SCHEDULE 14A
(Rule 14a-1O1)
INFORMATlON REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
X Preliminary proxy statement
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SCI SYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)
SCI SYSTEMS, INC.
(Name of Person(s) Filing Prox)' Statement)
Payment of filing fee (Check the appropriate box):
x $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-60)(2).
(DEPOSITED TO LOCK BOX AS UNRESTRICTED FUNDS)
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i) (3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) (2)and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
Set forth the amount on which the filing ree is calculated
and state bow it was determined.
SCI SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 27, 1995
To the Shareholders of SCI Systems, Inc.:
Notice is hereby given that the 1995 annual meeting of shareholders of
SCI Systems, Inc., a Delaware corporation, will be held at XX:XX A.M.,
Eastern Daylight Savings Time, on Friday, October 27, 1995, at The
Ritz-Carlton Hotel (Buckhead), 3434 Peachtree Street, N.E., Atlanta,
Georgia 30326, for the following purposes:
(1) to elect three Class II Directors to serve for a term of
three years;
(2) to act upon a proposal to amend the Company's Second
Restated Certificate of Incorporation to increase
the number of shares of the Company's authorized Common
Stock (par value $.10) from 50 million to 100 million;
(3) to act upon a proposal to ratify the selection of Ernst
& Young LLP as auditors for the fiscal year ending June 30,
1996; 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 18,
1995 as the record date for the determination of shareholders entitled
to notice of and to vote at such meeting and any adjournment or post-
ponement 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 XX, 1995
Please sign, date and promptly mail the enclosed white proxy card in the
postage paid envelope provided.
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 XX:XX A.M., Eastern Daylight
Savings Time, on Friday, October 27, 1995, at The Ritz-Carlton Hotel
(Buckhead), 3434 Peachtree Street, N.E., Atlanta, Georgia 30326, and at
any and all adjournments or postponements 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 Proposal
to amend the Company's Second Restated Certificate of Incorporation to
increase the number of shares of the Company's authorized Common Stock
(par value $.10) (the ``Common Stock'') from fifty million to 100 million,
and for ratification of the selection of auditors, as described in this
Proxy Statement. If other matters are proper 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, and the proposed
amendment to the Company's Second Restated Certificate of Incorporation
must be approved by the holders of a majority of the number of shares
outstanding and entitled to vote on the proposed amendment. 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 XX, 1995.
VOTING SECURITIES
At the close of business on September 18, 1995, the record date for
determining shareholders entitled to notice and to vote at the Meeting,
there were outstanding XX,XXX,XXX shares of 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, 1994 (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 3,554,700 (1) 12.2%
82 Devonshire Street,
Boston, Massachusetts
02109-3614
State of Wisconsin 1,933,000 (1) 16.6%
Investment Board
P.O. Box 7842,
Madison, Wisconsin 53707
The Capital Group 1,586,490 (1) (2) 5.4%
Companies, Inc.
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) Capital Research and Management Company, a registered investment
adviser, and an operating subsidiary of the Capital Group Companies,
Inc., exercised as of December 31, 1994, investment discretion with
respect to 1,586,490 shares which were owned by various institutional
investors. Said subsidiary has no power to direct the vote of the
above shares.
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 18, 1995.
Aggegate Number of Shares Percentage of
Name Beneficially Owned Outstanding Shares
------------------- ------------------------- ------------------
Olin B. King 1,176,038 (1) 4.0
A. Eugene Sapp, Jr. 226,551 (1) *
Howard H. Callaway 77,000 (3) *
Jerry F. Thomas 47,576 (2) *
David F. Jenkins 38,516 (4) *
Peter M. Scheffler 7,342 (2) *
G. Robert Tod 3,520 (1) *
William E. Fruhan 3,500 (1) *
Jackie M. Ward 2,585 (1) *
Joseph C. Moquin 1,000 (1) *
Wayne Shortridge 1,000 (1) *
All Directors and
Executive Officers
as a group
(15 persons) 1,734,625 (5) 5.9
* Indicates less than 1% of issued and outstanding shares of Common Stock
of the Company.
(1) Includes 210,900 and 157,200 shares not presently owned by Messrs.
King and Sapp, respectively, but which are subject to stock options
exercisable within 60 days after September 18, 1995.
(2) Includes 46,025 and 7,200 shares not presently owned by Messrs.
Thomas and Scheffler but which are subject to stock options
exercisable within 60 days after September 18, 1995.
(3) Includes 1,500 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) Shares indicated are shares subject to stock options exercisable
within 60 days after September 18, 1995.
(5) Includes 601,772 shares not presently owned but which are subject to
stock options exercisable within 60 days after September 18, 1995.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Board of Directors
In accordance with the Company's Second 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 II directors are
to be elected at the Meeting. The Board has nominated Jackie M. Ward,
Wayne Shortridge and William E. Fruhan for re-election as Class II
directors. It is intended that the proxies will be voted for the
re-election of the three 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 II Directors
(Term expiring in 1998)
-----------------------
Jackie M. Ward (1)(2) Chief Executive Officer, 1992
(57) Computer Generation Incorporated,
Atlanta, Ga.,
a provider of turn-key telecommunications
systems products and data process-
ing services to U.S. and International
markets, 1968 to present.
Wayne Shortridge (1)(3) Partner, Paul, Hastings, 1992
(57) Janofsky & Walker,
January 1994 to present;
Partner, Powell, Goldstein,
Frazer & Murphy,
Atlanta, Ga., 1968 to January 1994.
William E. Fruhan (1)(3) The Thomas D. Casserly, Jr. 1992
Professor of Business Administration,
(52) Harvard University,
Graduate School of Business,
Cambridge, Mass., 1979 to present.
Positions with the Company Director
Name and Age and Principal Occupation Since
------------ -------------------------- ---------
Class III Director Nominees
(Term expiring in 1996)
--------------------------
G. Robert Tod (2)(3) President and 1981
Chief Operating Officer,
CML Group, Inc.,
Acton, Massachusetts,
a specialty marketing company,
since 1969.
A. Eugene Sapp, Jr. (1)(4) President and 1981
(59) Chief Operating Officer
of SCI Systems, Inc.
Joseph C. Moquin (2)(4) Retired; Chief Executive Officer, 1992
(71) Teledyne Brown Engineering,
1985 to 1990; Interim President,
University of Alabama in Huntsville,
September 1990 to July 1991.
Class I Director Nominees
(Term expiring in 1997)
-------------------------
Olin B. King (4) Chairman of the Board and 1961
(61) Chief Executive Officer
of SCI Systems, Inc.
Howard H. Callaway (2)(3) President, Crested Butte 1976
(68) Mountain Resort, Inc.,
Crested Butte, Colorado,1976
a resort complex, since 1979;
CEO and President, Callaway Garden
Resort, Inc., a resort complex,
since January 1994.
--------------------------------------------
(1) Member of the Investment Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Executive Committee
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 Sensors Corp. and VBand Corporation; Mr. Tod, EG&G, Inc. and
CML Group, Inc.; Dr. Fruhan, Prudential Institutional Fund; and Ms. Ward,
TRIGON Blue Cross Blue Shield 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 1995 fiscal year the Board met four times; the Executive
Committee met five times; the Investment Committee met four times; the Audit
Committee met three times; and the Compensation Committee met twice.
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 1995 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 1995 Mr. Moquin was paid
$1,650 for attendance at Executive Committee meetings only.
The following Directors elected to receive a portion of their 1995 annual
director's fees in stock options pursuant to the Company's 1994 Stock Option
Incentive Plan in the amounts shown: Mr. Callaway, 970 options; Mr. Tod,
242 options; and Ms. Ward, 485 options. No Director exercised stock options
in 1995. The Compensation Committee of the Board is reviewing additional
alternatives to allow Board members to tie their compensation even more
closely to Company performance.
The Board of Directors recommends a vote ``FOR'' the re-election of the
director nominees named above.
PROPOSAL 2-PROPOSAL TO AMEND SECOND RESTATED CERTIFICATE OF INCORPORATION
The Company's Second Restated Certificate of Incorporation presently
provides that the Company is authorized to issue 50,000,000 shares of
Common Stock and 500,000 shares of preferred stock, without par value.
The Board of Directors has recommended that the authorized Common Stock
of the Company be increased from 50,000,000 to 100,000,000 shares. The
additional shares of Common Stock for which authorization is sought would
be a part of the Company's existing class of Common Stick and, if and
when issued, would have the same rights and privileges as the shares of
Common Stock now outstanding.
As of September 18, 1995, there were XXXXXXX shares of Common Stock
issued and outstanding and 29,683 shares of Common Stock held as treasury
stock. An aggregate of 2,229,600 shares are subject to issuance under
the Company's stock option plans.
The Board recommends the increase in authorized Common Stock to enable
the Company to have additional shares available for possible issuance
in connection with such general corporate purposes as stock splits and
stock dividends, the issuance of shares for cash to raise equity capital,
conversions of convertible securities, or in connection with business
acquisitions or stock option plans or other employee benefit plans which
may be adopted in the future. The Board believes that additional authorized
Common Stock will give the Company greater flexibility and may allow shares
of Common Stock to be issued without the expense and delay of a shareholders'
meeting to authorize additional shares if and when the need arises.
If the proposed amendment is adopted, the Company would be permitted
to issue the authorized shares without further shareholder approval, except
to the extent otherwise required by law, by a securities exchange or
association on which the Common Stick is listed or quoted at the time, or
by the Second Restated Certificate of Incorporation. Shareholders do not have
preemptive rights to subscribe for or purchase additional shares of the
Company's Common Stock.
The Company has no current plans, agreements or arrangements for the
issuance of additional Common Stock, other than the purchase of shares
pursuant to its stock option plans. However, the additional authorized
shares would be available for issuance (subject to further shareholder
approval only as noted above) at such times and for such proper corporate
purposes at the Board of Directors may approve, including possible future
financing and acquistion transactions. Depending upon the nature and terms
thereof, while the Board has no present plans in this regard, such
transactions could enable the Board to render more difficult, or discourage
an attempt, to obtain control of the Company. For example, the issuance of
shares of Common Stock in a public or private sale, merger, or similar
transaction would increase the number of the Company's outstanding shares,
thereby diluting the interest of a party seeking to take over the Company.
Furthermore, many companies have recently issued warrants or other rights to
acquire additional shares to holders of common stock to discourage or defeat
unsolicited stock accumulation programs and acquisition proposals. If Proposal
2 is adopted, more Common Stock of the Company would be available for such
purposes than is currently available. Management currently knows of no intent
or plan on the part of any persons or entity to gain control of the Company
and Proposal 2 is not being recommended in response to any such intent or
plan.
If Proposal 2 is adopted, the Second Restated Certificate of Incorporation
of SCI Systems, Inc., as in force and effect on the date of this proxy
statement will be amended by deleting Section (a) of Article FOURTH in its
entirety and by substituting in lieu thereof the following:
``FOURTH. (a) The aggregate number of shares which the
corporation shall have the authority to issue is One
Hundred Million (100,000,000) shares of common stock of
the par value of ten cents ($.10) per share (herinafter
called the ``Common Stock'') and Five Hundred Thousand
(500,000) shares of preferred stock without par value
(herinafter called the ``Preferred Stock''). At every
meeting of the stockholders, every holder of stock of
the corporation, be it Common Stock or Preferred Stock,
shall be entitled to one vote, in person or by proxy,
for each share of Common Stock or Preferred Stock standing
in his name on the books of the corporation. The Common
Stock and the Preferred Stock shall vote together as one
class unless otherwise expressly required by law.''
The Board of Directors recommends a vote ``FOR'' the proposal to amend
Article FOURTH, section (a) of the Second Restated Certificate of
Incorporation.
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, 1996. 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 1996.
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 1990.
Mr. Richard A. Holloway, age 53, joined the Company in April 1986 as Senior
Vice President, Government Division.
Mr. Jeffrey L. Nesbitt, age 44, 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 58, 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 58, 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
postions with International Business Machines Corporation.
Mr. Jerry F. Thomas, age 54, 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 44, 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 to shareholders 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 $100,000 for the year ended June 30, 1995.
<TABLE>
Summary Compensation Table
Annual Compensation
<CAPTION>
Long Term
Compensation
------------
Name and Total Securities All Other
Principal Annual Underlying Compensation
Position Year Salary($) Bonus ($) Compensation($) Options (#) ($) <F3>
--------- ---- --------- --------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King, 1995 464,709 452,000<F1> 916,709 40,000 16,596
Chairman & CEO 1994 399,573 211,613 611,186 40,000 14,385
1993 348,694 265,590 614,284 30,000 12,553
A. Eugene Sapp, Jr., 1995 358,309 294,000<F1> 652,309 28,000 12,444
President & COO 1994 308,800 137,548 446,348 28,000 11,117
1993 275,331 172,634 447,965 20,000 9,912
David F. Jenkins, 1995 182,282 139,000<F1> 321,282 12,000 3,281
Senior Vice President, 1994 160,004 71,338 231,342 12,000 2,898
Commercial Division, 1993 144,946 118,790 263,736 18,000 2,609
Western Region
Jerry F. Thomas, 1995 161,371 96,000<F1> 257,371 12,000 5,809
Senior Vice President, 1994 139,962 66,825 206,787 10,000 5,039
Commercial Division, 1993 132,769 35,495 168,264 18,000 4,780
Central Region
Peter M. Scheffler, 1995 189,510 66,000<F1> 255,510 18,000 76,049<F4>
Senior Vice President, 1994 70,673(b) 22,479<F2> 193,152 10,000 46,784<F4>
Commercial Division
Asian Region
<FN>
<F1> The 1995 bonus is a good faith estimate of the amount payable when final calculations are completed and approved
by the Board of Directors.
<F2> Represents partial salary and bonus for the year Mr. Scheffler joined the Company.
<F3> Amounts represent the Company's contributions to Profit Sharing Plans, which Plans are available to all eligible
employees.
<F4> Amounts represent contributions of $1,654 in 1995 to the Company Profit Sharing Plans with the remainder
representing foreign living and car allowances.
</FN>
</TABLE>
Stock Option Grants in Last Fiscal Year
Prior to October 28, 1994, the Company granted stock options to executive
officers and other key employees pursuant to its Incentive Stock Option and
Non-Qualified Stock Option Plans, and after October 28, 1994 pursuant to its
1994 Stock Option Incentive Plan (the ``1994 Plan''). The Company does not
grant Stock Appreciation Rights (SARs). The following table sets forth certain
information regarding stock options granted to the Named Executive Officers
during fiscal year 1995 under the 1994 Plan.
<TABLE>
Individual Grants
-----------------
<CAPTION>
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted Price Appreciation
Options to Employees in Exercise or Base Expiration Option Term
Name Granted (#) Fiscal Year Price ($/SH) Date 5% ($) 10% ($)
------------------ ----------- ----------------- ---------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King 40,000 16.00 18.88 10/28/04 474,815 1,203,276
A. Eugene Sapp, Jr. 28,000 11.20 18.88 10/28/04 332,371 842,293
David F. Jenkins 12,000 4.80 18.88 10/28/04 142,443 360,983
Jerry F. Thomas 12,000 4.80 18.88 10/28/04 142,443 360,983
Peter M. Scheffler 8,000 3.20 18.88 10/28/04 94,963 240,655
</TABLE>
The assumed annual rates of appreciation of five and ten percent would result
in the price of the Company's stock increasing by $15.26 and $39.84,
respectively, at the end of the option term.
<TABLE>
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
The following table summarizes options exercised during fiscal year 1995
and presents the value of unexercised options held by the Named Executive
Officers at fiscal year-end under all stock option Plans:
<CAPTION>
Nunber Of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) at Fiscal Year End ($)
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
------------------ -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King -0- -0- 257,450 74,000 4,192,269 612,250
A. Eugene Sapp, Jr. -0- -0- 163,100 51,200 2,644,995 420,100
David F. Jenkins -0- -0- 28,950 21,800 418,650 178,725
Jerry F. Thomas -0- -0- 39,825 19,800 605,350 156,525
Peter M. Scheffler -0- -0- 5,600 12,400 40,800 85,700
</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.
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 1995 until retirement, estimated annual benefits payable
upon retirement to the Named Executive Officers include the following:
Mr. King, $60,632; Mr. Sapp, $54,331; Mr. Jenkins, $23,476; Mr. Thomas,
$31,950 and for Mr. Scheffler, $73,072. 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 1995 is $150,000,
subject to cost of living increases as prescribed by the Secretary of the
Treasury.
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 com-
pensation program and policies each year and determines the compensation of
the officers. The Committee recommendations of compensation for 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 in-
centive 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, the 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 1993,
1994, and 1995. Total Annual Compensation for these officers decreased in
fiscal year 1994 and increased in fiscal year 1995, generally tracking the
overall performance of the Company during that period.
Chief Executive Officer Compensation
In determining Mr. King's base salary, annual bonus and stock option grant
in fiscal year 1995, 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 fiscal year 1995. Company results and Mr. King's individual
performance in fiscal year 1995 were, in general, very good. The Company had
record revenues, record net income, record bookings and finished the year
with record order backlog.
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, 1990)
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 $100.00 was invested on June 30, 1990 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
The following data was used in the hardcopy proxy statement.
Normalized Prices
SCIS DJIA H&Q Hardware
---- ---- ------------
06/90 100 100 100
09/90 65 85 80
12/90 83 91 88
03/91 80 101 101
06/91 75 101 85
09/91 70 105 91
12/91 65 110 85
03/92 88 112 89
06/92 71 115 90
09/92 115 114 80
12/92 183 115 74
03/93 211 119 73
06/93 173 122 72
09/93 169 123 63
12/93 176 130 77
03/94 160 126 81
06/94 151 126 70
09/94 211 133 84
12/94 180 133 96
03/95 187 144 99
06/95 250 158 123
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, 1995, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10 percent beneficial
owners were met, except that Mr. Holloway was one month late in filing one
form with the SEC.
GENERAL
Any shareholder of the Company wishing to submit a proposal at the Company's
1996 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 XXX X, 1996, 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 card 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
Secretary
Huntsville, Alabama
September XX, 1995
