internal Revenue
Code of 1986 (the "Code") 415 maximum benefit limitations. In addition,
these benefits do not reflect the maximum limitation on includable employee
compensation under Code 401(a)(17) effective for plan years beginning in
1989. The maximum limitation in 1994 is $150,000, subject to cost of living
increases as prescribed by the Secretary of the Treasury. Finally, these
estimated benefits may be subject to change in order to comply with final
regulations to be issued by the Secretary of the Treasury under Code
Sections 401(a)(4) and 401(l) regarding the maximum excess allowance for
defined benefit excess pension plans.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
"Committee") consists of four Directors who are neither employees nor
officers of the Company. The Committee reviews the Company's executive
compensation program and policies each year and determines the compensation
of the officers. The Committee determinations on compensation of the Chief
Executive Officer and the other officers are reviewed with and approved by
all the nonemployee directors, who constitute a majority of the Board.
The Committee's overall policy regarding compensation of the Company's
officers is to provide generally competitive salary levels and compensation
incentives that attract and retain individuals of outstanding ability; that
recognize individual performance and the performance of the Company relative
to the performance of other companies of comparable size and quality; and
that support both the short-term and long-term goals of the Company.
The executive compensation program includes three elements which, taken
together, constitute a flexible and balanced method of establishing total
compensation for management. These elements are base salary, annual incentive
awards in the form of annual cash bonuses, and long-term incentive awards
in the form of stock option grants.
Base Salaries
The Committee annually reviews and establishes officer base salaries.
Individual salaries are determined by the Committee's assessment of the
individual's experience level, scope and complexity of the position held,
and the salaries being paid for similar positions in the industry based upon
the Company's knowledge of competitive salaries in the marketplace.
Annual Incentive Program
The goal of the annual incentive, or bonus, program is to place a significant
portion of the officers' and senior managers' cash compensation at risk to
encourage and reward a continued high level of performance each year.
Individual incentive amounts are determined by the Committee generally based
upon profitability of the individual's business unit and his or her
organizational responsibility. The CEO and COO do not participate in the same
annual incentive program as the other Company officers. Annual incentive
compensation for Messrs. King, Chairman and CEO, and Sapp, President and COO,
are based upon Company profits and have been set for several years at 1% and
.65% of the Company's annual net income, respectively.
Long-term Incentive Program
Stock options are the basis for the Company's long-term incentive program.
The Company's stock option grants generally are made at market value at the
date of grant and vest over a four year and a day period. This program links
officer compensation to long-term shareholder value and focuses management
attention on Company performance over a period longer than one year. Stock
options are also granted to encourage and facilitate personal stock ownership
by the officers and thus strengthen both their personal commitment to the
Company and their longer term perspective. The Committee's policy is to grant
stock option awards annually, based both on individual performance and the
potential for the officer to contribute to the future success of the Company.
The Committee believes that the three programs described above provide
compensation that is competitive with the levels paid by other major
competitors in the industry, effectively links officer and shareholder
interests through equity-based plans, and is structured to provide incentives
that are consistent with the long-term investment horizons which characterize
the business in which the Company is engaged. In this regard, the Committee
draws shareholder attention to the Total Annual Compensation for Messrs. King
and Sapp, CEO and COO respectively, for fiscal years 1994 and 1993. Total
Annual Compensation for these officers decreased in fiscal year 1994 and
increased in fiscal year 1993, generally tracking the overall performance of
the Company during that period.
<PAGE> 9
Chief Executive Officer Compensation
In determining Mr. King's base salary, annual bonus and stock option grant
in 1994, the Committee considered both the Company's overall performance and
Mr. King's individual performance by the same methods described above for
Company officer compensation. The Committee also considered compensation
granted to chief executive officers of other companies in similar industries,
as well as incentive for future performance. The Compensation Committee
believes that Mr. King's compensation as Chief Executive Officer appropriately
reflects his performance and, in turn, that of the Company in 1994. Company
results and Mr. King's individual performance in 1994 were, in general, very
good. The Company had record revenues and finished the year with record order
backlog. The Company also successfully continued its strategy of providing
additional value added services to customers, with positive effect on revenue.
Further, during 1994 the Company established a significant presence in
Continental Europe through acquisition of a major customer's assembly
operation in France. Lastly, the Company started and completed a significant
expansion of its Mexican plant during the year.
The Committee does not believe that the compensation of any Company officer
is likely to exceed the $1 million threshold limit of Section 162(m) of the
Internal Revenue Code and has not yet sought to structure the performance-
based portion of any of its officers' compensation packages to comply with
that Section.
Submitted by the Compensation Committee of the Company's Board of Directors:
Howard H. Callaway, Chairman
Joseph C. Moquin
G. Robert Tod
Jackie M. Ward
PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative total
shareholder return to the Company's shareholders with that of the Dow Jones
Industrial Average ("DJIA") and the Computer Hardware Subsector of the
Hambrecht & Quist Technology Index ("H&Q Comp Hdw"). Total shareholder return
was determined by converting the closing price of a share of SCI Common Stock
at the beginning of the measurement period (June 30, 1989) to a base amount
($100.00). Cumulative return for each subsequent quarter end (assuming
reinvestment of all dividends into additional shares) was measured as a change
from the closing price at the beginning of the measurement period and plotted.
The graph assumes $100 was invested on June 30, 1989 in the Company's Common
Stock ("SCIS"), in the DJIA, and in the H&Q Comp Hdw companies.
Comparative Five-Year Total Returns
SCI Systems, Inc., Dow Jones Industrial Average and Hambrecht & Quist Computer
Hardware Subsector (Normalized) Stock Performance Graph
______________________________________________________
| |
| |
| STOCK PERFORMANCE GRAPH OF DATA BELOW |
| |
| |
|______________________________________________________|
SCIS 100 98 67 63 153 134
DJIA 100 118 119 136 144 149
H&Q 100 110 93 99 79 77
6/89 6/90 6/91 6/92 6/93 6/94
<PAGE> 10
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and
the National Association of Securities Dealers, Inc. Officers, directors and
greater than 10 percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on transactions reported to the Company and review of the copies
of such forms and any amendments thereto furnished to the Company, or written
representations that no forms were required, the Company believes that during
the year ended June 30, 1994, all Section 16(a) filing requirements applicable
to its officers, directors and greater than 10 percent beneficial owners were
met, except that Messrs. Holloway and Sullivan were each tardy in filing one
form with the SEC.
RELATED PARTY TRANSACTIONS
As previously reported, in February 1990 the Company sold a vacant, excess
facility located in Huntsville, Alabama (the "Facility") to Mr. King, Company
Chairman and CEO. In 1993 certain environmental problems were identified by
the current tenant and Mr. King, as landlord, was required to have the problem
remediated. Pursuant to an environmental indemnification provision in the
February 26, 1990 Real Estate Sales Agreement (the "Agreement") between the
Company and Mr. King relating to the Facility, the Company was required to
effect the remediation. During the period December 1993 to September 1994 the
Company paid $483,383 in remediation fees and for replacement material
directly to third party companies and $44,318 directly to the current tenant
in the Facility for expenses incurred as a result of the ongoing remediation.
None of the above monies was paid to Mr. King, and the third parties and the
tenant are unrelated to him. The Company believes no further remediation work
is required at the Facility. A Special Committee of the Board of Directors
(the "Special Committee") has under review a request from Mr. King for
payments for the period a portion of the Facility was unavailable for lease
due to the remediation. The Special Committee has not completed its
deliberations on the request. It is not possible to determine at this time
what payment, if any, the Special Committee will authorize.
GENERAL
Any shareholder of the Company wishing to submit a proposal at the Company's
1995 annual meeting of shareholders and desiring the proposal to be considered
for inclusion in the Company's proxy materials must provide a written copy of
the proposal to the management of the Company at its principal executive
office not later than June 1, 1995 and must otherwise comply with the rules of
the Securities and Exchange Commission relating to shareholder proposals.
The cost of preparing and mailing the proxies, accompanying notices and Proxy
Statements, and all costs in connection with solicitation of proxies will be
paid by the Company. In addition to solicitation by use of the mail, certain
directors, officers and regular employees of the Company may solicit the
return of proxies by telephone, telegram or other electronic methods, or
personal interview without additional compensation. The Company may request
brokerage houses and custodians, nominees and fiduciaries to forward
soliciting material to their principals, the beneficial owners of Common Stock
of the Company, and will reimburse them for their reasonable out-of-pocket
expenses.
Management does not know of any other matters to be presented at the Meeting
for action by shareholders. However, if any other matters requiring a vote of
the shareholders arise at the Meeting, it is intended that votes will be cast
pursuant to the proxies with respect to such matters in accordance with the
best judgment of the persons acting under the proxies.
If you cannot be present in person, you are requested to please date, sign
and mail the enclosed proxy promptly. An envelope has been provided for that
purpose. No postage is required if mailed in the U.S.
By Order of the Board of Directors,
MICHAEL M. SULLIVAN /S/
Michael M. Sullivan
Secretary
Huntsville, Alabama
September 28, 1994
