UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 24, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission file Number 0-2251
SCI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0583436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
(Address of principal executive offices) (Zip Code)
----------------------------------------------
(302) 998-0592
(Registrant's telephone number, including area code)
----------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.10 par value - 29,505,345 Shares
Outstanding at January 23, 1996
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
SCI Systems, Inc.
Condensed Consolidated Balance Sheets
<CAPTION>
December 24, June 30,
1995 1995
(In thousands of dollars) (Unaudited) (*)
- ----------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 9,112 $ 10,277
Accounts receivable 241,855 259,308
Inventories 732,409 456,107
Refundable and deferred federal and foreign income taxes 7,633 7,869
Other current assets 22,294 11,491
-----------------------------------
Total Current Assets 1,013,303 745,052
Property, Plant and Equipment
(Less accumulated depreciation of $266,684 at December 24, 1995, and
$242,953 at June 30, 1995) 233,078 214,025
Other Noncurrent Assets 22,143 22,215
-----------------------------------
Total Assets $1,268,524 $ 981,292
===================================
<FN>
* Derived from audited financial statements, but does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
</FN>
See notes to condensed consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
SCI Systems, Inc.
Condensed Consolidated Balance Sheets
<CAPTION>
December 24, June 30,
1995 1995
(In thousands of dollars except share data) (Unaudited) (*)
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses $ 572,124 $ 417,495
Accrued payroll and related expenses 23,696 22,634
Federal, foreign and state income taxes 22,551 19,079
Current maturities of long-term debt 5,798 5,720
------------------------------------
Total Current Liabilities 624,169 464,928
Deferred Income Taxes 1,134 509
Pension Liability, less current portion 4,669 4,669
Deferred Compensation 6,384 5,040
Long-term Debt - Note C
Industrial revenue bonds 21,293 21,306
Long-term notes 183,779 96,138
Convertible subordinated debentures -0- 38,926
------------------------------------
Total Long-term Debt 205,072 156,370
Commitments and Contingencies - Note D
Shareholders' Equity
Preferred stock, 500,000 shares authorized but unissued -0- -0-
Common stock, $.10 par value: authorized 50,000,000 ; issued 29,505,345 shares
at December 24, 1995 and 27,465,675 shares at June 30,1995 2,951 2,747
Capital in excess of par value 166,782 126,123
Retained earnings 264,475 227,195
Currency translation adjustment (6,771) (5,948)
Treasury stock of 29,683 shares, at cost (341) (341)
------------------------------------
Total Shareholders' Equity 427,096 349,776
------------------------------------
Total Liabilities and Shareholders' Equity $1,268,524 $ 981,292
====================================
<FN>
* Derived from audited financial statements, but does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
</FN>
See notes to condensed consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
SCI Systems, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<CAPTION>
Quarter Ended:
December 24, December 25,
(In thousands of dollars except per share data) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $1,203,506 $621,545
Costs and expenses 1,160,912 600,307
Goodwill amortization 209 196
-------------------------------------
Operating Income 42,385 21,042
Other income (expense):
Interest expense (5,917) (4,876)
Other income, net 772 551
-------------------------------------
Income before Income Taxes 37,240 16,717
Income taxes - Note B 15,082 6,520
-------------------------------------
Net Income $ 22,158 $ 10,197
=====================================
Earnings per share - Note A: $.74 $.37
Weighted average number of shares used in computation 30,121,293 27,816,460
See notes to condensed consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
SCI Systems, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<CAPTION>
Six Months Ended:
December 24, December 25,
(In thousands of dollars except per share data) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $2,080,129 $1,239,966
Costs and expenses 2,007,515 1,198,371
Goodwill amortization 418 393
-------------------------------------
Operating Income 72,196 41,202
Other income (expense):
Interest expense (10,615) (9,224)
Other income, net 1,074 1,226
-------------------------------------
Income before Income Taxes 62,655 33,204
Income taxes - Note B 25,375 12,950
-------------------------------------
Net Income $ 37,280 $ 20,254
=====================================
Earnings per share - Note A: $1.24 $.73
Weighted average number of shares used in computation 30,135,192 27,796,171
See notes to condensed consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
SCI Systems, Inc.
Condensed Consolidated Statements Of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended:
December 24, December 25,
(In thousands of dollars) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C>
Net income $ 37,280 $ 20,254
Adjustments to reconcile net income to cash
used for operations:
Depreciation and amortization 29,084 24,643
Undistributed equity earnings (744) (937)
Effect of property, plant and equipment disposals (219) (444)
Unrealized foreign currency exchange loss (gain) (531) 97
Changes in current assets and liabilities:
Accounts receivable 16,432 5,360
Inventories (277,957) 26,439
Refundable and deferred income taxes 236 37
Other current assets (10,213) 14,777
Accounts payable and accrued expenses 156,951 (109,593)
Income taxes 3,387 3,949
---------------------------------------
Net Cash Used for Operating Activities (46,294) (15,418)
---------------------------------------
Investing Activities
Purchase of property, plant and equipment (47,606) (21,212)
Proceeds from sale of property, plant and equipment 228 487
Decrease (increase) in noncurrent assets 1,741 (4,534)
---------------------------------------
Net Cash Used for Investing Activities (45,637) (25,259)
---------------------------------------
Financing Activities
Net increase in commercial paper and other short-term notes 71,615 186
Payments on long-term debt (4,653,517) (4,172,192)
Proceeds from long-term debt 4,669,520 4,184,780
Issuance of common stock 2,037 175
---------------------------------------
Net Cash Provided by Financing Activities 89,655 12,949
---------------------------------------
Effect of exchange rate changes on cash 1,111 (279)
---------------------------------------
Net decrease in cash and cash equivalents (1,165) (28,007)
Cash and cash equivalents at beginning of period 10,277 35,822
---------------------------------------
Cash and Cash Equivalents at End of Period $ 9,112 $ 7,815
=======================================
Cash equivalents consist of short-term deposits and liquid marketable securities
which are stated at cost that approximates market value.
See notes to condensed consolidated financial statements.
<PAGE>
</TABLE>
================================================================================
Notes to Condensed Consolidated Financial Statements
================================================================================
December 24, 1995
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries after elimination
of significant intercompany accounts and transactions. The financial statements
have been prepared in accordance with instructions to Form 10-Q and do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. The statements (and all
other information in this report) have not been examined by independent
auditors, but in the opinion of the Company all adjustments, which consist of
normal recurring accruals necessary for a fair presentation of the results for
the period, have been made. The results of operations for the period ended
December 24, 1995, are not necessarily indicative of the results of operations
for the year ending June 30, 1996. For further information, refer to the
financial statements and footnotes included in the Company's annual report on
Form 10-K for the year ended June 30, 1995.
Primary earnings per share are based on the weighted average number of common
stock and dilutive common stock equivalents outstanding during each period.
Common stock equivalents consist of stock options whose exercise price is less
than the stipulated market price using the Treasury-stock method for both
primary and fully diluted earnings per share. Fiscal year 1995's fully diluted
computations, when applicable, assumed the dilutive conversion of the Company's
outstanding convertible debenture issue, after adding back their after-tax
interest expense. Shares issued upon conversion of the 5 5/8% Convertible
Subordinated Debentures on September 1, 1995, have been treated as outstanding
from July 1, 1995, for purposes of the computation; fiscal year 1996's related
after-tax interest expense for the converted debentures have been added back to
net income for computational purposes.
Note B - Income Taxes
The Company provides U.S. income taxes on that portion of its foreign
subsidiaries' earnings that it does not consider permanently invested. U.S.
income taxes are not provided on certain undistributed earnings of foreign
subsidiaries aggregating approximately $53,000,000 at December 24, 1995.
Otherwise, approximately $14,500,000 of cumulative deferred income taxes would
have been provided. Income tax provision for fiscal year 1996 differs from the
U.S. statutory income tax rate primarily due to state income taxes.
Note C - Changes in Amount Outstanding of Securities or Indebtedness
Outstanding borrowings at December 24, 1995, under the Company's Revolving
Credit and Commercial Paper, and other long-term debt agreements increased
approximately $88,000,000 from the June 30, 1995, balance. At December 24, 1995,
the Company had $150,000,000 outstanding under its Asset Securitization
Agreement, a $100,000,000 increase from the June 30, 1995, amount. Total unused
credit facilities available to the Company at December 24, 1995, approximated
$224,000,000.
The $38,825,000 of outstanding 5 5/8% Convertible Subordinated Debentures at
June 30, 1995, were substantially converted into 1,847,120 shares of the
Company's common stock on September 1, 1995.
Note D - Termination of A-12 Aircraft Program Subcontracts
The Company was a subcontractor for development of certain subsystems for the
U.S. NAVY A-12 Aircraft. The Government, in January 1991, announced termination
(for default) of the A-12 prime contracts. Terminations for convenience were
received for eleven of the Company's A-12 subcontracts, of which the majority
were with McDonnell Aircraft Company (McDonnell). Settlements have been
concluded for all subcontracts terminated for convenience, at the approximate
amounts previously accrued by the Company. In October 1991, McDonnell filed a
sealed suit in Federal Court in St. Louis, Missouri claiming default on seven
other subcontracts, which have a remaining Company inventory exposure of
approximately $22,000,000. Based upon the advice of special counsel, the Company
believes it has meritorious defenses, although no assurance can be given to that
effect, and is pursuing counterclaims against McDonnell through the courts.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Sales for the second quarter of fiscal year 1996 were $1.204 billion, a 94%
increase over $621.5 million in fiscal year 1995's second quarter. Sales for the
first six months increased 68% to $2.080 billion from $1.240 billion for the
same period in fiscal year 1995. Substantially all of the increased sales
resulted from increased unit volumes, especially in finished product
manufacturing services. Fiscal year 1996 second quarter's sales were favorably
impacted by seasonal factors and by nonrecurring pipeline filling for certain
products. Geographically, foreign sales increased 46% during fiscal year 1996's
first six months from that in the corresponding period of the prior fiscal year,
with domestic sales increasing 83% during the same period. Foreign sales
represented 36% of total sales for the first six months of fiscal year 1996
compared with 41% for total fiscal year 1995.
Operating income, net income and earnings per share for the second quarter of
fiscal year 1996 each more than doubled from the comparative quarter in fiscal
year 1995. These increases can be mainly attributed to substantially higher
sales volume. Operating margins for fiscal year 1996's second quarter improved
to 3.5% from 3.4% a year earlier. Operating margins for the first six months
improved to 3.5% for fiscal year 1996 from 3.3% for fiscal year 1995. The
improvement resulted from recovering operating margins in certain foreign
operations as their sales volumes increased.
Interest expense as a percentage of sales declined to .5% for both the second
quarter and first six months of fiscal year 1996, compared with .8% and .7% for
the corresponding periods of fiscal year 1995 as a result of a higher asset
turnover ratio. Fiscal year 1996 second quarter's asset turnover increased to
3.6 times (excluding the favorable impact of an asset securitization program)
compared with 2.8 times for fiscal year 1995's second quarter. Average combined
quarter-end borrowings and amounts securitized remained at the same approximate
level for both fiscal year 1996's and 1995's first six months ($291 million and
$290 million, respectively), although sales increased 68%. Ending debt to
annualized sales ratio for the first six months of fiscal year 1996 declined to
.05 from .12 for first six months of fiscal year 1995.
Fiscal year 1996's estimated effective income tax rate differs from the U.S.
statutory rate primarily due to the effects of state income taxes. The estimated
effective income tax rate increased to 40.5% in fiscal year 1996 from 39% in
fiscal year 1995's first six months as a result of higher state income taxes and
higher foreign income taxes as certain tax holidays expired.
Capital Resources and Liquidity
The Company had working capital of $389 million at December 24, 1995, compared
with $280 million at June 30, 1995. December 24, 1995's ratio of current assets
to current liabilities (current ratio) was 1.6, the same level as at June 30,
1995.
Available funds at December 24, 1995, were approximately $233 million. Fiscal
year 1996's capital expenditures are currently estimated to be between 80 and 90
million dollars.
The dollar amount of order backlog at December 24, 1995, believed by the Company
to be firm was $2.427 billion, as compared with $1.230 billion a year earlier.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's annual meeting of shareholders held on October 27, 1995, the
following individuals were elected as Class II Directors:
Votes in Favor Votes Withheld
Jackie M. Ward 26,833,234 86,377
Wayne Shortridge 26,817,403 102,208
William E. Fruhan 26,833,400 86,211
The other matters voted on at the meeting were:
Votes in Favor Votes Against Abstentions
Amendment to the Company's Second
Restated Certificate of Incorporation to
increase the number of authorized shares
of Common Stock to 100,000,000 25,186,729 1,632,442 100,400
Selection of Ernst & Young LLP as the
Company's independent auditors for the
fiscal year ending June 30, 1996 26,803,053 57,520 59,038
Of the total shares eligible to vote, no response was received to the
solicitation for proxy from shareholders holding 2,569,984 shares.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Exhibit 10 - First Modification of Amended and Restated Credit
Agreement (dated August 3, 1995) made as of December 8, 1995, between
the Registrant, its Obligated Subsidiaries and its Lenders.
(2) Exhibit 11 - Computation of primary and fully diluted earnings per
share.
(3) Exhibit 27 - Financial Data Schedule
(b) Reports
The Company filed no reports on Form 8-K during the period of September 25,
1995, to December 24, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SCI Systems, Inc.
(Registrant)
Date: February 7, 1995 By: Olin B. King /s/
-------- -- ---- ---- -- ---- ---
Olin B. King
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer and
Principal Financial and Accounting Officer)
<PAGE>
================================================================================
================================================================================
Exhibit 10.
FIRST MODIFICATION OF AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FIRST MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT (this
"Modification") is made as of this 8th day of December, 1995, by and between SCI
SYSTEMS, INC., a Delaware corporation (the "Borrower"), the banks and other
financing institutions which are signatories to this Modification (the "Banks"),
CITIBANK, N.A., acting in its capacity as agent for the Banks (the "Agent") and
ABN-AMRO BANK, N.V., acting through its Atlanta Agency and in its capacity as
co-agent for the Banks (the "Co-Agent").
Statement of Facts
Borrower, the Agent, the Co-Agent and the Banks are parties to that
certain Amended and Restated Credit Agreement, dated as of August 3, 1995 (as
same may hereinafter be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the Banks
committed to loan certain amounts to the Borrower and the Co-Agent (acting for
the Commercial Paper Banks, as defined in the Credit Agreement) has issued a
Letter of Credit for the benefit of the Borrower.
Borrower and SCI Technology, Inc., a wholly-owned subsidiary of
Borrower, desire to increase the amount of the Receivables Purchase Facility (as
defined in the Credit Agreement).
Borrower also desires to enter into, or permit a Subsidiary to enter
into, a $50,000,000 foreign receivables purchase facility.
Borrower also desires to extend the Credit Expiration Date (as defined
in the Credit Agreement) for an additional two years.
Borrower has requested that the Agent, the Co-Agent and the Banks
consent to (i) a $50,000,000 increase in the Receivables Purchase Facility, (ii)
Borrower and any other Credit Party entering into a $50,000,000 foreign
receivables purchase facility, (iii) a two-year extension of the Credit
Expiration Date and (iv) such other amendments set forth herein, and the Agent,
the Co-Agent and the Banks are willing to give their consent, subject to the
terms and conditions of this Modification.
<PAGE>
================================================================================
================================================================================
Borrower has also requested that the Agent, the Co-Agent and the Banks
consent to the incurrence of Indebtedness by Borrower in connection with an
unsecured term note facility not to exceed $75,000,000 to be privately placed
with institutional investors, and the Agent, the Co-Agent and the Banks are
willing to grant such consent, subject to the terms and conditions hereinafter
provided.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Borrower, the Agent, the
Co-Agent and the Banks do hereby agree as follows:
Statement of Terms
1. Definitions. All capitalized terms used in this Modification but
not otherwise defined or limited herein shall have the meanings set forth in the
Credit Agreement, as amended hereby.
2. Consent to Transactions. Subject to the fulfillment of the
conditions precedent to the effectiveness of this Modification which are set
forth below, the Banks hereby consent to the increase in the amount of the
Receivables Purchase Transaction, the consummation of the Foreign Receivables
Transaction (whether done individually or combined with the Receivables Purchase
Transaction) and the incurrence of Indebtedness by the Borrower pursuant to the
Term Note Facility, all on the terms and conditions set forth in this
Modification. The Agent and the Banks hereby acknowledge and agree that the
amount of the Term Note Facility shall not be included in the calculation of the
Permitted Transaction Amount.
3. Amendment to Credit Agreement. Subject to the fulfillment of the
conditions precedent to the effectiveness of this Modification which are set
below, the parties hereby agree as follows:
(a) The Credit Agreement is hereby modified by deleting from
Section 1.01 thereof, the defined terms "Inventory Loan", "NECTEC", and "NECTEC
Agreement".
(b) The Credit Agreement is further modified by amending the
definitions of "Non-Recourse", "Permitted Asset Securitization" and "Receivables
Purchase Transaction" in their entirety to read as follows and adding a new
definition of "Term Note Facility" as follows:
"Non-Recourse: means that the terms and conditions
applicable to the Receivables Purchase
Transaction and the Foreign Receivables
Transaction provide that the recourse of a
purchaser of accounts receivable or any interest
therein or any invoice for losses resulting from
an obligor's failure to pay, due to credit
problems, is limited to such accounts receivable
or interests therein or such invoice (as the case
may be), together in each case with any related
security, if any; provided, however, that the
terms and conditions applicable to the
Receivables Purchase Transaction and the Foreign
Receivables Transaction may also provide for
additional bases of non-recourse.
Permitted Asset Securitization Transactions:
the Receivables Purchase Transaction and the
Foreign Receivables Transaction.
Receivables Purchase Transaction: a revolving trade
receivable securitization facility not to exceed
$150,000,000 (or $200,000,000 in the event that
the Foreign Receivables Transaction is combined
with the Receivables Purchase Transaction as
contemplated by Section 10.15(a)) whereby a
Person shall purchase from time to time and on a
Non-Recourse basis, accounts receivable or
undivided fractional interests in one or more
pools of accounts receivable of a Credit Party or
Credit Parties or a Bankruptcy Remote Subsidiary.
TermNote Facility: an unsecured term note facility
or any refinancings thereof, in each case to be
entered into by Borrower not to exceed
$75,000,000 to be privately placed with
institutional investors and which provides that
such facility shall mature after December 8, 2000
and which prohibits any voluntary or mandatory
principal payment or prepayment on the note or
notes evidencing the Indebtedness owing by
Borrower under such facility on or before
December 8, 2000 without the prior written
consent of the Agent, the Co-Agent and the
Required Banks."
(c) The Credit Agreement is further modified by deleting from
Section 1.01 the defined term "Loan/Purchase Transaction" and replacing it with
the following definition:
"Foreign Receivables Transaction: a revolving foreign
trade receivable securitization facility not to
exceed $50,000,000 whereby a Person shall
purchase from time to time and on a Non-Recourse
basis accounts receivable or undivided fractional
interests in one or more pools of accounts
receivable of a Credit Party or Credit Parties or
a Bankruptcy Remote Subsidiary."
(d) The Credit Agreement is further modified by deleting the
date "August 3, 1998" appearing in the first line of the definition of "Credit
Expiration Date" in Section 1.01 and replacing it with the date "December 8,
2000".
(e) The Credit Agreement is further modified by deleting
Section 3.01(e) thereof in its entirety and by substituting in lieu thereof the
following new Section 3.01(e):
"(e)The initial Credit Expiration Date shall be
December 8, 2000. The Borrower may, however,
request an extension of the initial Credit
Expiration Date by submitting a written request
to the agent no earlier than September 30, 1999,
and no later than October 31, 1999. Upon such
request, the initial Credit Expiration Date may
be extended by one additional year upon written
consent of the Required Banks. The Agent will
give written notice to the Borrower, not more
than sixty (60) days after receipt of the request
for extension from the Borrower, stating either
that (i) the Required Banks have given their
written consent to a new Credit Expiration Date,
which shall be specified in such notice, or (ii)
the Required Banks have not given their consent
to the requested extension. Any Credit Expiration
Date subsequent to the initial Credit Expiration
Date may be extended by one additional year by
following the same procedure as for extension of
the initial Credit Expiration Date, with the
Borrower requesting such extension no earlier
than September 30 and no later than October 31 of
each year subsequent to 1999. If an extension of
the Credit Expiration Date receives the consent
of the Required Banks, Banks which do not consent
to such extension may be replaced on or before
the Credit Expiration Date which is to be
extended (the "Prior Expiration Date"), provided
that, in any event, the Commitment of each
non-assigning and non-consenting Bank shall
terminate on the Prior Expiration Date. Any
financial institution proposed to replace any
Bank which does not consent to an extension of
the Credit Expiration Date shall be an Eligible
Assignee within the meaning specified in Section
15.04(b)(v), and the Bank being replaced shall
assign its rights and obligations to such
Eligible Assignee in accordance with the
provisions of Section 15.04(a) through (e). Such
replacement shall be in all respects satisfactory
to the Required Banks which consented and shall
be effected at the sole cost and expense of the
Borrower. None of the Agent, the Co-Agent and the
Banks shall incur any cost or expense (except any
reasonable cost or expense which the Borrower
shall promptly reimburse) to effect any such
replacement. Notwithstanding anything herein to
the contrary, no Bank which has denied or
withheld its consent to any extension of the
Credit Expiration Date shall be bound by any such
extension by the Required Banks and such Bank's
Loans shall become due and payable on the Prior
Expiration Date unless such Bank's Loans have
accelerated prior to such date pursuant to
Section 11.01 hereof."
(f) The Credit Agreement is further modified by deleting
Section 9.11 thereof in its entirety and by substituting in lieu thereof the
following new Section 9.11:
"Section 9.11. Insurance; Maintenance of Properties.
Maintain, and keep, and cause its Subsidiaries to
maintain and keep, its and their respective
properties in good repair, working order and
condition, excepting ordinary wear and tear and
any loss, damage or destruction which is fully
covered by proceeds of insurance; and maintain,
with financially secure and reputable insurance
companies, or provide through self-insurance in
amounts and on terms customarily maintained by a
similar business, and cause its Subsidiaries to
maintain, with financially secure and reputable
insurance companies, or provide through
self-insurance in amounts and on terms
customarily maintained by a similar business,
policies of insurance on its and their respective
properties in such amounts and against such risks
as are customarily maintained by a similar
business and will furnish on the Agent's or
Co-Agent's request full information as to the
insurance carried."
(g) The Credit Agreement is hereby further modified by
deleting Section 10.01(ix) in its entirety and replacing it with the following:
"(ix) [Intentionally Omitted]; and"
(h) The Credit Agreement is hereby further amended by deleting
Section 10.02(xi) in its entirety and replacing it with the following:
"(xi) Indebtedness arising from any Permitted Asset
Securitization Transaction; provided, however,
the incurrence of Indebtedness resulting from the
Foreign Receivables Transaction and the
incurrence of Indebtedness resulting from the
increase in the Receivables Purchase Transaction
as contemplated by Section 10.15(a) is subject to
all representations and warranties of the
Borrower and the other Credit Parties being true,
correct and complete in all material respects on
the date such transaction is consummated and
after giving effect thereto and no Default or
Event of Default having occurred and then
continuing (including without limitation, any
Default or Event of Default under any of the
financial covenants specified in Section 11.01 of
the Credit Agreement) on the date such
transaction is consummated, and after giving
effect thereto, and is also subject to the Agent
having received a certificate with respect to the
foregoing signed by its Chairman or President."
(I) The Credit Agreement is further modified by adding to
Section 10.02 the following new Section 10.02(xii), with the intent being that
the Indebtedness described in Section 10.02(xii) shall be permitted:
"(xii) Indebtedness incurred in connection with the
Term Note Facility so long as on the date that
the Term Note Facility is consummated, and after
giving effect thereto, all representations and
warranties of the Borrower and the other Credit
Parties in the Credit Agreement are true, correct
and complete in all material respects and no
Default or Event of Default has occurred and is
then continuing (including, without limitation,
any Default or Event of Default under any of the
financial covenants specified in Section 11.01 of
the Credit Agreement) and Borrower has delivered
to Agent a certificate with respect to the
foregoing signed by its Chairman or President."
(j) The Credit Agreement is further modified by deleting
Section 10.03(ix) in its entirety and replacing it with the following:
"(ix) Reimbursement obligations of any Credit Party
arising under reinsurance agreements in support
of self-insurance or third-party insurance
programs and the guarantee by any other Credit
Party of such Credit Party's obligations arising
under such reinsurance agreements; and"
(k) The Credit Agreement is hereby further modified by
deleting Section 10.15(a) in its entirety and substituting in lieu thereof the
following new Section 10.15(a):
"(a)Agree to any amendment to or a modification of
the terms or conditions of any Asset
Securitization Document executed in connection
with a Permitted Asset Securitization Transaction
that would in any way cause such transaction to
not be on a Non-Recourse basis or cause the total
facility amount of such transaction to exceed (I)
if done as separate transactions, $50,000,000 (in
the case of the Foreign Receivables Transaction)
or $150,000,000 (in the case of the Receivables
Purchase Transaction) and (ii) $200,000,000 in
the event the Foreign Receivables Transaction is
combined into the Receivables Purchase
Transaction as a single securitization facility."
(l) The Credit Agreement is hereby further modified by adding
to Section 10.15 thereof the following new Section 10.15(c):
"(c)Agree to any amendment to or a modification of
any agreement, instrument or document executed in
connection with the Term Note Facility that would
in any way (i) permit the total Term Note
Facility to exceed $75,000,000; (ii) cause the
Term Note Facility to be secured; (iii) cause the
maturity date of the Term Note Facility to occur
earlier than December 8, 2000; or (iv) permit the
Borrower or any Credit Party to make any
voluntary or mandatory principal payment or
prepayment of the Indebtedness evidenced by the
Term Note Facility."
(m) The Credit Agreement is hereby further modified by adding
to Section 11.01 thereof the following new clause (l) immediately after clause
(k) of such Section, with the intent being that the occurrence or the happening
of an event specified in Section 11.01(l) shall also constitute an Event of
Default under the Credit Agreement:
"; or (l) the occurrence of any default or event of
default under the Term Note Facility after giving
effect to any applicable notice and/or cure
periods".
4. No Other Amendments. Except for the amendments expressly set forth
and referred to in Section 3 above, the Credit Agreement shall remain unchanged
and in full force and effect; provided, however, that the Banks, the Agent and
the Co-Agent hereby authorize the Agent to enter into or obtain from the Credit
Parties such modifications to the Credit Documents as the Agent may deem to be
necessary or appropriate in order to reflect the amendments set forth herein.
Nothing in this Modification is intended, or shall be construed, to constitute a
novation or an accord and satisfaction of any of the Borrower's indebtedness or
any indebtedness of any other Credit Party to the Banks, the Agent or the
Co-Agent under or in connection with the Credit Agreement (collectively, the
"Obligations") or to modify, affect or impair the perfection or continuity of
the security interests in, security titles to or other liens on any collateral
for the Obligations.
5. Representations and Warranties. To induce the Agent, the Co-Agent
and the Banks to enter into this Modification, the Borrower does hereby warrant,
represent and covenant to such parties that: (a) each representation or warranty
of the Borrower set forth in the Credit Agreement is hereby restated and
reaffirmed as true and correct on and as of the date hereof as if such
representation or warranty were made on and as of the date hereof (except to the
extent that any such representation or warranty expressly relates to a prior
specific date or period and except as otherwise disclosed on Schedule 1 attached
hereto), and no Default or Event of Default has occurred and is continuing as of
this date under the Credit Agreement as amended by this Modification; and (b)
Borrower has the power and is duly authorized to execute, deliver and perform
its obligations under this Modification and this Modification is the legal,
valid and binding obligation of Borrower enforceable against it in accordance
with its terms.
6. Conditions Precedent to Effectiveness of this Modification. The
effectiveness of this Modification and the amendments provided in Section 3
above are subject to the fulfillment of the following additional conditions
precedent:
(a) the Agent shall have received one or more counterparts
of this Modification duly executed and delivered by
the Borrower, the Agent, the Co-Agent and the Banks;
(b) any and all Guarantors of the Obligations shall have
consented to the execution, delivery and performance of
this Modification and all of the transactions contemplated
hereby by signing one or more counterparts of a
Confirmation of Guaranty in the form of Attachment 1
attached hereto and returning the same to the Agent;
(c) the Agent shall have received one or more counterparts
of an Officer's Certificate in form and substance
acceptable to the Agent executed by the Borrower and each
Guarantor;
(d) the Agent shall have received an opinion of Borrower's
and Guarantors' counsel in form and substance reasonably
satisfactory to the Agent and an opinion of in-house
counsel to the Borrower and the Guarantors in form and
substance reasonably satisfactory to the Agent;
(e) Each and every representation and warranty of the
Borrower set forth in Section 5 above shall be true and
correct in all material respects as of the date of and
after giving effect to this Modification; and
(f) There shall not exist as of the date of and after
giving effect to this Modification any Default or Event of
Default under the Credit Agreement as amended by this
Modification.
Notwithstanding the foregoing, the extension of the Credit Expiration
Date is also subject to the Agent's receipt of written confirmation from Moody's
Investor Services, Inc. and Standard & Poor's Corporation of their ratings of
least "P-1" and "A-1 plus", respectively, after giving effect to the extension
of the Credit Expiration Date as contemplated by this Modification.
7. Counterparts. This Modification may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute one and the same instrument.
8. Delivery of Material Asset Securitization Documents. Borrower shall
deliver, or cause to be delivered, to the Agent and the Co-Agent, a copy of the
material Asset Securitization Documents executed in connection with a Permitted
Asset Securitization Transaction promptly after the consummation of such
Permitted Asset Securitization Transaction. Failure to comply with this
paragraph 8 shall be deemed to be an Event of Default under the Credit
Agreement, if such failure is not cured within thirty (30) days after receipt by
the Borrower of written notice of such default from the Agent or the Co-Agent.
9. GOVERNING LAW. THIS MODIFICATION SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE.
(Remainder of Page Intentionally Left Blank)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Modification to
be duly executed and delivered as of the day and year specified at the beginning
hereof.
BORROWER:
SCI SYSTEMS, INC.
(CORPORATE SEAL)
By:
Title:
AGENT:
CITIBANK, N.A.
By:
Name:
Title:
CO-AGENT:
ABN-AMRO BANK,
N.V., ATLANTA
AGENCY
By:
Name:
Title:
By:
Name:
Title:
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
BANKS:
ABN-AMRO BANK,
N.V., ATLANTA
AGENCY
By:
Name:
Title:
By:
Name:
Title:
CIBC, INC.
By:
Name:
Title:
CITIBANK, N.A.
By:
Name:
Title:
BANK OF AMERICA
(ILLINOIS)
By:
Name:
Title:
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
FIRST ALABAMA
BANK, N.A.
By:
Name:
Title:
MELLON BANK, N.A.
By:
Name:
Title:
NBD BANK
By:
Name:
Title:
THE BANK OF TOKYO
LTD.
ATLANTA AGENCY
By:
Name:
Title:
(Signatures continued on next page)
<PAGE>
(Signatures continued from preceding page)
THE DEVELOPMENT
BANK OF SINGAPORE,
LTD.
By:
Name:
Title:
THE LONG-TERM
CREDIT BANK OF
JAPAN, LIMITED
By:
Name:
Title:
<PAGE>
<TABLE>
===================================================================================================================
===================================================================================================================
SCI Systems, Inc
Exhibit 11 - Computation of Primary and Fully Diluted
Earnings Per Share (In thousands of dollars except for number of shares and per share amounts)
<CAPTION>
Quarter Ended: Six Months:
December 24, December 25, December 24, December 25,
1995 1994 1995 1994
--------------- -------------- --------------- --------------
Primary Earnings Per Share
<S> <C> <C> <C> <C>
Net income $22,158 $10,197 $37,280 $20,254
Add back after-tax interest for debentures converted
during period N/A N/A 218 N/A
--------------- -------------- --------------- --------------
Adjusted net income used in primary computation $22,158 $10,197 $37,498 $20,254
=============== ============== =============== ==============
Weighted average number of shares outstanding during 29,469,208 27,322,644 29,411,513 27,316,967
period
Applicable number of shares for common stock equivalents
(stock options) outstanding for period using Treasury-
stock method based on average market price for period 652,085 493,816 723,679 479,204
=============== ============== =============== ==============
Weighted average number of shares used in computation 30,121,293 27,816,460 30,135,192 27,796,171
=============== ============== =============== ==============
Primary earnings per share $.74 $.37 $1.24 $.73
=============== ============== =============== ==============
Fully Diluted Earnings Per Share
Net income $22,158 $10,197 $37,280 $20,254
Add back after-tax interest for debentures converted
during period N/A N/A 218 N/A
Add back after-tax interest expense for outstanding
convertible debentures: N/A 348 N/A 665
=============== ============== =============== ==============
Adjusted net income used in fully diluted computation $22,158 $10,545 $37,498 $20,919
=============== ============== =============== ==============
Weighted average number of shares outstanding during
period 29,469,208 27,322,644 29,411,513 27,316,967
Applicable number of shares for common stock equivalents
(stock options)outstanding for period, using
Treasury-stock method based on the higher of average
market price or ending market price 732,980 493,831 729,059 479,336
Number of shares to be issued if 5 5/8 % convertible
debentures were converted: N/A 1,850,727 N/A 1,850,727
=============== ============== =============== ==============
Weighted number of shares used in computation 30,202,188 29,667,202 30,140,572 29,647,030
=============== ============== =============== ==============
Fully diluted earnings per share $.73 $.36 $1.24 $.71
=============== ============== =============== ==============
The additional dilution effect of the common stock equivalents and potential
conversion of any outstanding convertible debentures represent less than 3%;
consequently, fully diluted earnings per share are not presented on the income
statement for the periods presented.
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 24,
1995'S BALANCE SHEET AND THE INCOME STATEMENT FOR THE SIX MONTHS THEN ENDED, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> DEC-24-1995
<CASH> 9,112
<SECURITIES> 0
<RECEIVABLES> 241,855
<ALLOWANCES> 0
<INVENTORY> 732,409
<CURRENT-ASSETS> 1,013,303
<PP&E> 499,762
<DEPRECIATION> 266,684
<TOTAL-ASSETS> 1,268,524
<CURRENT-LIABILITIES> 624,169
<BONDS> 205,072
0
0
<COMMON> 2,951
<OTHER-SE> 424,145
<TOTAL-LIABILITY-AND-EQUITY> 1,268,524
<SALES> 2,080,129
<TOTAL-REVENUES> 2,080,129
<CGS> 2,007,933
<TOTAL-COSTS> 2,007,933
<OTHER-EXPENSES> (1,074)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,615
<INCOME-PRETAX> 62,655
<INCOME-TAX> 25,375
<INCOME-CONTINUING> 37,280
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,280
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
